28 June 2011

The European Parliament’s Agriculture and Rural Development Committee yesterday voted in favour of an amendment calling for mandatory written contracts across the sector throughout the EU, and supported greater transparency and information requirements in the milk market, such as volumes delivered and prices paid.

The Agriculture committee, chaired by Paolo De Castro, said in a statement, “To boost dairy farmers' bargaining power, they must be enabled to negotiate fairer prices through producer groups, pricing practices must be made clearer throughout the distribution chain, and dairies must be made to report their monthly purchases.”

The amendments to a draft EU regulation on milk contracts mean new rules will apply until 30 June 2020; the changes will be reviewed in 2014 and 2018.

New rules to ‘correct imbalance'

The rules will see producers gaining the ability to join producers' organisations that can negotiate raw milk deliveries for them and ensure that they get a fairer share of the price paid by consumers, inter alia to cover rising production costs and “correct the imbalance in bargaining power between farmers and dairies.”

Furthermore, under the new regulation every raw milk delivery from a farmer to a processor would have to be covered by a written contract, which would have to guarantee a milk price fixed for at least one year. MEPs said that, at present, milk prices are often fixed only after delivery and arranged according to the profit made by dairies, which means farmers must sell without knowing how much they will earn. 

To improve the working of the market for dairy products registered under a protected designation of origin (PDO) or protected geographical indication (PGI), the committee also proposed a supply management system, which Member States may establish provided that it will in no way harm competition on the single market or lead to small producers being adversely affected.

Reforms could go further to help struggling farmers

The report, which was produced by James Nicholson UK MEP, was approved with 34 votes to 3 and will be put to a vote by Parliament as a whole by the end of the year. Some MEPs have expressed concerns that the new rules may not suffice to overcome all the difficulties facing dairy farmers, especially those with small herds or in remote areas. They called on the Commission to table further measures for dairy farmers to be incorporated into its Common Agricultural Policy (CAP) reform proposals, due in the autumn.

Scottish Nationalist Party MEP, Alyn Smith said, “It’s been clear for some time that there are deep structural problems in the milk market thanks to an inadequate form of deregulation that left dairy farmers without adequate bargaining power and without even the security of knowing what price they would receive for their delivery.

“When producers are consistently receiving a price lower than their production costs there’s clearly something wrong, and while mandatory contracts are not a silver bullet they will at least be a start towards the rebalancing we need to see.”

NFU Scotland’s milk committee chairman, Kenneth Campbell commented on the outcome after hundreds of farmers in the UK attended open meetings, demanding change. Mr Campbell said, “Despite the strong commodity markets, we have the lowest milk price in the EU 15 by a mile. We are not prepared to hang about forever to see whether milk buyers and retailers see this as just a PR exercise but a mandate for change that must be taken seriously. We know we have producers on our side, but some of those who buy and sell the milk they produce are hiding behind the coat-tails of the Competition Commission, and are not prepared to put their head above the parapet.”

NFUS’ chief executive, James Withers said, “This [vote] could deliver a stronger negotiating position for dairy farmers and ultimately generate a fairer milk price.”