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Dairy sector in crisis: European Parliament calls for urgent measures

7 July 2015

Dairy sector in crisis: European Parliament calls for urgent measures

The European Parliament has today adopted a report by European Conservatives and Reformists Agriculture spokesman James Nicholson MEP calling for immediate action to address the crisis in the dairy sector.

The European Parliament has today adopted a report by European Conservatives and Reformists Agriculture spokesman James Nicholson MEP calling for immediate action to address the crisis in the dairy sector.

The Ulster Unionist MEP drafted the report in response to both the 2012 Milk Package and the growing crisis in the dairy industry caused by global supply outstripping demand, and the Russian embargo.

In particular the report calls for action to reduce the dairy sector’s volatility, including:

– a stronger role for the Milk Market Observatory with data received and published in a timely manner
– a more responsive and realistic safety net which is reflective of the cost of production
– increased research and innovation in the dairy sector and in the products brought to market
– exploration of the potential and options available to the sector through newer contract models and insurance tools
– identification and development of new markets to increase the EU global market share and secure fair access for EU dairy producers
– a reduced administrative burden related to the quality schemes such as PDO, PGI and TSG
– funds gathered from super levy fees to be reinvested in the dairy sector

Speaking in a debate in the European Parliament in Strasbourg on Mr Nicholson’s report, he said:

“They say that a week is a long time in politics, but I have to say that the last 12 months have been an extremely long time for dairy farmers.

“Since last year, global supply has continued to outstrip global demand. The continuing fall in prices can no longer be dismissed as a blip. All the indications point to a dairy sector in crisis.

“I have repeatedly said that the European Commission has failed to recognise the scale of the problem, but finally there may be some understanding about just how bad it has become. Dairy farmers cannot wait until next year to see things turn. The Commission must act now. One measure that could make a real difference to dairy farmers in the short term would be a review of the current market intervention threshold. My report calls for a realistic safety net that accurately reflects production costs and market prices.

“In Northern Ireland, processors are paying an average base price of 20 pence per litre, with the average cost of production of around 26.5 pence per litre. It does not match up. With the intervention rate so low, prices have fallen below the cost of production, and that is not unique to my area alone. We need to put a flow in the market to ensure no further decline arises.

“Another short-term major sector is the Russian ban. Mr Putin has now extended that embargo for another year in response to the latest round of EU sanctions. The onus is on the Commission to stand behind dairy farmers who continue to suffer the consequences of political decisions beyond their control. The Russian ban has emphasised the pitfalls in relying too heavily on one trading partner. Diversifying export markets is crucially important to the countries like my own, and we need to ensure that we diversify the markets and expand the markets that are already there.

“The Commission has made good progress in sourcing new outlets for our own quality European produce, but there is always scope to improve that. We also cannot ignore the longer-term challenges in the dairy sector. We need to look at imbalances in the supply chain between producer, processor and retailer, as well as own brand labelling and the use of liquid milk as a loss leader by large supermarkets. We need to look at the possibilities of futures-market and fixed-term contracts, as more predictability would allow producers more flexibility. While these are major issues, I believe the single greatest challenge facing the dairy sector is volatility. Unfortunately, it is here to stay.”

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