Milk market in crisis: Farmers demand more security in sales!

Milk market in crisis: Farmers demand more security in sales!

On Monday, the EU Agriculture Council will meet in Brussels to discuss the planned stronger regulation of milk quantities and producer milk prices. The focus is on a proposal from the EU Commission that would require dairies and dairy farms to conclude written contracts on quantity, price, quality and duration before milk delivery. This measure could have far-reaching consequences for dairy farmers, but implementation of the proposal in Germany is considered unlikely.

Agriculture Minister Cem Özdemir (Greens) presented a draft regulation on contractual obligations in December, but it has not yet been brought to the cabinet or the Federal Council. Frank Kohlenberg, vice president of the Landvolk, expressed concerns about the contract requirement and warned that it could harm dairy farmers because they would not be able to react flexibly to market changes.

Positions of those involved

The supporters of the proposal, which include the Working Group on Farming (AbL), the Association of German Dairy Farmers (BdM) and environmental organizations, hope that the regulation will result in more affordable producer prices and better regulation of milk quantities. They even wrote an open letter to Chancellor Olaf Scholz (SPD) to promote support for the contractual obligation. Currently, the existing system often leads to producer prices that are below cost coverage, meaning that many farmers have to live from hand to mouth because they have insufficient reserves.

On the other hand, the farmers' association and the rural people claim that there is no significant demand for a contractual obligation. Although farmers can already suggest contracts, those involved lack the majority to implement this. The contract requirement is also seen as an overly bureaucratic solution and there are concerns that dairies could pay low producer prices, particularly given the volatility of the milk market where demand can fluctuate quickly.

According to the Özdemir Ministry's draft, all components of contracts for raw milk deliveries are freely negotiable, including price-quantity agreements. The possible models include fixed price models, price differentiation models as well as A/B models and price hedging transactions on futures markets. The Federal Ministry of Food and Agriculture (BMEL) assumes that milk processors will make four price-quantity offers to farmers every year in order to take seasonal fluctuations in milk supply into account Agricultural today reported. The upcoming Agricultural Council in Brussels could therefore be groundbreaking for the future of the milk market in Europe.

Further information on the different points of view and the current state of affairs can be found in the reports South German newspaper and Agricultural today.