DUTCH farm leader, Sieta van Keimpema, has warned that precisely the same forces that have destroyed Europe’s banking sector are set to do the same to European food production unless the European Commission faces the challenge posed by gigantic retail multiples and the various levels of speculators that are now inserting themselves into the chain between farmers and consumers.
Mrs van Keimpema was speaking at a conference held by the European Milk Board at the Carlton Hotel, Dublin Airport, where dairy farmers from 14 European countries were hosted by the Irish Creamery Milk Suppliers Association.
Mrs van Keimpema was supported by Jackie Cahill, the ICMSA President, who told the conference that the Commission was “never done regulating things it had no business regulating but was either unwilling or unable to regulate the pricing system of European food production which was the one area that was simply crying out for the imposition of transparent regulation”.
Mr Cahill said the brutal truth now was that several European multiple retailers were now of a size and financial muscle that enabled them to effectively ‘make’ their own markets and dictate the prices ‘backwards’ to the farmers and ‘forwards’ to the consumers.
“The idea that these multiples were amenable to self-regulation or that such a light-touch system would work was nothing less than a fantasy,” he declared.
Romauld Schaber, President of EMB, told the conference that there was a ‘relentless consolidation’ of already huge companies at processor and retail level without any concern being expressed by the Commission, while the food producers and farmers receive no support for their efforts to consolidate or act in unison. Mr Schaber observed that the Commission seems happy to watch the power to get decent prices continue to flow away from the people producing the food and towards the massive and dominant intermediaries in the food chain.
The dairy farmer representatives from 14 different countries agreed that a monitoring agency at European level must be empowered to supervise production costs, prices, as well as supply and demand. This agency would determine whether producer prices are cost-covering and ensure this objective through fixing ‘price bands’ which will determine the volumes to be produced.
They stated that given the completely unequal positions of the dairy market chain (farmers, processors, retail and onwards to consumers) and the significance of dairy production for European society, such an agency becomes absolutely vital if the continuing existence of sustainable dairy production in Europe is to be assured. Consumer representatives should also be a part of the monitoring agency.
The EMB cited the example of Switzerland, where an unfettered market, that encouraged overproduction, drove down producer prices and led to a situation where, from October 2008 to October 2010, the average Swiss milk price decreased by approximately 25%, and the amount of butter in storage, as at mid-February 2011, was 7311 tons, a figure which is 75.5 % more than the same period in 2008.
Jackie Cahill noted a similar Irish experience regarding the long term decline in farmer share of final retail price.
“In 1995 in Ireland, the milk producer’s share of the retail milk price was 43%. By 2005 that had fallen to 36% and by 2009 that, in turn, had fallen to 26%. The trend is unmistakable and unless it is addressed in a way that fixes a fair portion of the final retail price for the milk producer then the long term future of Europe’s family farm must be considered very doubtful. Consumers want cheap food and under the guise of giving them cheap milk, the giant multiple retailers have simply wiped out the margins of the dairy farmers while keeping their own or using milk as a so-called ‘loss leader’. It’s a real European problem that will require a real European solution,” he concluded.