First speaker was Russell Mildon, representing the EU commissioner for Agriculture, Mariann Fischer Boel.
Mildon talked about the positive outlook in the dairy industry, with empty intervention stores and market forces increasing prices. "There is new dynamism and new opportunities in the dairy sector. The consumers want more dairy products, and we should not let non-EU dairy producers take this opportunity", was his message.
The European Commission wants a public debate regarding the Health Check, to assure a clear long term perspective. They are having conferences with invited stakeholders. (Read more about the stakeholder consultation>>)
Mildon said that there is a need to simplify the dairy policy. This is a capital intensive industry, and the producers need to know how to invest.
"We need to provide clarity for the dairy producers", he said. "We have to decide on a soft landing or a sharp change when phasing out the quotas in 2015".
If nothing is done for the transition, a so called 'hard landing', it will be less smooth. The price will rise for a few years, and then drop fast when quota is ended. The proposal from the EC is instead to increase the quotas by 2 per cent, and according to Mildon a clear majority of the Ministers are for an increase in the short term.
The EC sees the need to ensure a smooth transition, by reducing the super-levy, charge on surplus milk, fat and protein and balancing the quota.
The areas that are dependant on milk production will need support. This can be done through the Rural Development, and amendment of the direct payment legislation. Article 69 will allow for adaption of the de-coupling, and for more flexible rules. (Link to a Common Agricultural Policy glossary>>)
Russell Mildon also explained the timetable for the Health Check.
In March the European Parliament will give their opinion on the propsed 2 per cent increase from April 1st. In March the European Parliament will give their opinion on the overall Health Check communication. The European Commission will finalise the proposal and present it end of May. The EP will give their opinion in the fall, and the French want to have a political decision in 2008.
Florian Engler from Rabobank in Frankfurt gave his view on the market outlook. Looking back first, Engler concluded that from 2003 the demand has been higher than the supply. The production was lagging behind and the price was cushioned by the huge stocks. In 2007 the stocks were used up and the price increase started. Other reasons for the high increase in the demand were the growth in world population, and a higher average income to spend. Also, people want more high quality food.
According to Engler the worldwide demand will increase 2,5 per cent annually in the next years. And he posed the question whether this amount can be produced? If it is produced where it is consumed then it will be true for Asia and South America, but the high demand can’t be produced in the US, EU or in Russia.
Does EU want to participate in this or leave it to others? Another important issue was according to Engler how well the dairies are organized. He predicted that in Germany the production of milk will be restricted, but that Denmark, Netherlands and Ireland will be in a different line, they will be able to export at a good price, but that the German sector is lagging behind.
"We need more milk, and the dairies in the EU will be forced to improve efficiency, to be able to compete without export funds" he said.
His prediction is that cheese and fresh milk are going up. Eight million tones of fresh milk are needed to serve the market.
The consumers are ready to spend more money on milk, and in 2008 the milk price will still be good. There will be fluctuations, but the markets will readjust and find a new equilibrium, on a higher level than before. There will be no inventories. The production costs will increase, and nobody will be able to produce cheap milk anymore. In the next few years the world production will be scarce – it takes time to build up extra capacity. The milk market will not collapse, but there will be fluctuations, concluded Engler.
Germany’s Federal Minister for Agriculture, Horst Seehofer objected to the plans to increase milk quotas on 1 April 2008. The economic prospects that have recently become available to farmers should not be destroyed again; milk prices are again collapsing, according to Seehofer. He also called for an accompanying programme to the quota abolishment, for farmers who cannot survive strictly under market conditions. “I want a health check, and with it a milk policy based on the principles of reliability, simplification and diversity”, he said. And he underlined the importance to ensure that everybody received acceptable conditions.
Udo Folgert, Dairy president at the German Farmer's Union, agreed with Seehofer on the need for a reliable, dependable dairy policy with a long term perspective. "We want to strengthen competitiveness by targeted investment and subsidy support," he said, and continued: "Farmers that wish to invest in the future need clear definitions to be able to plan". Therefore, in his opinion, the subsidies for milk production must be maintained and raised, and the weaker regions must be supported.
Lior Yaron, director for Global Dairy Project Support at DeLaval International gave his view on the development of milk production in China, the challenges and opportunities.
His conclusions were that the Chinese dairy industry is expanding very rapidly to meet the increasing demands for dairy products from the huge population. The Chinese dairy market in 2007 was 12.6 billion USD. It has grown by 122% since 1999. Milk production in 2007 was 38 MMT, a 12% increase from 2006
The average milk consumption in Beijing is about 46.2 kg per capita; and even if this average would be reached only in the big cities, an additional 16 million tones of milk will be needed, which is the equivalent of the total current New Zealand milk production. (Source: IFCN)
The local production will continue to increase but not at the same pace as the demand, so the import of milk products will continue, and there are great opportunities for European dairies in China.
The main limiting factors for Chinese milk production are that the industry value chain remains long and complicated, there is a lack of experience and technology, and there are land and climate limitations (especially in central and southern China). Chinese traditions and habits also represent a challenge to the country's milk production, together with the lack of tradition in dairy farming.
Lloyd Downing, a Fonterra-farmer from New Zealand described the conditions for milk production in New Zealand, where the dairy sector is the largest industry, making up 25% of the earnings and 7% of the GDP. There are 4.2 million people and 3.9 million cows. With land access as a limiting factor, the only way to improve profitability is by becoming more efficient. The current challenges to the productivity in New Zealand milk production are: finding young skilled people, the urbanization (land values), the environment and climate change. Downing's message to the European farmers were that 'the sooner you get the government out of your industry, the better!
Bent Juul Sörensen, chairman of the Danish Dairy Board, gave an introduction to the situation in Denmark. There is a positive farm development in Denmark, and they have a highly developed structure and are willing to increase production. Not only are they for a 2% yearly increase of milk quota, they would prefer a 3% increase. The spot prices on the German market is tempting in the short term for the dairy farmer, and they should be tied closer to the dairies in these days of less loyalty. He also brought up the climate change, that this is a challenge that the industry will have to deal with.
Henri Brichard, president of FNPL, the French dairy farmers' organisation, is positive to the Health Check in general, and agrees with the phasing out of the milk quota. But he is not in favour of the 'soft landing', and the gradual increase of the quota. There has to be compensation to the weaker regions. He talked about the needs to defend and protect the French model, based on diversity, small and large farms, cooperatives etc. But he also said that producers need to adapt to the market, and prepare for a world without regulation, like New Zealand. He made a remark about French legislation preventing cooperatives like Fonterra. |