France: Causes of a prolonged crisis in milk production. Ways to ensure a collective exit; extract from the letter from APLI Brittany by EMB, January 2016 (was in French).
1. Rules of the game that have remained unchanged over many years:
– Successive European directives have liberalised the markets for agricultural products. With the CAP reform in 2003, it was decided to do away with market regulation tools. The fundamentals of this strategy shall not be called into question.
– The LME (Law on Modernisation of the Economy) was adopted in France in 2008. It allows for significant powers to be accorded to distributers in business negotiations with transformers and in 2010, led to the adoption of the LMA (Law on the Modernisation of Agriculture). This, in turn, resulted in market conditions and volatility affecting production: Contracting, especially for milk, transferred the right to produce and the management of volumes to dairies, without any price guarantee for producers.
2. How to regulate a liberal market now well-anchored in the Euro zone?
Clearly, this is not simple because those benefiting from these conditions are not going to ask for the rules to be changed…
– Distribution has been able to lure away even more consumers, to the detriment of small business – all while enjoying comfortable margins. They are now the masters of the game.
– Transformation has not needed to restructure in any way: It is enough for them to pass on drops in prices to producers.
– Heads of large agricultural unions and cooperatives: They prefer to protect the interests of ‘their’ cooperative rather than those of their member farmers. Their liberal convictions prevent them from advocating for regulation mechanisms.
3. How to reinforce the power of producers?
At European level:
– Regrouping supply of agricultural products by creating producer organisations according to region and product that are managed at European level, in order to regulate the volumes released on to the market and to integrate cost of production into the prices fixed for producers.
– Adopting the MRP (Market Responsibility Programme) proposed by the European Milk Board. Regulating production with a flexible, dynamic and temporary measure: simply adapting the supply of agricultural products to market demand.
At French level:
– Targeting the retail sector: they have the means to favour French products. Additional costs resulting from our social and environmental model need to be calculated for a tonne of meat, of milk, etc., and taken into account for French products.
– Creating boundaries between production and the processing sector. We need producer organisations that are independent from the processing industry.
– Reintegrating private subsidiaries into cooperatives to ensure that the added value remains with producers.
– Complementing the observatory for margins with an observatory for gross operating surplus (EBITDA): Margins mask profits in the profit and loss account.
– Adopting a fiscal model that would allow for the creation of reserves that would be exempt from taxation in good years, which can then be reinjected in difficult times.
– Obliging banks to adapt loan repayment annuities according to economic conditions.
– Making it possible for regions to co-finance investment plans for agriculture.
4. Conclusion:
Farmers in all European countries are facing difficult times. We need to unite to protect our collective interests. We are not competing against each other. These crushing crises have emerged in the same way in all Members States. It is up to us to build our common future in a Europe united for progress. This was the dream of Europe’s founding fathers.
Thanks to Christian Hascoët, APLI, Brittany, France and EMB Newsletter!
