Int’l - EU dairy facing up to challenges ahead (II Part)

Milk prices, new EU members and the dairy industry review in 2008 were on the agenda in the second part of DairyReporter’s interview with the European Dairy Association.

We speak to Dr Joop Kleibeuker and Veijo Merilaïnen, secretary general and president respectively of the European Dairy Association, about economic issues facing Europe's dairy industry.

Farmgate milk prices are falling across the EU. There have been calls in Britain for a ‘fairtrade', or minimum, milk price – can this work?

When you look around you see that we are in a world where trade liberalisation is becoming more and more important. In such an environment, this approach does not have much chance of success.

We've also seen farmers in the last few years saying they will put all milk through one co-operative to raise the price. But, no one has been successful up to now and it is not considered they will be successful.

The problem in the UK has been that they have had strong consolidation in the retail sector, but only now is this starting to happen with dairy companies.

Some have suggested cutting the milk supply to raise prices.

The European market at some point should come into equilibrium. Depending on different calculations, the EU's milk surplus is likely between eight and 12 per cent of production. Using up more milk to produce more added value products, like cheese, should bring a more reasonable balance between consumption and production.

There is a strong connection between domestic milk consumption and production. Less than seven per cent of milk is traded between the world's main dairy players.

Will the entry of Romania and Bulgaria into the EU club cause problems for Europe's dairy sector?

Their dairy businesses are pretty under-developed and further behind than those in the countries that joined in 2004.

But, we must take a pro-active approach. It is another 30m consumers and it offers new opportunities for dairy products with a longer shelf life.

What early thoughts do you have on the European Commission's planned dairy industry review in 2008?

The most important thing is to work on an integrated and balanced approach. There are all sorts of issues coming together, such as milk quotas, increasing demand for healthy products and the WTO negotiations.

We have invited Mariann Fischer Boel (European Agriculture Commissioner) to have discussion with us in the coming months, and an exchange of views on what the agenda items should be. We are pleased with the Commission's current position; it has indicated it will reconsider the level of butter intervention, support schemes and milk quotas.

If there is no deal at the World Trade Organisation (WTO) before then, and that is possible, won't that cause problems for you?

It is possible an agreement could be reached in spring 2007, but we will have to prepare for the possibility that there won't be.

We are really concerned about the WTO breakdown. We think that the EU has taken major steps towards an agreement – there was even an agreement to phase out export subsidies. But, we think this is only acceptable for the dairy industry when there is increased market access.