60% of dairy producer organisations earn better returns for their farmers, according to report

The report states that more than 60% of dairy POs have earned better or more stable milk prices for their farmers
The report states that more than 60% of dairy POs have earned better or more stable milk prices for their farmers

The European Commission has published the second report on the operation of the so-called 'Milk Package', a series of measures launched in 2012 to strengthen the position of European dairy producers in the supply chain.

The report shows that after three years of implementation, European farmers are increasingly using the tools provided by the Milk Package, such as collective negotiation of contract terms via producer organisations (POs), or the use of written contracts.

The measure allowing collective negotiation is designed to reinforce the bargaining power of milk producers, whilst written contracts offer better transparency and traceability to farmers.

The report states that more than 60% of dairy POs have earned better or more stable milk prices for their farmers.

EU Commissioner for Agriculture Phil Hogan decided to fast-track the report to the end of 2016
EU Commissioner for Agriculture Phil Hogan decided to fast-track the report to the end of 2016

The National Farmers Union has previously renewed calls for new dairy POs. NFU dairy board chairman Michael Oakes said the UK must develop a 'collaborative dairy industry' that can compete effectively in the UK and on the world markets.

“This is something the NFU has always promoted and encouraged," Mr Oakes said, “it’s a shame that many UK milk buyers, both large and small, see POs as a threat and have publically said that they will not work with farmers who are part of a PO. Today in the dairy farming sector, collaboration is the key and the NFU sees POs as a vital part of developing new relationships in the UK dairy sector.

The focus of the Commission report is the important role POs can play in increasing farmer bargaining power, it lines up with the NFU dairy board’s asks including its calls for fairer, more balanced milk contracts and stronger producer representation.

The report was initially due to be delivered in 2018, but in light of the continuing difficulties in the dairy sector, the EU Commissioner for Agriculture Phil Hogan decided to fast-track the report to the end of 2016. This commitment was part of the series of solidarity packages for the dairy sector announced and implemented during the past year.

'Secure a better position for dairy farmers'

Welcoming the report, Phil Hogan stated today: "The report shows that there are measures that we can take at EU level to secure a better position for dairy farmers in the supply chain. Following on from the Agricultural Markets Task Force report last week, I see this report as further evidence for policy action, in the context of the 2017 Commission Work Programme."

The report also examines further possibilities for dairy farmers. For example, it highlights the potential of two key instruments of the Milk Package – POs and collective negotiations – which are not yet fully exploited by the UK, and outlines various ways of making these more effective both at EU and Member State level.

The report encourages Member States to take the steps to foster the creation of producer organisations with collective actions that go beyond collective bargaining, thus enhancing producers' weight in the milk supply chain. In addition to these recommendations, consideration should be given to expand the role of Inter-Branch Organisations (IBOs).

For the full potential of the Milk Package's possibilities to materialise, the report concludes that an extension of its application beyond 2020 should be considered.

What is the Milk Package?

Adopted under co-decision in 2012, the Milk Package was aimed at strengthening the position of dairy producers in the dairy supply chain and preparing the sector for a more market-oriented and sustainable future, seeking in particular to learn lessons from the 2009 dairy market crisis.

EU Member States have the option to make written contracts between farmers and processors compulsory in the milk sector, and it allows farmers to negotiate contract terms collectively within certain limits.

The package also sets out specific EU rules for inter-branch organizations, allowing actors in the milk supply chain to dialogue and carry out certain activities and Member States are allowed, under certain conditions, to apply rules to regulate the supply of PDO/PGI cheeses. The package also entails a series of measures enhancing transparency in the market.

The measures established by the Milk Package will apply until mid-2020. The Commission was mandated to report in 2014 and 2018 on the market situation and the implementation of the measures.