The milk crisis reveals the need for production quotas

But the content of the declaration, also supported by the Czech Republic, makes it apparent that negotiations will once again fail to address the essence and main causes of the problem, and that instead of a long-term solution the Union prefers temporary market measures (export subsidies, intervention purchases, marketing support). While these might improve the situation of European milk producers for now, they will not eliminate the problem in the long run. What’s more, these measures to a significant extent ship the problem over the border and hurt the development of agriculture in the poor countries of the South. 

The source of the current crisis is disproportionately low purchase prices of milk that have fallen by up to one-half since last year. Farmers in the majority of European countries, including the Czech Republic, are experiencing difficult times, as the purchase prices of milk do not even cover their production costs. The situation was exactly the opposite less than two years ago, when milk prices reached a historic high. 

What is behind these dramatic fluctuations? European milk prices are increasingly tied to world prices, those of powdered milk in particular. The EU is in fact gradually abandoning regulatory tools (the cancellation of minimum prices, increasing production quotas and their progressive cancellation by the year 2015, a ban on intervention mechanisms) and leaving regulation to the invisible hand of the market. A sector that had once been relatively stable suddenly became very volatile and had a difficult time adjusting to decreasing demand during the economic crisis. Farmers have been left to the mercy of processors and supermarket chains that force prices down and, as a result, contribute to the rapid destructuralisation of the sector and the rise of large farms, as these are the only producers that can manage to survive. In this regard the rhetoric from Brussels on support for rural development sounds especially hypocritical. 

Milk producers in other parts of the world are facing similar problems, especially in developing countries, where small farmers comprise up to 50% of the population. However, everything suggests that the measures the EU plans to adopt or has already adopted to solve the milk crisis will only make their situation worse. The Union has no plans to limit its own milk production, which far exceeds total European consumption. Instead, it is only looking for tools and mechanisms to get rid of the surplus milk. The European Commission agreed to reinstate export subsidies for milk products back at the beginning of 2009. This measure was taken without looking into how it would impact third world countries, where subsidized European milk forces local farmers from the market, robbing them of their livelihood. 

This is all happening in a period when the high prices of 2007-08 enabled the poorest countries in the South to launch programmes to support local markets and small farmers, who had fought for over 30 years against unfair competition in the form of subsidized European powdered milk. And this concerns more than just milk; other agricultural commodities are also involved. If there’s one thing the developing world needs today, it’s market protection to allow them a chance to develop their own agriculture sector. They certainly don’t need competition from cheap European food products. 

And so, what should Europe do in the face of the milk crisis? Above all, the European Union should search for a long-term sustainable solution that satisfies European farmers and won’t conflict with the development goals of the EU and the needs of third world farmers. The goal must be the stability and sustainability of the agriculture sector, not penetrating foreign markets or winning the competition as the largest and most competitive milk producer in the world. It is not possible to continue on this senseless and untenable roundabout on which Europe imports from South America enormous quantities of soy (cultivated on vast farms at the price of great environmental and social problems) which it then feeds to dairy cows. The milk that is produced is dried in a high-energy process and, with the help of subsidies from taxpayer money, exported to markets where local farmers are subsequently hurt.

It is essential to ensure stability created by supply and demand so that all the subjects in the milk sector can make a profit. This balance can be achieved either by the removal of a large number of producers from the market, which is naturally unacceptable from the perspective of food independence, rural development, employment or from an environmental perspective (the loss of biodiversity, soil fertility, adaption to climate change). Or we can secure this balance by establishing and fairly distributing production quotas adjusted to demand. 

However, this solution, one promoted by many agricultural organisations, requires the European Union (especially the Commission) to stop invoking competitiveness and to refrain from raising production quotas, the cancellation of which is planned for 2015. Unfortunately, nothing suggests this will happen, and it seems that not even the approaching meeting of the Council of Ministers will change things.