System under critical
Milk price is kept artificially low
Long-term contracts between dairy farmers and processors are the norm in dairy land, but a thorn in the side of the German cartel service. According to chairman Andreas Mundt, this means that the dairy market is hermetically closed, which does not benefit mutual competition and thus also the level of the milk price.
'The fact that dairy farmers cannot easily switch between dairies is very problematic. In this way, the milk supply to the established order is more or less self-evident, while new and growing dairies hardly get a chance', Mundt criticizes the price system. The fact that farmers are obliged to deliver while the milk price is only determined after delivery is not at all well received by the German cartel regulator.
The cartel service in Germany has examined the supply contracts at 89 different dairies in recent months. These companies are good for the processing of approximately 98 percent of the German milk lake. The conclusion that the cartel service draws from this is that mutual competition between dairy manufacturers is prevented by long notice periods and terms. According to the service, it is high time to introduce more flexible and competitive systems to the market.
In the Netherlands, too, contracts between dairy farmer and dairy manufacturer are often the norm. Here too, dairy farmers regularly criticize the system in the corridors.
Wouter Job
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