Inside Milk
Emergency fund of 10 million for French dairy sector
The French trade association for the dairy sector CNIEL has realized an emergency fund of 10 million to support French dairy farmers in heavy weather. With the peak season approaching, the pressure on French milk processors is increasing enormously. The question is whether they can handle the extra supply of milk.
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France, Europe's second largest milk producer, seems to be the umpteenth country in a row that cannot escape milk dumping. The French dairy sector has asked its dairy farmers to scale back production to hopefully relieve some of the pressure on processors. An almost impossible task, not only because there is no 'pause' button on a cow, but also because the peak season is approaching.
Peak season creates extra pressure
CNIEL previously warned about the pressure that the peak season brings. During this period, 16 million liters more milk is produced every week than in a 'normal' week. This extra supply is not desirable for the French processors, as they are already almost at their processing tax.
milk prices
That is why the trade organization has created an emergency fund. The money used to finance the fund comes from other funds owned by the organization. With this money, CNIEL wants to keep the milk price somewhat stable. If the total volume (based on 2019 figures) can be reduced by 2 to 5%, the milk price could reach a maximum of €0,32 per liter.
French milk prices have not been bad in recent months in the LTO milk price comparison. For example, dairy processor Lactalis achieved the best-scoring French milk price in February at €35,75 per 100 kilos of milk. Savencia and Sodiaal also managed to position themselves above €35, while Danone recorded just under €34.
At €32 per 100 liters of milk, the price is declining slightly, but a decline in price was probably already in the offing. Our Dutch processors are also adjusting prices downwards due to the corona crisis.
Awaiting Europe
Trade association CNIEL is now waiting for approval from the European Commission (EC) before the fund can come into effect. The organization has urged the French authorities to strengthen support measures for companies in dire straits.
The French fund is not the only commodity Europe needs to consider. The European Dairy Association (EDA) has urged the EC to open the private storage scheme. The European Milk Board wants the milk reduction plan to be implemented.
Huge financial setbacks
In Ireland, it is expected that dairy farmers will lose around €65 million by mid-summer due to falling milk prices. If this trend continues through the rest of the year, there is a good chance that losses will exceed €130 million by the end of the year.
It is still unknown what the total global damage will be. One thing is certain: the damage is not easy.