Inside Milk
French organic farmer stuck between market and target
While the conventional French milk supply is lagging behind with rising prices, the opposite is happening with the organic milk supply. Despite price reductions and product depreciation, the supply continues to increase. Organic farmers thought they were doing well, but are currently not sure how to proceed.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
The supply of organic milk in France is expected to increase this year by almost a quarter compared to last year, to approximately 1,35 billion liters. This makes France the largest producer of organic milk in the EU. However, the number of companies that have switched and the combined milk supply have grown so fast this year that the big four in the supply and processing of organic milk (Biolait, Sodiaal, Lactalis and Agrial) do not know what to do with it.
French consumer demand is not growing along with the sharp increase in supply. Organic dairy is a lot more expensive than conventional products. This is not really unexpected. What is more disappointing is the industrial demand. It was expected that more organic milk would be needed, especially for infant nutrition. French processors had hoped for additional sales, especially to China. However, things turn out differently. Just like Dutch dairy, French dairy is also seeing a decline in sales to China, including for organic products. There are no real alternatives to this either.
Price reductions and markdowns
That is why processors of organic milk are forced to write down large volumes of organic milk and reduce payment prices. For example, Sodiaal has chosen to downgrade 10% of the supply volume from organic to conventional and to pay a current price for it. The difference in payment price is approximately €12,00 per 100 liters. Biolait has written down 30% of its supply. The two other major processors are implementing price reductions across the entire volume, from an average of €5,00 to €6,00 per 100 liters. In addition, the large processors have temporarily suspended the switching fee of €3,00 to €6,00 per 100 liters.
In the Netherlands and many surrounding countries, the price increase for organic milk is lagging behind the increases in the market for conventional milk, but the situation is not as dramatic as in France. The discussion now revolves around the question: what next? Want to promote organic dairy more? But who pays for that?
Conventional market is moving along with Northern Europe
On the market for conventional milk, France is moving along with developments in Northwestern Europe. Just like in the Netherlands and Germany, the milk supply is lagging behind last year. In September, supply fell by 2,4%. In October, based on weekly reports, this will be approximately the same, reports government organization France-Agrimer.
The going milk price in France for September fluctuates around an average of €37,00 per 100 liters. That is the price for milk with 32 grams of fat and 38 grams of protein. In the Netherlands, the average milk price paid for the same month is approximately €39,50 per 100 kilos (at 4,41% fat and 3,57% protein).
It is striking that, while French milk supplies fell less this year than, for example, German and Dutch supplies, spot milk prices rose to record levels. In recent weeks, prices of up to 55 cents have been paid, parties in the day trading reported. Prices have now fallen again.
Calculate to 2022
Kees Gielen, CFO at Sodiaal, notes that the French milk price does not differ very much from that in the Netherlands. "For French farmers there is the problem that, just like in the Netherlands, costs are rising very sharply. This largely undoes the effect of the higher prices. Dairy is now faced with the problem that a leap must be made before 2022 regarding the sales prices at the supermarkets. It will be difficult to get those higher prices implemented there."