Background Dairy
How France is drowning in organic milk
The European dairy market will be dominated by scarcity in 2021, but this is not noticeable in the organic segment in France. The country is struggling with a large surplus of organic milk. The problems are complex, concrete solutions do not seem to be available.
'Long live organic', French dairy farmers must have thought. In recent years, entrepreneurs have switched en masse, fueled by the price crisis on the dairy market in 2016. A few numbers in a row: in 2017 and 2018, organic milk production grew by 35% to 848 million kilos. In the meantime, production has grown to 1,2 billion kilos, which amounts to 5% of the French milk lake. France is the largest grower in organic dairy in the Eurozone.
The expectation for 2022 is a further growth of 10%, but that is far from desirable. After a few years of growth, organic dairy consumption has leveled off in 2021, partly because a group of consumers has started to orientate on locally produced dairy in short chains. The rapid increase in production has disrupted the organic dairy market in France.
Organic is sold as common
The oversupply of organic dairy is putting pressure on the milk price, which has dropped to around €47 per 100 kilos. Processors are desperately trying to push the oversupply into the market through price action, but that's a blood clot. The large processors such as Sodiaal and Lactalis are forced to sell up to a quarter of the organic dairy as conventional.
Currently, the demand for conventional dairy is good, resulting in high prices. The gap between organic and conventional payout prices is therefore limited, which alleviates the pain for dairy farmers who are being cut. Processors that only produce organic dairy (such as market leader Biolait, a cooperative of 1.400 dairy farmers), are less flexible, however. They are left with large unsold volumes.
Discouraging switchers
However, solving the problem is not so easy. The French government, accused of having encouraged organic production too much, is leaving the solution to the market. The government has also expressed the ambition that a quarter of the French milk lake must be organic, and that is far from being the case. Processors such as Bel, Sodiaal and Biolait try to slow down the biological transition. They do not accept farmers who want to switch, or only young entrepreneurs.
Biolait wants to level off the spring milk peak in 2022 by paying premiums for volumes that are not delivered, as FrieslandCampina did a few years ago to curb the oversupply. This has already been done by Biolait in recent years and the premiums will probably be even higher next year. Interest representatives also urge dairy farmers not to switch to organic for the time being. The frustration in the sector is great. There is talk of a collective error in organic chain regulation.
Wouter Job
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