The MEP, who is about to publish a report on the sector, tells Alistair Driver why he thinks the Commission is in denial over the milk market ‘crisis’.
Northern Irish MEP Jim Nicholson has warned the sector faces a ‘massive crisis’ unless the Commission adopts a more proactive role, starting with increasing the intervention price.
The Ulster Unionist Party MEP is due to publish a report in March on progress made in implementing the EU Milk Package – introduced in 2012 to help the industry adapt to life without quotas from April 1 this year.
Mr Nicholson, who was the EU Parliament’s lead negotiator in formulating the package, acknowledged his recent inquiry into its implementation had been overshadowed by what he, unlike the Commission, firmly describes as a ‘crisis’.
“Dairy farmers have been hit by the perfect storm - increased production, China not purchasing and the Russian ban,” he told Farmers Guardian in his Brussels office.
Before I met the veteran MEP, who has also served in the UK Parliament, he had hosted a farming delegation from Finland who have had it ‘even worse’ as, like other direct exporters, they had been hit harder by the Russian ban. “It seems to be patchy. People seem to be worse off in the most remote places,” he said.
He fears the worst is still to come.
“The crisis will really hit in the months of March to July when cows go to the grass and most parts of Europe will be on full flow with milk,” he said.
On top of this, a number of member states have geared themselves to expand production when quota disappear in the spring.
“A lot of farmers have put their heifers in place and are going to be calving in the next month or two, which will increase milk supply and put further pressure on price,” Mr Nicholson said.
“I hope the common sense of farmers will come through. I have spoken to some farmers where they are facing super levy, including my neighbours south of the border, who are doing early culling and drying off cows early to reduce volume,” he said.
He was dismissive of the ‘small number of countries’ who are called for a ‘soft landing’ into the post-quota world in the form of relief on their super levy payment.
Mr Nicholson praised new Agriculture Commissioner Phil Hogan for resisting the calls. “It would be totally unfair on dairy farmers who are being hit if they were given a bye ball,” he said.
But, while Mr Nicholson’s overall impression of Mr Hogan is good, that was as good as it got in terms of his view of the Commission’s handling of the crisis, including Mr Hogan’s insistence there is ‘no crisis’ in the EU dairy sector.
“I believe the commission are in denial,” Mr Nicholson said.
“I was on the agriculture committee when (former Agriculture Commissioner) Marianne Fischer Boel told us that never again would the dairy farmers of Europe have to experience what they did in 2008/09 because the Commission would not wait so long to act.
“I believe, if they do not act soon they will have a massive crisis on their hands in the late spring, early summer.”
His biggest frustration - one shared by UK dairy bodies and MPs, although the UK Government has opposed private storage aid in Brussels votes - is the Commission’s stubborn stance on the intervention price.
It currently stands at around 17-18ppl, meaning very few processors have taken advantage of the opportunity to put designated products into storage.
Jim Nicholson believes the next few months could be the toughest yet for EU dairy farmers
Mr Nicholson suggested 22-24ppl would be a more realistic level, adding that the Commission should have the tools at its disposal to pitch it correctly,
“The current level is just not realistic – even Finland, which has really struggled, never got down to that level,” he said.
“I would like to see a realistic level that would at least put a bottom in the market. Even 22-24p would still be below cost of production but, at that level, it would be easier for farmers to survive.”
“But all the indications I have had is that the Commission has no intention of intervening.”
The EU’s inability to forecast milk market trends with any accuracy, despite the launch last year of the European Milk Market Observatory, was identified by Mr Nicholson as another area where the Commission had fallen short.
“I really want my report to show how monitoring can play a better role because forecasting is one of the biggest weaknesses we have,” he said.
Other key elements of the milk package included provision for member states to make written contracts between milk producers and processors compulsory and to encourage farmers to form Producer Organisations to bolster their negotiating power.
Mr Nicholson acknowledged only lukewarm progress had been made in these areas.
While the UK has introduced a voluntary code covering milk contracts, he suggested the increase in prices after the package was published was partly to blame for the failure of milk contracts to ‘take off’ more widely across the EU.
He expressed disappointment at the lack of uptake, beyond France, in POs and co-ops.
He said co-operation between producers and between producers and processors was vital if the industry was to forge a brighter future.
Mr Nicholson described the treatment of their supplier by retailers as the ‘elephant in the room’.
“Although the UK has led the way with the Adjudicator, no European Government has taken on the retailers,” he said.
“There is a big element of processors and retailers taking advantage of the situation, certainly farmers would blame for that.
“But they are only able to do it because farmers allow them to. Better co-operation and less individualism hold the key as far as farmers are concerned.”
He said his report would ‘look outside the box’ at issues like A and B quotas, advocated by Farmers For Action among others, where farmers get a guaranteed price for a quota but less if you produce over that quota, and the development of a futures market for milk products.
He stressed that milk quotas, while still yearned after by some, did not save the industry from this or previous crises and urged the industry to move on.
“I personally believe some degree of quotas should have been maintained but quotas are gone and not coming back. So what I have got to do is try and get enough tools in the box for the industry to be able to work together to address the issues out there.
“We need to add tools to the box so, if this never happens again, it will not be as shattering to the dairy industry.
“We want to put some ideas out there and hear the response from the industry. There is no point the industry blaming politicians because they have a part to play, too,” he said.
The more immediate concern, however, is how long the current crisis will last and how great will be its toll.
“If you look at the New Zealand markets, there are signs it has bottomed. The question is: How long will it stay at the bottom before it starts to improve? Nobody, including the Commission, can tell what the situation will be in four months’ time.
“UK producers cannot sustain the price they are currently being asked to produce milk at. It is the young people who are hit hardest, the young farmers who have just taken over the farm and spent a lot of money expanding and modernising .
Is there a bright future in dairying once this passes?
“There is always a future in dairying,” Mr Nicholson said. “But the question is: At what level and how great will the reward be for the time you put in.”