Perspectives from the Real World Absence of European vision Benot - PDF document

Perspectives from the Real World Absence of European vision Benoît Rouyer Workshop For Dairy Economists and Policy Analysts 11 May 2011 Milk price determination in Europe : no classes of prices No European rules specific to milk price fixing Milk price fixing is a national issue handled in accordance with European fair trading rules. In most European countries, there are no national rules specific to milk price fixing. -> milk price is determined by free negotiations between farmers and processors, but the context of those negotiations differs widely. Cornell Workshop, Denver 29 April 2010 2 1

The volatility of the world market is impacting European milk prices at farm level. 5 4 '000 € / tonne '000 € / tonne European World butter price butter price 4 3 3 2 ' € / 1 000 litres 500 European 2 1 farm milk price 400 00 12 12 00 4 '000 € / tonne 4 '000 € / tonne European SMP 300 World SMP price price 3 3 200 11 00 2 2 NB : European quotations in France ; European farm milk price in Germany. 1 1 00 12 00 12 Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 3 This new exposure to volatility is linked to the CAP reform implemented in 2003 Objective of the reform: to guide the European dairy sector gradually towards more market orientation.  to confront the European dairy sector with world market signals in order to stimulate its reorganization and increase its competitiveness. In 2008, The ‘CAP Health check’ confirmed this free-market orientation with the ratification of milk quota abolition for 2015. Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 4 2

The principle of CAP reform  Less market regulation / Compensation by direct payment to farmers billion € 7 European expenses for dairy sector regulation 6 (storage + marketing aid + refunds) 5 5 billion € / year 4 (6.5 billion USD) 3 6.0 5.3 4.8 4.4 4.3 4.1 2 3.8 3.7 3.1 2.9 3.0 2.8 2.8 2.6 2.2 1 1.7 0.4 0,1 1.1 0.6 0,5 0 90 92 94 96 98 00 02 04 06 08 10 CNIEL / Commission Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 5 Balance of the CAP reform - What is the current health of the European dairy sector? No more internal disposal subsidies No export refunds (except during the 2009 crisis) Export refunds for SMP € / 100 kg 100 80 Aid decreased down to zero during CAP reform 60 2009 crisis 40 (temporary reintegration for 9 months) 20 0 99 01 03 11 05 07 09 CNIEL / Commission Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 6 3

Balance of the CAP reform - What is the current health of the European dairy sector? Gap between world and European prices is narrowing, especially for SMP. Butter SMP 1 000 € / tonne 1 000 € / tonne 11 5 09 11 99 01 03 05 07 09 99 01 03 05 07 4 4 EU Butter price European SMP price 3 3 2 World Butter price 2 1 World SMP price 1 0 Average gap between European* and world prices Average gap between European* and world prices before CAP reform (from January 1999 to June 2004) : 1 700 € / t before CAP reform (from January 1999 to June 2004) : 520 € / t after CAP reform (from July 2007 to January 2002) : 470 € / t after CAP reform (from July 2006 to August 2011) : 110 € / t *: French quotations CNIEL / ATLA, ZMB Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 7 The duality of thoughts in the minds of many European dairy operators A clear conviction that the long term outlook is rather positive,.. but also a relative anxiety of being defenceless if a new severe crisis should crop up. Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 8 4

Are we living in a reasonable world ? Can the world market be balanced if we all invest in the same field ? Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 9 Investments announced or finalized in 2011 and early 2012 concerning dried dairy products. The tip of the iceberg : total investments exceeding 3 billion USD 50 projects 28 countries 44 companies Tasmanian Dairy NZ Food Innovation Products Co (Waikato) Estancias del Lago Meierei Wasbek Workshop for Dairy Economists and Policy Analysts 10-11 May 2012 10 5