Dairy cows in a field© Tim Scrivener

More than 60% of dairy producer organisations (POs) have earned better or more stable milk prices for their farmers, according to a report.

The European Commission study, examining the so-called “Milk Package” of industry measures, found there were 260 POs across the EU by the end of 2015, covering 13% of total production. 

A questionnaire sent out to POs found improved milk prices were the main motivation for setting up a legally constituted group, which collectively negotiates with processors by using an exemption from competition law. 

Of the groups that replied, 70% said they had achieved better prices, 60% said their returns were more stable, while 65% said they had strengthened their producers’ position in the supply chain.

See also: Producer organisations – what they can do for dairy farmers

Take-up gulf

But the report found a gulf between EU countries in the take-up of POs.

Three member states – Germany, France and Italy – accounted for 92% of the existing groups. 

The UK is one of the countries lagging far behind.

In 2015, just 5% of British milk deliveries, by milk solids, were collectively negotiated compared with 42% in Germany and 20% in France. 

Here, the only POs set up so far have been Dairy Crest Direct supplying Dairy Crest, Direct Milk supplying Muller, and the Milk Supply Association supplying Lactalis.

‘Clear potential’

The report placed the UK alongside Croatia and Romania as countries with “clear potential” for more collective bargaining.

This was partly because farmer-owned co-ops do not dominate the market, the way they do in Denmark, Ireland or the Netherlands. 

Across farmer organisations, POs and governments, explanations for why more have not been established were a lack of success stories, little knowledge among farmers about the advantages, and unwillingness from producers to work together.

Clout

In countries where POs have been successful, governments said the groups needed to have a minimum size to carry some clout, but should be set up at a manageable size before expanding.

In Germany and France, POs tend to contain on average 100-250 members. 

Other suggestions included raising awareness among milk buyers about collective bargaining, ongoing financial support for POs, and ensuring farmers cannot circumvent their collective agreements.

NFU dairy board chairman Michael Oakes said the union had always promoted and encouraged POs.

“It’s a shame that many UK milk buyers, both large and small, see POs as a threat and have publicly said that they will not work with farmers who are part of a PO,” he said.

Brexit

Mr Oakes added that the British government should implement the report’s recommendations, with Brexit looming.

“It would be extremely unfair if the commission supports EU farmers to collaborate and increase their bargaining power in the supply chain, but the same support isn’t offered here in the UK.” 

Thierry Roquefeuil, chairman of the Copa-Cogeca milk and dairy products working part, said the package should be extended beyond 2020 – when it is due to come to an end.

But he said the measures, such as POs, should be complemented with tools to help farmers’ incomes, such as fixed-price contracts and futures markets.

“The dairy package is not sufficient to meet all the challenges,” Mr Roquefeuil said.