Contrasting views about dairy trades prospects

17 March 2000

Contrasting views about dairy trades prospects

STARKLY contrasting views about the fortunes of dairy farmers were highlighted at the conference.

Organic dairy producers have a bright future, as market demand for their product continues to outstrip supply, leading to premium prices, said Jeremy Deacon, managing director of Bristol-based Horizon Organic Dairy.

He predicted the EU organic market, which is growing at 25% a year, would account for 10% of total food sales by 2005, worth k30bn (£18bn). The dairy sector was expanding even faster.

A combination of factors had led to this, especially on the demand side, he said (see panel). "Our research has shown that almost everybody would switch to organic food if there was no price difference," he said.

Producer concerns that the bubble would burst as soon as supply catches up were not justified, Mr Deacon said. "Organic food costs more to produce, but it is a genuinely added value product and that will always be reflected in the market."

Sainsbury is already offering a five-year, rolling price guarantee to its milk suppliers.

These optimistic views were in stark contrast to those of Antoon van de Ven, secretary general of the European Dairy Association. He predicted continuing pressure on the EU conventional dairy market, after the failure of Agenda 2000 to make any reforms until 2005.

Increased quota from this year for certain member states, more imports and restricted ability to export would boost surpluses and drive down prices. Static demand for dairy products (except cheese) and eastward enlargement would compound the problem. &#42

ORGANIC DAIRYING

Reasons for growth

Demand side

&#8226 Consumer desire for healthy food and concern for the environment.

&#8226 Favourable media coverage.

&#8226 Rising disposable income.

&#8226 Positive involvement by retailers.

Supply side

&#8226 Poor prices for conventional farm produce.

&#8226 Increased government assistance to convert.

&#8226 Commercial assistance to convert (financial and technical).

&#8226 Ethical concerns about intensive farming.