Tuesday, 19 July 2016 06:55

Don’t blame us – EU

Written by  Sudesh Kissun
EU diplomat Eva Tvarozkova. EU diplomat Eva Tvarozkova.

A European Union diplomat says EU farmers cannot be blamed for low farmgate milk prices.

Eva Tvarozkova, deputy chief of mission of the delegation of the EU to New Zealand, rejects suggestions that the decline in dairy prices in NZ results directly from subsidies paid to EU farmers.

Tvarozkova told Rural News the oversupply of milk in the global market has several causes.

She notes that NZ is a small economy easily affected by external shocks or changes in global markets.

In its June Global Dairy Update, Fonterra noted that milk production in Australia and NZ was down 3% for the year ending April 2016.

However, EU production in March increased 7% versus the same month last year. Production for the 12 months to March increased 4% vs the same period the previous year. This is despite falling local milk prices going below the level seen in the same period
last year. Contributing most to production growth are Ireland (+19%), Belgium (+14%), the Netherlands (+12%), Denmark (+6%) and Poland (+5%).

Fonterra says dairy prices will rebound once milk growth eases in Europe when demand overtakes supply.

But Tvarozkova points out the biggest driver of oversupply: the effective Russian ban on EU and other western countries' dairy products.

"All dairy production that was supposed to go to Russia needs to go somewhere else. Ultimately this creates oversupply in the global market, given that Russian is a significant importer of dairy."

Another drag is the slowdown of the Chinese economy, a key dairy market for NZ, also weighing on ourdairy prices. "The volume supposed to go to China needs to go somewhere else, so demand is decreasing."

Tvarozkova accepts that EU farmers have been free to produce any quantity of milk they wish since EU milk quotas ended in April 2015. But she insists EU dairy farmers are not subsidised according to production

"The sort of aid to farmers that used to exist has significantly decreased and is completely decoupled from production," she says. "It means under the new CAP framework there is no incentive for overproduction by dairy farmers."

The lower prices equally lamented in the EU and NZ result from all these global dairy market factors "and clearly cannot be blamed on any sort of overproduction by EU farmers," she says.

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

» Latest Print Issues Online

The Hound

Quid prod quo?

OPINION: Ageing lefty Chris Trotter reckons that the decision to delay recognition of Palestinian statehood is more than just a fit…

Deadwood

OPINION: A mate of yours truly recently met someone at a BBQ who works at a big consulting firm who spent…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter