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Open Letter: On the Dairy Crisis

31 August 2008

Here is what we have to say to the European Union on the dairy crisis:

" To the Agriculture Ministers of the European Union, to the members of the European Parliament, and to Ms. Fischer Boel, European Commissioner for Agriculture and Rural Development

Dear Sir/Madam,

The measures the EU has taken so far in order to deal with the drastic decreases in milk prices at the farm gate have been inefficient . Prices have not increased and many producers risk bankruptcy. In the face of the economic, social and environmental challenges of the dairy crisis, we ask you to recognize your responsibilities. The crisis will continue because the old measures you have implemented and that were proposed in the 22nd July report of the Commission are costly for taxpayers, harmful for third countries and don’t tackle the roots of the crisis: moreover the EU itself criticized these measures during various CAP reforms since 1992. There will be no way out of the crisis without real changes to the current dairy policy (1).

1) the « soft landing » transformed into crash: supply must be adapted to demand

Madam Commissioner, the “market signals” are clear: if demand decreases, supply has to decrease. Even though the European quota was already too high in 2003 compared to European demand, the EU continued to increase it. It is a clear mistake which seems to be dictated by an ideological vision opposed to market regulation . This vision is out of date today: markets, like finances, need to be regulated by public policies. The so called “soft landing ” of quotas by 2015 had two objectives. The first was to offer low prices to the milk industry and large retailers - this has been achieved, to the detriment of producers (who receive less for their milk) and to consumers - who do not see the prices of dairy products decrease. The second objective was a progressive lowering of the price of quotas by 2015 in order not to have to pay allowances to those who bought quotas. One cannot respond to the mistakes of 1984 which we also opposed (when member states were allowed to set up markets for quotas) with another error. The solution is to maintain dairy quotas but to improve the way they work – and to make them non-marketable.

Milk producers are entitled to fair prices. Their work is highly qualified, and requires considerable dedication of time and effort throughout the year: it is work which must be remunerated correctly. In order for a production decrease to result in an increase of prices for producers, it will be necessary to re-examine the mechanisms establishing prices between the EU, governments, producers, the dairy industry, and the retailing sector. We need transparency and a limitation of margins. It is necessary to re-examine the current rules of competition, which have not prevented the formation of retailing oligopolies.

Not only this, but the social, rural and environmental challenges of the dairy crisis also have to be answered. “Who produces, how, and where” are questions just as important as “how much is produced”.

2) the social and rural challenge : to differentiate a reduction in production and better distribute production between the regions

In spite of the important role played by small and middle sized dairy farms in the countryside and rural economies of many regions, EU dairy policy has up until now presided over the disappearance of a great number of these farms. The EU even financed the abandonment of production and the Commission proposes it again in their report: this constitutes a misuse of public funds. During the last crisis, the weakest could not survive, but the banks were used to support the largest producers. Today the objective of restructuring production through the crisis does not work as the Commission has planned - the same banks who are responsible for the financial crisis are no longer providing producers who increased and intensified their production with credit. Today the indebted producers are those who are in the most critical situation.

We ask you to stop haemorrhaging of the number of milk producers. It is necessary to modulate the production decrease according to the size of the dairy farms and the number of people active on the farm. Intensive large farms must reduce their production more, and small-scale farms should be exempted from reductions. It will then be necessary to raise the question of the geographical distribution of production: its movement towards the ports where there is cheap access to imported soya harms the development of European meadows and native fodder. The rural environment needs a great number of dairy farms, well distributed throughout the regions which have an agro-climatic disposition to milk production.

3) for Copenhagen, words are not enough : the mode of milk production has to be changed

The questions posed by today's environmental challenges (climate, energy, biodiversity, pesticides,...) require us more than ever before to question how milk is produced in Europe. Intensive dairy production, based on imported soya, manure, and turbo cows quickly replaced without never having grazed on grassland, has been largely supported by the CAP since 1962, starting with the lack of tariffs on the import of animal feeds, CAP premiums given to silage maize but not to grass and so on. The EU must turn it's back on this industrial model which is a voracious consumer of energy (both for production and transport) and which makes the EU dependent on imports (2) . The farms which courageously moved to a sustainable form of dairy production, by cultivating grass and protein plants, became less dependent on external risks and have resisted the crisis better. The EU has enough space to cultivate its own protein plants, but if only it ceases promoting a model now incompatible with the environmental crisis. The current distribution of the CAP premiums must be re-examined in this direction. With Copenhagen only a few months away, we ask the Council of September 7th to take significant measures which will show, beyond words, a will to change the mode of production.

Several Member States expressed during summer their will to reconsider the quota increase of 2009. This is good news, but it is necessary to go further. We propose that European deputies work to convince their governments that another dairy policy can be implemented now – a dairy policy which will be more legitimate for taxpayers, better for the environment, save many producers from bankruptcy, and which will return hope to all the young people who want to start a dairy farm.

The dairy crisis is global, because the WTO is defining all agricultural policies. You will find herewith a position of our world farmers’ movement Via Campesina, where milk producers of both the North and South demand a change in policy.

Madam the Commissioner, ladies and gentlemen Ministers, it is not a shame to change a decision taken in the past: it is never too late to act justly and well. Your responsibility is great. We ask you to act urgently on these social, economic and environmental urgencies.

We thank you for your kind attention.

Yours sincerely,

Lidia Senra (tel : +34 609 84 5861)- René Louail (tel : +33 6 7284 8792)

Members of the Coordinating Committee

(1) See our proposals of April 4th 2009 and our declaration at COMAGRI of EP on July 21st.

(2) These European imports support the production of destructive GM soy in South America- see the FOEE/ECVC briefing of Nov 08 and the FOEE/ECVC film to be published next Oct 16th."

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