Editorial: Spanish Dairy Woes

Supermarket bargaining power, the limiting effects of quotas on national production and a feed shortage caused by drought last year have led to an unsustainable market situation in the Spanish milk supply chain headed by a disparity between farmgate milk price and production costs.

Spanish farmers have had to endure some of Europe’s lowest milk prices. Spanish processors’ average price of 0.27 cents a litre is being dwarfed by production costs around the 40 cents/litre mark.

Every week, six producers are forced out of milking due to what farmers' unions have called an unfair market structure, the Spanish Agriculture Minister, Arias Canete revealed this week on national television and radio.

Mr Canete said that 22,000 more dairies will face closure if the problem of dairies offering ‘abusive prices’ was allowed to perpetuate. A dependency on French imports would develop, which Mr Canete urged was not good for a failing Spanish economy.

The dairy ‘crisis’ has already been met with strong protest from farmers since the summer. COAG (Coordinator of Farmers Organisations) organised a series of demonstrations which climaxed in a mass collaboration of european dairy farmers protesting in Brussels before Christmas.

Farmers in the north-west of Spain, a dairying stronghold, were active in calling for market adjustments. Protests amounted to a production halt in Galicia which saw 6million litres of milk go uncollected as processors in the region were at standstill.

Protests subsequently generated a national fervour but Mr Canete has told the national press that the problem will not and cannot be rectified by passing costs on to the consumer.

Mr Canete said because of the economic recession and the importance of milk in the national diet it must be the processors’ bills that aligns with production costs.

Extensive talks have begun to create farmer cooperatives that strengthen producer bargaining power. A milk package has been passed by Royal Decree with the hope of concentrating supply.

European subsidy increases have also been confirmed which come from an additional allocation of €31 million. The agricultural ministry have said that, per farm, this will work out at €4-5 per ton available up to a funding cap of 305,000 tons a year.

The government has said that recent market interventions are as far as they are prepared to go.

Unable to fix prices, the government has rallied in European Parliament for more direct payments to support Spanish dairying.