What is it?
According to the board, the MRP is a programme for the EU dairy sector that can be used when there is a risk of market imbalance. A monitoring facility will enable market crisis to be identified early followed by a three phase reaction – early warning, crisis and obligatory cut back phase.
Early warning phase – when MI ?7.5%
Monitoring agency announces warning and private storage is opened, Incentives for extra consumption of milk – feeding to calves, fattening of heifers on milk.
Crisis - when MI ?15%
Monitoring agency announces crisis and reference period established. Bonuses offered to farmers who reduce production by at least 5%. Penalty for farmers increasing production.
Obligatory cutback phase - when MI ?25%
All farmers to reduce production by 2-3% for a defined period.
Chief dairy adviser Sian Davies says…
UK and EU dairy farmers now compete in a global milk market and no EU only mechanism can manage to cushion EU farmers through periods of market downturn. If EU farmers are forced to cut back production this only leaves the gates open for further imports from outside the EU and allows those farmers to be better prepared for increasing production when the market improves.
I would support better monitoring of the dairy market and have been calling for improved data collection and forecasting both at UK and EU level to enable farmers to better predict and react to the market. Put simply no amount of monitoring could have predicted the Russian Embargo or periods of inclement weather that impact on EU milk production.
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I’d also agree on the need for EU market indeces and this is gain something we have been calling for – but for different reasons. It’s clear that we need EU dairy price indeces to help further the development of risk management tools such as futures contracts which could be utilised by processors, co-operatives and producer organisations to manage risk volatility on behalf of their farmers. Developing an index for EU cost of production may be more problematic is we look at the different costs and production systems across the EU. For example labour costs vary greatly between say Poland and the UK. Developing price indexes for dairy products will be far simpler and more useful. This could be role for the Milk Market Observatory.
Furthermore how would the MRP scheme work with the different milk contracts we have in the UK? Some farmers are contracted to supply a volume, others are contracted to supply retailers and others have evergreen contracts that state “all milk produced will be collected”.
Elements of the MRP could work at a processor level but this must be done in consultation with supplying farmers, ideally arranged in a producer organisation or grouping that can allow them to manage volumes in discussion with the processor.
It’s clear that the Commission is moving away from EU supply management measures and in their place looking for ways to support farmers to become more market orientated, matching supply with demand. Market management measures such as intervention and private storage are available to support the dairy sector through periods of low prices and have been strengthened over recent months.
Looking ahead I believe that Agriculture Commissioner Hogan is right in supporting the development of EU risk management tools – which will be the role of the new High Level Group on Competitiveness and looking at how the European Investment Bank can be utilised to support EU agriculture, both at processing and farmer level.