2013-03-26 xml
EDA Policy Conference 2013

EDA Dairy Policy Conference 2013 brings lively debate on dangers of supply management in times of crisis and the need to consider dairy as a whole food from a health policy perspective.

On Wednesday March 20, the European Dairy Association (EDA) organised a Dairy Policy Conference in Brussels. This conference had a double focus with two topics which are currently high on the agenda in the EU: the Common Agriculture Policy towards 2020 and the need to adopt a holistic approach in European health policy-making.

dairy cattle

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Dr Joop Kleibeuker, EDA Secretary-General, opened the conference and introduced the moderator, Mr Fraser Cameron who is Director at the EU Policy Centre. EDA invited a number of renowned speakers from the academic and professional world to share their insights and participate in a panel discussion. On both topics, the conference came to clear conclusions: crisis supply management as proposed by EU policymakers will not work for the dairy sector and is even counter-productive, and there is a distinct need for EU policy-makers to consider dairy as a whole food when developing policy.

Session 1: Common Agriculture Policy towards 2020.

What about supply intervention after the quota expire?

In the first session, the conference speakers shared their insights on a very current topic, frequently in the news: supply management and intervention after quota expiry.

Mr Mark Voorbergen from Claassen, Moolenbeek & Partners shared insights in global markets beyond 2015 and its implications for EU value chains. He spoke of exciting times ahead in the dairy sector, as there are fierce drivers of global dairy demand: the general population growth and the growth opportunities for milk consumption per capita in the BRICs and developing countries. Because of quality and cultural heritage, these countries will mostly be looking towards traditional export regions to fulfil their needs. As global consumption growth is shifting towards the developing world, Mr Voorbergen demonstrated that the global supply will be challenged to keep the pace: between 2011 and 2013 the milk supply is slightly ahead of demand growth, but between 2014 and 2017, milk supply will start lagging behind, despite the post 2015 EU events and continuous growth in New Zealand and the USA. Mr Voorbergen demonstrated that after 2017 rising milk prices may boost milk production in new areas or choke off demand in price-sensitive regions. Although the gap in milk production cost between the EU and New Zealand is decreasing, it still compares less favourably with other export regions. Mr Voorbergen concluded that the post 2015 era should be seen as an opportunity rather than a threat for European dairy chains, and pointed out that supply management is a bad idea when building long-term relationships with global buyers. The EU dairy farmers will have to learn to deal with global market volatility. In this matter, guidance from their co-operatives and banks will be indispensable.

Dr Jan Maarten Vrij, Director International Dairy Affairs from the Dutch Dairy Association and Chair of the EDA Trade and Economics Committee, explained how dairy processors are preparing for a future without quota. He based his presentation partly on a survey conducted by EDA amongst dairy processors. As a first conclusion of the EDA survey, it appears that dairy processors are taking their responsibility. The need for future planning is taken seriously, as individual dairy companies are already taking initiatives which are expected to be further developed. It should be taken into account of course that different processors face different situations. One of the tools that companies should develop and use is communication: forecasts and communication of market developments, as well as regular dialogues with producers on supply prospects. This is important, because processors want to contribute to a stable market and they need to plan their capacity to demand and supply. Another important tool is contracting. Half of the respondents to the EDA survey, including co-ops, already have contracts in place with agreements on volume. Dr Vrij also spoke about some of the pros and cons of introducing A/B systems, in which a fixed milk price is set on a certain volume and that possible extra volume will be sold at a lower price. Dr Vrij concluded that dairy processors and dairy farmers are clearly preparing themselves for responsible operations after quota abolishment and urged for policy stability to help processors and producers in preparing for a quota-free environment.

Professor Michael Keane presented a preliminary analysis of the approach as adopted last week by the European Parliament for crisis supply management. According to Article 156a in the amended proposals for CAP 2020, from 1 April 2015, when a price of EUR 0.24/litre is reached, the Commission may decide to grant compensation to milk producers who voluntarily cut their production by at least 5% compared with the same period in the previous year. When granting this aid, the Commission will also impose a levy on milk producers who increase their production during the same period and in the same proportion. In Prof Keane’s view, reintroducing supply management by public authorities would be counterproductive. Although a crisis supply management policy can be successful in stabilising extreme low prices in certain defined circumstances, such as a closed economy, the economic circumstances in the EU have fundamentally changed for EU dairy, following the 2003 Luxembourg agreement and the GATT/WTO Uruguay Round of 1995, in which the EU dairy sector evolved from a largely closed economy to an open economy. In an open economy, international competitors would profit from crisis supply management by experiencing stabilised or increasing prices and responding with stabilising or increasing production. The EU dairy sector on the other hand, would then experience limited price increases and reduced production. Professor Keane put forward more attractive alternatives. For a public policy, he spoke about a crisis reserve, an income stabilisation fund and the strengthening of existing policy instruments. Private alternative policies would be price risk management, futures markets, forward contracting etc. He also argued that from a historical perspective, a simple uniform crisis supply management policy would be inappropriate for the widely divergent price and production systems among EU 27.

Concluding, EDA President Michel Nalet put forward a simple yet urgent message. He asked for stability, predictability and transparency in EU policies. Dairy processors are preparing, together with dairy farmers, for a future supply, so reintroduction of supply management by public authorities is not in line with the policies developed in the last 10 years for the dairy sector, and is not a good idea, as this would penalize the farmers who anticipated on decided policies. He asked EU policy-makers to give the EU dairy chain the chance to take advantage of the ongoing developments both in Europe and worldwide.

During the panel debate, the speakers reiterated how the proposed crisis supply management for the dairy sector would be counter-productive. It was pointed out, for example, that the average age of dairy farmers is quite high, making it necessary to attract new entries to the sector. Penalizing anyone who increases production more than 5% would discourage the needed new dairy farmers to invest. Another important point was raised with regards to the proposal currently on the table. Initially, the Dairy Package was introduced to give the dairy sector more confidence, yet the current policy seems to bring a new pricing system every day. The panel agreed that dairy farmers need to be given confidence and that they need to be supported in this transition to a quota-free EU environment, but that there are better alternatives for doing so than via a crisis supply management system. First of all, the Dairy Package needs to be given time to do its work. Second, we need to look into some tools to cope with extreme price volatility such as hedging, futures market, and a timely and accurate analysis of market data. There are also important roles to be played by milk cooperatives, the dairy industry and other stakeholders such as the banks, who should be flexible in structuring loans for dairy farmers. Mr Nalet concluded that it is important that all members provide as much input as possible to EDA, so that EDA can translate that input into actions. The final conclusion of the first session is that the proposed supply management measures in times of crisis will not work and will most likely be counterproductive for the further development of the European dairy industry.

Session 2: Health, a focus point in European policies, asks for a holistic approach

Dairy, a whole food, not just a few nutrients.

The second session of the policy conference focused on health, and the need to view dairy as a whole food instead of singling out a few nutrients.

Professor Jean-Michel Lecerf from the Institut Pasteur de Lille first spoke about the importance of dairy in health across all ages. Milk and dairy products are nearly a complete food with almost all macronutrients and all micronutrients essential for healthy life. Milk is a natural food that contains the most nutrient diversity among all available food to humans. Professor Lecerf strongly argued that milk should be regarded not only as the sum of its nutrients but that the matrix effects should be considered. This is specific to dairy products, which contain a lot of nutrients that are able to interact favorably. He confirmed that dairy products thus have positive effects on weight management, metabolic syndrome, colorectal cancer incidence, bone health and cardiovascular disease. Prof Lecerf concluded that the incredible nutrient richness and the specific matrix effects make naturally nutritious dairy foods useful for health and nutrition at any age.

Dr Rosalie Dhonukshe-Rutten from Wageningen University spoke about how dairy can improve the health of elderly people. She discussed the role of nutrition with regards to ageing and showed the nutrients that are of importance for the elderly. It is crucial to not only look at the well-known calcium, but also to be aware that elderly people do not consume enough vitamin D and B12, and that they often have a too low energy and protein intake. These nutrients are very present in dairy products. Dr Dhonukshe-Rutten advised to give elderly people nutrient dense foods, such as dairy products, especially since dairy products fit easily into a healthy diet.

Mr Jørgen Hald Christensen, Director of the Danish Agriculture and Food Council and Chair of the EDA Food and Environment Policies Committee, spoke about the discrepancy between the science showing that dairy is good for us and its insufficient reflection in European health policies. He showed that dairy consumption is recommended in dietary guidelines all over Europe and that major scientific studies confirm the natural nutrient richness of dairy foods and the positive associations between dairy and health. In European policies, however, dairy is not getting the attention it deserves, as food regulation focuses on single negatively perceived nutrients (too much saturated fat, added sugar, salt etc.) and items to avoid. Comparing this to consumer needs, Mr Hald Christensen pointed out that consumers eat whole foods, not single nutrients, and focus on positives, such as taste, enjoyment and health. A negative approach towards foods and diet is confusing for consumers. Looking at the EU claims regulation, he mentioned the paradox that one can claim that calcium is good for bones, but not that milk is good for bones. Mr Hald Christensen concluded that the focus of EU health policy should shift from single nutrients to whole foods, that positive messages should be delivered to the consumer, that consumer education is important and that new scientific results need to be taken into consideration.

All speakers were then joined by Dr Judith Bryans, chair of the EDA Nutrition Working Group, and Mr Eric Grande, chair of the EDA Claims & Labelling Working Group, during the panel discussion. The panelists agreed that the focus should be on whole foods, not on single, negatively perceived nutrients. All nutrients are good when eaten in the recommended amounts and it is important to consider how they interact and function in the diet. Current public health policy is confusing for consumers who have difficulties to translate single nutrient information in a healthy and balanced diet. Consumers react best to positive messages. In addition, when current EU legislation puts constraints on the dairy (and other food) industry, health care professionals and others to communicate good things about their products while advocacy groups and media have freedom of speech, there is something wrong in the system. Maybe a service check of the whole system is needed. A holistic approach, looking into the total nutrient composition and matrix effects of foods is necessary, and it should be a priority for the dairy sector to convey this message to the public authorities. Finally, the panel suggested that the time is right for the dairy sector to join forces with other supporters of nutrient rich basic foods and communicate together.

european dairy association

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