Could the Spanish Dairy Sector Collapse?

ANALYSIS - This week, the Spanish Small Farmers Union (UPA) has said that the Spanish milk market is on the brink of a collapse. The union says that rising production costs are crippling farmers, and farmgate milk prices are falling.
calendar icon 5 April 2012
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For the dairy industry, feed accounts for around 70 per cent of production costs. These feed costs have reportedly increased by 50 per cent since 2010 and the current drought situation is set to make this worse.

UPA has said that demand for dairy products is increasing, which should economically speaking increase prices, but as yet Spanish and European milk producers, have not seen this.

Spanish producers are set to organise protests over the coming month, demanding a fair price for milk.

Arnaud Petit, Director of Commodities and Trade for Copa-Cogeca told TheCattleSite that Spain was not the only country suffering from falling milk prices. In fact, it is a trend that has been seen across Europe in the last couple of months.

Passing the cost of production on from producers to retailers and onto the consumer is a global problem, he explained.

Whilst Spain is suffering from drought, it also has a feed advantage due to the trade deal it has with South America, he says. Through this trade deal Spain can import around two million tonnes of maize and sorghum at a low duty, providing low cost feed for producers. However, Mr Petit points out that South America is also currently suffering from severe drought, which has lowered harvest estimations, particularly for maize.

Whether the Spanish industry is on the brink of a collapse or not is unknown. Certainly producers are struggling with high production costs and a low milk price. Whilst it is too early to see any impact of the European Milk Package, which was given the go ahead last month, it is hoped that when it comes into play, it will give producers more power to negotiate with processors for a fair milk price.

Charlotte Johnston, Editor

Charlotte Johnston - Editor

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