Until April 1, more than 8,000 dairy cattle farmers have signed the renewal of their contracts for the supply of milk with the industries. The rest of the farmers, up to the less than 12,000 who currently remain, as members of different cooperative groups such as Feiraco, Iparlat, Covap or Central Lechera Asturiana, do not have a contract, and their income is as a result of the balance of the companies. According to the data managed by the production sector, the bulk of the contracts signed in the last month have registered an upward trend.
Those signed in the weeks preceding March 31, when their validity expired, registered an average increase of 38 euros, to reach average prices of between 0.40 and 0.41 euros per litre, which represents an increase of between four and five cents over the previous year. Compared to this average, there are some important firms with stagnant sales that maintain purchase offers at less than 0.37 euros, still losing farmers. The current regulations contemplate the possibility of signing contracts for one year, although farmers can request shorter terms, with fixed prices or linked to different parameters, with the possibility of reviewing them depending on the evolution of the production costs.
Along these lines, Román Santalla, from Unions Agrarias in Galicia, and head of livestock at UPA, considers it essential that Agriculture offer monthly information on the evolution of the production cost indices in order to apply the Chain Law. , and that the Autonomous Communities also establish the same, something that is not done today. Likewise, he demands that the Administration inform when a file is opened to a company and not wait for the resolution of the same that can last for years.
However, these prices are on the rise as a result of the general increase in the means of production, for Rosario Arredondo, a Cantabrian cattle farmer from COAG, they currently do not fall below 0.44 euros per litre. From the organization of milk producers OPRACOL, its president, Francisco Fernández, estimates that prices below that figure are causing farmers to work at a loss, which has already caused the sending to the slaughterhouse of cows with less production than in other moments would be profitable, in order to have liquidity to continue feeding the rest. In his opinion, the reduction of animals would be more extensive as of April 30, as soon as the community aid forces the animals to be kept on the farm in the first four months of the year.
For the purposes of the income of dairy farmers in a crisis situation like the current one, to these price increases derived from the markets, the direct aid approved by the government of 124 million for the cow’s milk sector is added at a rate of 210 euros for each of the first 40 animals per beneficiary, 145 euros per head from 41 to 180, and 80 euros per animal when there are more than 180 cows. In the case of sheep, the aid is 15 euros per animal, with a fund of 32.3 million, and 10 euros for goats, with a fund of 12.7 million. This direct aid has been valued in the sector as an important measure to cover the holes caused by the crisis, although it is estimated that the way out in the future is to sell by covering production costs, something that cannot be achieved if there is no greater control over contracts by applying the Law of the Chain and, above all, due to the differences in power between the farmer and the buyer, also dealing with a perishable product.
He knows in depth all the sides of the coin.
Negotiations in recent years with a view to signing the contracts were marked by an excess of global supply and with it the possibility of importing cheaper raw material from other EU countries, low prices and tacit agreements between industries so that farmers the collection company will not be changed. At present, on the contrary, world demand exceeds supply due to increased purchases in Asian countries, with a strong general rise in prices in all EU countries, increases that are finally being registered in the Spanish sector. This has given rise to companies in need of milk, which previously imported surplus raw material from other member countries at cheaper prices, have put aside possible pacts for their purchasing policies and also try to “steal” farmers with an improvement purchase prices to ensure your supply needs.
In Spain, the herd has been reduced in recent years from more than 900,000 to 830,000 cows, with the annual closure of between 700 and 800 farms to less than the current 12,000, as a result of the improvement of structures, of larger farms and by advances in genetics. Since 2016, production has gone from 6.8 to more than 7.5 million tons, a figure that is still far from a demand for fresh milk and derived products of more than nine million tons. The current cost crisis and closures pose a threat to increase the deficit position of the sector.