Uproar in the dairy sector: the industry keeps the pulse of producers by sinking the price of milk

The traditional increase in milk production in the spring months, together with cheaper imports from other EU countries and a decline in demand, are complicating the accounts for farmers. Given the increase in supply and pressure from foreign markets, industries have offered producers contracts with lower prices. Compared with average amounts at origin of 0.60 euros per litre, the price in the new contracts has fallen to between 0.52 and 0.54 euros. According to the farmers’ accounts, these offers do not cover rising costs, mainly driven by the increase in the cost of energy, fodder or straw. These fixed costs are located, according to the data provided, at 0.58 euros per liter, so in accordance with the Food Chain Law, the sale price should be above this figure.

In the industry they argue that the cost is very different in each farm and that there is currently no official average price, but rather that it is negotiated individually with each producer. In these circumstances, farmers opt for short-term contracts for periods of three months, waiting for an increase in prices starting in autumn, with a lower supply. The moderation in the price of cereals has been, according to the producers, a balloon of air. But it is not enough, and the fall in demand, which the industry estimates at 9% in 2022 due to the increase in the final price of the liter, complicates the negotiations.

Faced with this situation, bulk milk imports from other EU countries, although they have been reduced in recent years from more than 500,000 tons to only around 100,000, continue to have a negative impact on the sector as tankers are offered at lower prices. between 0.42 and 0.45 euros per liter, well below the range of production in Spain.

closure of farms

The rise in costs and the tension in the price of the contracts have compromised the profitability of the farms. During the last year around 700 farms have ceased their activity, leaving a total number of 10,400 active facilities. On the other hand, those that have resisted have slightly increased their average size. The largest grow more and, in many cases, in areas not traditionally linked to milk production, but to nuclei or territories with more consumption such as the Mediterranean area. Those that disappear are the smaller ones, located in traditionally cattle-raising areas, which affects the abandonment of the territory. One of the main problems is the lack of generational relief in a sector where the group of workers is of advanced age.

By number of animals, there has also been a reduction in the number of heads from more than a million years ago, to the current census of around 880,000, although a very important part of the current census are animals with higher yields due to genetic improvements.

This lack of dynamism in the sector has meant that in 2022, compared to average productions of 7.5 million tons, deliveries fell by just over 2% to 7.3 million tons, with monthly figures between 530,000 and 550,000. tons.

In relation to the drought, the aid provided by the current government to support the sector amounts to 355 million euros for all the affected livestock sectors. In the case of dairy cattle, the aid is estimated at 61 euros for a dairy cow in the areas most affected by the drought —basically the southern half of the Peninsula, together with Aragon and Catalonia—, while in the Cornisa and Galicia aid is reduced to 25%. In Madrid, Castilla y León, Navarra or La Rioja, it is reduced to 50%. In the case of suckler cows (destined for breeding), the aid would be 157 euros per head with an equal distribution system.

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