German farmers symposium on supply

The German Farmers’ Union (DBV) recently held a symposium on pricing and supply relations. “The on-going crisis in the dairy market with ruinous producer prices calls for new market-oriented ways for dairies as well as dairy farmers to design delivery relationships. Responsibility for the management of delivery, marketing and volatility lies in the hands of the market players”, said the dairy farmer president Karsten Schmal at the meeting.

The goal of the German farmers’ association is to counter the increasingly globalised dairy market run by quantities and by the market fluctuations, with a modern design of delivery relationships.

There are already examples of dairies where the production quantities could be altered by appropriate incentives, Schmal notes. Depending on the individual economic situation of the dairy, incentives for a lower or an increased delivery might be appropriate.

Schmal points out that the dairy sector needs to set the stage for preventing future price crises:

“Planning security for prices and quantities has to be improved for both sides, milk producers and dairies.”

Various price models, such as fixed-term fixed-price agreements, bonus payments or a price-related price-scale, should be discussed and decided individually in the companies and implemented, he says.

“These instruments, like commodity exchanges, must be seen as an opportunity to hedge more price risks for dairy farmer,” emphasises the dairy farmer president.

Schmal also made it clear that the delivery and receiving obligation is to be regulated solely among the parties involved and in the cooperatives. Both are inextricably linked in a cooperative dairy.

Termination periods should be designed to give milk producers the opportunity to react, but not to jeopardise the economic stability of the cooperatives.