German milk board warns about competitive failure

The German dairy farmers are in the dark, according to their organisation MEG Milch Board.

“Once again we are experiencing market failure. Responsible for this is, once again, is the subsequent fixing of milk prices. As before, the producers lack important information on the market situation at the time of the production decision. Market signals such as falling demand are not passed on to the milk producers in a timely manner, ie, before the milk is produced, and the quantity supplied and the quantity demanded, diverge,” says Frank Lenz, chairman of MEG Milch Board.

All of this has been known since an inquiry about the milk sector in 2012 by the German Bundeskartellamt (Federal Cartel Office).

“We very much welcome, in future, the Bundeskartellamt being able to take appropriate measures to remedy abuses of competition, which it finds as part of a sector inquiry – to pave the way to free milk producers in our economic system: that the purchase price, as is usual in most markets, is contractually agreed before the goods are delivered,” says Lenz.

He points specifically at three points required in the future: quantity needed, timescale for production and what price is agreed between negotiating partners for this quantity in this period.

“If this information reaches the producers before delivery, they can react appropriately to the needs of the market and the dairies as well as to threatening economic shocks, for example by restricting the amount of milk produced,” states the Milch Board chairman.

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