Prices on the EU dairy market are expected to stabilise during the remainder of 2008 despite wider-global supply concerns, says the president of the European Dairy Association (EDA).
During a presentation given to the EU parliament on Wednesday, Veijo Meriläinen said that prospects for the bloc's dairy farms and processors appeared mostly positive, though challenges lie ahead for processors and farmers.
He claimed that although demand for milk and other dairy products was expected to remain strong, uncertainty will remain over where additional production may come from.
Meriläinen suggested that there is a need in Europe to create a sustainable milk supply as well as dealing with nutrition issues over labelling and health claims, if competitiveness is to improve in the industry.
Then urgency for addressing these concerns has been driven in part by ongoing Common Agricultural Policy (CAP) reforms that have resulted in an increasingly market driven industry, Meriläinen stated.
The reforms require a number of commitments from producers in a bid to improve profitability within the market through deregulation of the existing systems, including abolishing export refunds and other market protection measures.
As a result of these measures, the EDA said that extreme price volatility had occurred during the first half of 2008 and the last six months of 2007.
Commodity costs were found to be up between 40 to 80 per cent over the period, which in turn led to a 20 per cent hike in processed good prices, the association added.
Meriläinen said that with prices up over the period, demand had eventually began to fall negatively affecting farmers incomes. A problem exacerbated by increasing fuel and feed costs, he added.
The EDA said that although prospects for the industry remain generally positive, there was some uncertainty over global dairy production issues, such as whether India can export a significant milk supply worldwide as well as US growth prospects. The impact of South American and Eastern European countries on supply and demand also needed to be considered by the industry, the association said.
In a bid to remove some of this uncertainty at European level, Meriläinen said that total clarity will be required by the Commission in regards to its plans for the CAP reforms. He said this was particularly true for detailing the exact nature of quota increases before removing the milk quota production system by 2015.
"Major investments on farms and by companies in innovation, processing plants and in the markets will be needed to ensure for the industry profitable development up to and after 2015," he stated. "Therefore, full commitment to the principle of abolition is needed now to give the industry the right framework for their investment decisions.
In addition, the EDA said that it also called for no further changes to current intervention schemes, which have been used as a safety net for some producers over the price of some products.
Besides this CAP focus, the incoming regulations on health and nutrition claims are another major concern of the dairy industry, especially in terms of nutrient profiling.
Nutrient profiling is defined as the science by which foods are raked according to their nutritional composition. While nutrient density was previously applied to overall diets, increasingly it is being applied to individual foodstuffs.
Meriläinen said that he was encouraged by the commission's pledge to provide dairy specific nutrient profiling for its products, which can be high in naturally occurring saturated fatty acids.
The presence of these fats would normally be read as having a detrimental impact on health through profiling, though the industry claims that peer-reviewed research has found no proof that the naturally occurring variant found in dairy can be harmful.
Meriläinen added that he hoped the threshold for acceptable saturated fat levels in products with health claims would reflect this.
"In our opinion, the majority of cheeses should have the possibility of bearing a claim," he stated. "Therefore, it is essential that the limits for saturated fat should not be set too low."