EMB says coronavirus has potential to be worst crisis yet for dairy

For example, the Global Dairy Trade index dropped as much as 3.9% this week, after a steady decline in recent weeks. Further significant price decreases are also being seen on the Italian spot milk market. These prices have shrunk by almost 7% compared to February.

Following the same trend, the rates for milk-product futures on the European Energy Exchange (EEX) have dropped significantly. Contracts for May went down 5.7% to €3,300 ($3,544)/tonne.

Iindividual dairy-market stakeholders are already taking action to limit the fallout of the coronavirus crisis, the EMB said.

For example, Mila, an alpine-milk dairy in South Tirol, recently asked its producers to voluntarily reduce their production volumes to adapt milk supply to this crisis situation.

It has become clear over the past few days that during crises, everyone needs to act in concert in order to deal with the arising issues effectively, the EMB said.

It is not enough for individual regions to react or for different regions or institutions to implement measures that are all very different from each other, the EMB warned, adding the measures must be aimed at everyone and must enjoy broad support to bring the coronavirus crisis under control.

In many areas, the amount of milk being produced on farms is too high for existing processing and market capacity, the EMB argued. The spread of the coronavirus is leading to major difficulties in procurement and logistics in the processing industry. This is further compounded by possible personnel shortages, as well as the collapse in demand for certain products.

An effective way to bring real relief, the EMB said, is to actively reduce the pressure caused by these surplus milk volumes in the EU.

It has urged the European Commission to immediately start preparing for the launch of a voluntary volume reduction scheme with capping. As the situation continues to worsen as is currently expected, volume reduction must be promptly activated. 

In this way, the EMB says farmers will jointly reduce production on their farms. This action, coordinated at EU level, can then adapt production volumes to current circumstances and can keep the economic consequences in check.

The EMB said failure to react risks the entire sector falling into its worst crisis yet.

Even after the health consequences of the coronavirus crisis start to subside, the economic fallout will continue to wreak havoc, it said, adding that in the major crisis of 2016, the voluntary production reduction scheme was launched too late.