Dutch dairy Friesland Campina is to pay its farmers a bonus for limiting milk supply.
Farmers are to be paid an extra €2.00/kg of milk if during the period from January 1 to February 11, 2016 they supply less milk.
The European Milk Board (EMB) has said that it is an important instrument for countering further increases in production in the milk market.
The idea is for a bonus payment to encourage dairy farmers not to increase or even to reduce their production, the EMB stated.
The reference volume taken is the average daily supply within the December 13 – 27, 2015 reference period, according to the EMB.
Sieta van Keimpema, Vice-President of the EMB, sees this as a key signal.
“So the dairies, too, are making it clear that unchecked growth in volume is problematical, and there must be instruments to counter it.
“Friesland Campina has opted for a voluntary limit on supply, or a voluntary restraint on supply.
“Because that is a very effective way of reducing volumes. It means positive action can be taken in the market and distortions prevented,” van Keimpema said.
Initiative on the part of individual dairies is not enough and according to the EMB, it is up to politicians in particular to establish the proper legal framework for this, stipulating a market volume that enables prices to cover producers’ costs.
In recent months, the EMB has said that unchecked growth as a pan-EU strategy has caused huge problems and already driven many dairy farmers to ruin.
With prices in some cases at just 20c/kg of milk, survival is simply impossible for many farms, according to the EMB.
It has stated that the fact that a major dairy group itself is now pulling in the reins by applying a voluntary restraint on supply shows yet again how drastic the situation is.
“The EU politicians must finally act now to stop this development and cannot pursue their ignorant line further,” she said.
She also appealed to the European Commissioner for Agriculture, Phil Hogan, to put into practice a Market Responsibility Programme on an EU level with voluntary restraint on supply as the key element to enable the milk market to finally recover.