One euro per stone? The milk price will continue to rise because of the drought
Within a year, a series of shocks fueled food inflation between the rapid post-Covid recovery and the war in Ukraine.
The already very high price of milk will continue to rise due to the ongoing historic drought in France, as farmers no longer have enough grass to feed their cows, with cascading consequences for overall dairy production.
“The price increases that have existed for several months will continue for dairy products,” says Benoît Rouyer, economic director of the National Interprofessional Center for Dairy Economics (Cniel).
Within a year, a series of shocks fueled food inflation between the rapid post-Covid recovery and the war in Ukraine. Among dairy products, between June 2021 and June 2022, the price of yoghurts increased by 4.5%, semi-skimmed milk in cartons or bottles by 4.5%, butter by 9.8% and cheese by 5.2%.
“Bad news for the consumer, we don’t see dairy inflation falling in the coming weeks,” the economist continues.
Global warming has also had a very concrete impact.
First there was an unusually hot and dry month of May, then three heat waves in June, July and early August. The drought is “the worst in 70 years,” notes Christian Huyghe, Scientific Director of Agriculture at Inrae.
“Lack of Milk”
As a result, grass production fell 21% from normal on July 20, at a time when dairy cows mostly feed on pasture, according to data from Agreste, the Department of Agriculture’s statistical service.
When the grass in the meadows is no longer green, the shepherds have three options: fall back on their planned fodder supplies for the winter, buy animal fodder, or sell part of the flock to reduce their costs.
With feed prices for dairy cows up 25.9% in May from May 2021, according to Agreste, many breeders agree that parting with some of their animals is most profitable.
There will still be milk on the shelves, but Benoît Rouyer believes that there is a “lack of milk”.
“Overall, a shortage of milk leads to a reduction in the ability to make butter, cream, milk cartons, cheese… And when you have a product, regardless of the industry, it affects the price.” , he explains.
Upcoming negotiations?
With a subtlety: in the current agri-food system, trade negotiations on food prices take place once a year, and the prices at which traders (hypermarkets and supermarkets, etc.) buy milk from producers do not automatically increase with the increase in production costs incurred by farmers.
Negotiations resumed in the spring, and the National Federation of Milk Producers (FNPL) is demanding that the liter of milk sold on supermarket shelves be close to the euro by the start of the school year “around 78 cents at a fixed price,” the observations made her network conducted this summer.
In 2021, the prices paid to producers for cow’s milk averaged around 390 euros per 1,000 litres, an increase of 4.3% compared to 2020. If the price rose to 427 euros in May 2022, the unions claim that this new price still does not cover their production costs and are demanding new increases.
For comparison: “In Germany, a tonne of milk costs 480 euros, in Belgium around 500 euros and in the Netherlands up to 540 euros per thousand litres,” explains Thierry Roquefeuil, President of the FNPL.
If France doesn’t reach the level of its European neighbors in terms of milk prices, the association threatens to turn into a “union of destruction” at the beginning of the school year, he warns.
