Paris, Aug 27 - The head of France's largest farmers group urged the government on Wednesday to reverse a "grotesque" ruling that threatens to completely overturn the country's milk pricing system.
The comments came amid a growing dispute over prices between farmers and Entremont-Alliance, France's biggest producer of Emmental cheese and a major producer of industrial dairy products like butter powder and lacto-serum.
"It's not just an issue between Entremont and its producers. It is becoming a national issue," Jean-Michel Lemetayer, president of the FNSEA farmers association told reporters after a meeting with Agriculture Minister Michel Barnier.
"Who can envisage a situation where the price of Camembert changes as a function of a variation in the price of butter powder in New Zealand?" he said.
The trigger for the dispute is an offer of 311 euros ($457.4) per 1,000 litres of milk Entremont made its suppliers in western France in July, a 30 euro increase over July 2007, but well below the 49 euros rise that farmers have been seeking.
"Our decision ... was made for economic reasons, obviously and it reflects the situation in the market the company is operating in," said Entremont spokesman Alain Troalen.
"We have raised prices for consumers this year and now retailers are refusing to go along with it anymore and are saying 'Enough!'," he said.
More significantly, he said Entremont faced stiff competition in the global market for industrial products like butter powder used in food manufacture worldwide.
"The problem isn't really the cheese," he said. "The problem is the industrial products. You can't subsidise the butter powder market via the price of cheese."
SPIRAL
Beyond the immediate dispute over Entremont's offer, however, is a struggle over the system under which French dairy farmers and dairy food companies like Entremont, Lactalis or yoghurt giant Danone agree prices.
Under the previous system, a recommended price was set every three months by CNIEL, a so-called "interprofessional" body representing both farmers and manufacturers that gave the industry a fixed guide to prices.
Manufacturers like Entremont say the system was too inflexible to allow them to respond quickly to competitors from countries such as New Zealand or Denmark and earlier this year, competition authorities ordered the CNIEL to end it.
Farmers, who have held a series of protests over the issue in recent days, fear that the decision will leave companies free rein to impose their own prices on suppliers, who have to milk their cows every day and who cannot switch buyers easily.
"We'll get into a spiral where Entremont will pay a certain price and its competitors will say, why should we pay any more?" said Lemetayer.
"Calling the interprofessional recommendations into question was a grotesque error by the administration," he said.
"The end result will be the price of milk in France will be the lowest price companies can get away with paying and that is unacceptable and will never be accepted by farmers."
Farmers are due to meet Entremont on Thursday to seek a way out of the standoff and Barnier said he would be watching the discussions closely. "I urge the parties to reach an agreement," he said in a statement on Wednesday.