With Sebastián Serena, UGT Spain

Market intermediation,

the main problem

The unity of workers is crucial to face the new global conditions of the dairy industry.

As an introduction for the IUF Global Dairy Conference, Sirel interviewed Sebastian Serena, industrial policy secretary of the Agro-Food Federation of the General Workers Confederation of Spain (FTA-UGT) in order to learn about the present situation of that country's dairy sector and his expectations for the meeting.

-What is the present situation of the dairy sector in Spain?

-In order to speak about the present situation, we first need to revisit what happened in recent years. In Spain, we are in fact very concerned about the dairy industry, which covers the full range from milk farming to industrial dairy processing.

Since 2007, the crisis of the dairy sector has worsened and become increasingly complex. Since that year, the European Union collectively -and that includes Spain- has witnessed a tremendous price war.

This war had its origin in the so-called milk quota in force for EU countries, which was (supposedly) designed to "regulate" the sector. So, in 2007 it was determined that Spain would have a ceiling of milk production, which was established at 6 billion metric tons per year. But what happens is that domestic consumption is 3 billion metric tons higher than that ceiling - that is, 9 billion metric tons of milk are consumed in the country alone. This has led to the development of a parallel production of milk, milk that's illegally entering the market and leading to a drop in prices and huge losses for dairy farmers.

To give an idea of these complex problems, in 1997 the price of milk at origin was 0.30 euros, a decade later, in 2007, it had only increased by 0.04 euros, which indicates that prices are stalled for farmers. However, the situation is the complete opposite if we consider the price of milk paid by consumers, who, in 4 months of 2007, witnessed a 30-percent increase.

So, the big problem for the sector is the huge gap between the price of origin --paid to farmers-- and consumer prices of products, evidencing that most of the profits go to market players.

-Who is involved in market intermediation in Spain?

-It is the retail sector, such as the large distribution chains, like Carrefour, just to mention one of the transnational ones. And Eroski, Mercadona, both Spanish, among others.

-Has this situation reduced the number of farmers and workers in this industry?

-Until 2008, there were 24,000 dairy farms in Spain, with 200,000 direct and indirect jobs. According to recent data, there was a decrease of 2,825 workers both in the farming and processing areas.

Concentration and foreignization of this industry

The concentration of the dairy industry in a handful of companies, for the most part foreign, is another current trend.

Leche Puleva was recently put up for sale. It is one of the major dairy companies in Spain and it will almost certainly be acquired by the French-based Lactalis, although a few days ago there was also an offer from the Mexican Group Lala, which controls 60 percent of the fresh milk market in Mexico.

This process evidences the restructuring of the sector towards concentration in a few companies, which consequently leads to job losses.

-How is your Federation facing this situation?

-As a consequence of several meetings with Spanish government authorities, there was an agreement among companies and farmers to set a basic fee for milk in order to regulate prices, which has been successful so far, because this action has allowed farmers to develop more accurate projections of expenditures and profit.

Another work in progress in Spain --copied from Italy-- is an initiative promoted by some farmers, which is aimed at eliminating as many intermediaries as possible. This initiative consists of raw milk vending machines that bring milk to neighborhood supermarkets. We think this system will be successful in Spain.

It should also be noted that our Federation does not gather farmers; our membership is instead made up of the workers employed by farmers. But while we represent different interests, we all belong to the same organization: UGT;  and this leads to common aims. In this case we share with the brothers and sisters of the Union of Small Farmers and Breeders (UPA), the concern to maintain a fair price of milk at origin, which is a safeguard for our livelihoods and for the sustainability of livestock farming, and therefore it guarantees job security.

-What is the impact of private branding in the Spanish dairy industry?

-It has a huge impact in the market. At present, private branding is becoming more and more widespread, increasing its market share by nearly 5 percent.

In the ice cream area, private branding has a 60 percent market share; in fresh milk it's taken over 51 percent of the market. This has impacted the dairy industry in terms of innovation, but it's not creating any new jobs. And, in terms of workers' rights and working conditions, they are very far behind branded-product companies.

One of our aims as a Federation is to bridge the gap between workers of this private branding companies and those of large corporations, like Danone. We are working on that.

-What are your expectations for the IUF Global Dairy Conference?

-Above all, I'm personally very grateful to have been invited to such an important meeting, an event that I consider is a forum for workers from around the world to share problems and find common solutions to them.

I am sure we will come out of this meeting enriched: as a union it is very important to monitor the behavior of Spanish companies in Latin America and be instrumental for our brothers and sisters in that continent.