HomeIdeaParmigiano Reggiano, Grana Padano and production quotas. #Clean shovels

Parmigiano Reggiano, Grana Padano and production quotas. #Clean shovels

Parmigiano Reggiano and Grana Padano PDO - the most famous Italian hard cheeses, only apparently similar (1) - actually express two radically different production systems.

Most of the farmers who supply milk for Grana Padano are now on the gas barrel. And it is on them, and on the cow's diet, that the quality of the milk and the product depend.

The system risks imploding and the prohibition of sales below cost, introduced by Legislative Decree 198/2021, (2) may not be enough to resolve a fundamental anomaly. Who regulates supply and demand, and why?

1) Parmigiano Reggiano and Grana Padano, production and production plans

1.1) Production volumes, 1970-2021

The production volumes of the two historic cheeses have more than doubled in the last half century, recording the rise of Grana Padano over Parmigiano Reggiano. Some hints:

- 1970. Out of a total of 3 million wheels (whose weight was 30kg at the time), about 2 million were of Parmigiano Reggiano (PR, 67%) and 1 million of Grana Padano (GP, 33%),

- 2001. Out of a total of 6,747 million wheels (already 40kg in weight), the GP exceeded the PR, with 3,869 (57%) v. 2,878 (43%) million shapes,

- 2015. Out of a total of 8,1 million wheels, 4,8 million (60%, 183.564 t) the GP and 3,3 million (40%, 132.800 t) the PR,

- 2020. Total cheeses 9,193 million, of which 5,255 (57%) Grana Padano and 3,938 (43%) Parmigiano Reggiano,

- 2021. Total cheeses 9,325 million, of which 5,234 (56%) Grana Padano and 4,091 (44%). Average wheel weight, 38,74 kg for GP and 39,99 kg for PR (source CLAL database).

1.2) First attempts at 'self-discipline'

in 1983 the two consortia had defined a first 'self-regulation plan' which provided for an overall annual production of 130 thousand t / year, equally divided between PG (51%) and GP (49%). The gentlemen's agreement however, it was immediately nullified with the entry into force of the European 'milk quotas' system (EEC regulation 856/84).

in 2002 the Consorzio del Grana Padano was trying to introduce an agreement to reposition the product on the market. In 2004, however, the Antitrust Authority declared the illegitimacy of the system of self-regulation of the offer prepared by the Consorzio del Grana Padano, as an agreement restricting free competition. (3)

1.3) Law 231/05, production plans for Italian PDO cheeses

Law 231/05 introduced the possibility for the Ministry of Agricultural and Forestry Policies to enhance Italian aged cheeses by defining, with its own decree, of 'production plans for the quality and development of the markets, lasting no more than five years, prepared by the production protection consortia for cheeses with a protected designation of origin'(article 1-quater. See note 4).

A unique case in the European Community, which was justified in its delimitation to the hypotheses of 'presence of abnormal market conditions'. Conditions expressed in a decrease in the average unit price for milk production of at least 10% compared to the average of the previous three years.

1.4) Grana Padano PDO, start of production plans

The Consortium of Grana Padano PDO thus activated an overall production plan at the end of 2005 which provided for a physiological annual growth (+ 1,7%) and a balance point in 4,220 million forms subject to ordinary contributions. In the event of an 'overrun', additional resources had to be allocated to be allocated to promotion, to market the surplus productive.

Quotes of production were and still are assigned to dairies - rather than to stables (farms of breeders) - and expressed in number of wheels. In 2006 the new 'Riserva' category was introduced. A Grana Padano PDO with over 20 months of aging, which represents 3,6% of the total production (156 thousand wheels / year). As a rule, Grana Padano is placed on the market at 15/16 months and reaches a maximum maturation of 24 months.

1.5) Parmigiano Reggiano DOP, start of production plans

In 2005-2006 the Consortium of Parmigiano Reggiano PDO in turn prepared a five-year production plan (2006-2010). The initial equilibrium point (the so-called reference point) was set at 3,1 million shapes, with moderate annual increases. Each dairy divided the forms assigned among its own contributors / suppliers, in relation to their individual contributions to their determination, on the basis of pre-established coefficients. The system was cumbersome, since in it coexisted the milk quotas of the contributing farmers and the 'form quotas' assigned to the dairies.

The complexity it reached its peak in the hypothesis of transfer - both in ownership and in rent - which required a coupled passage of milk-farmers quotas and relative cheese-dairy quotas. The 'overruns' also in this case involved an additional contribution which, after various compensations at the level of the district and of the dairy, fell on the latter and cascade on the farmer. The first production plan was followed by a second one lasting three years (2011-2013), in continuity, before the turning point.

2) Market regulation. The turning point in the 'Milk Package'

The 'Milk Package', reg. EU 261/2012, introduced the possibility for Member States - 'For a limited period of time'and with the prohibition of restrictive agreements on competition (TFEU, article 101) - to introduce'binding rules for the regulation of the offer'of PDO cheeses, at the request of the respective protection consortia. (5) Only two Member States have accepted this 'opportunity', France (with the Comté, Beaufort, Reboclon, Gruyère PDO cheeses), and Italy with Asiago, Grana Padano, Parmigiano Reggiano and Pecorino Romano.

The price of milk - despite the declared objectives of priority protection of breeders, as weak parties par excellence in the contractual relationships of the supply chain - he nevertheless remained hooked to the strategies and plans approved by the Consortium for the Protection, in both cases of the Pecorino Romano PDO cheese (as has been already demonstrated in a specific analysis. See note 6) and of Grana Padano PDO, as will be seen. For one simple reason, the asymmetry of power, which the Parmigiano Reggiano Consortium has been able to compensate for.

2.1) Parmigiano Reggiano, quotas to farmers

The turning point of Parmigiano Reggiano was implemented with the 2014-2016 supply regulation plan, under the presidency of Giuseppe Alai. The Consortium, in self-regulation shared with its members (see next paragraph 5), has defined an increase in production compared to the previous three years and attributed a quota of milk to each farmer. If the production is in excess, the dairies are subject to an increasing additional contribution, in fact fines the amounts of which are then divided among the farmers in proportion to the liters of milk in excess of the "quota".

This supply chain on closer inspection it presents some peculiarities that increase business risk in relation to market fluctuations:

- production cycle. After the new heads are placed in the stable and their entry into production, the seasoning of the product must be considered (22-24 months on average). Market phenomena therefore reflect production choices made 30-36 months earlier,

- production costs. Producing milk from only grass, hay and a few other vegetable feeds (without resorting to silage) involves costs that in fact exclude alternative destinations, except for minimum quantities of non-branded cheese (so-called white cheese).

2.2) Why allocate quotas to breeders?

The document illustrating the turning point of Parmigiano Reggiano is crystal clear: 'the reference model identified is that of an additional economic contribution mechanism correlated to the assignment of a district production reference and production references - Parmigiano Reggiano milk quotas (hereinafter QLPR) - attributed to individual producers. These references are exclusively a tool for determining additional contributions aimed at market expansion actions. Therefore, any farmer will remain free to produce milk suitable for the production of Parmigiano Reggiano and the Regulation Plan offered does not constitute a limitation on access to the system. For greater clarity, 

milk from a breeder without milk quota Parmigiano Reggiano does not lose its suitability for transformation into Parmigiano Reggiano Dop (as long as it complies with the specification). To define the setting of the production reference points, the general objectives of EU Reg. 261/2012 were preliminarily carefully assessed:

- 'agreements that contribute to stabilize the market and the incomes of milk producers and strengthen the transparency of the sector ' (Recital 3), - 'in many cases there is a low concentration of supply which results in one imbalance of bargaining power within the supply chain between farmers and dairies '(Cons. 5), -' per ensure sustainable development of production and to ensure therefore a a fair standard of living for milk producers, it is appropriate to strengthen their bargaining power vis-à-vis dairy producers, thus leading to a more equitable distribution of the added value along the supply chain '(Cons. 14), -' given the importance of PDOs and PGIs, in particular for vulnerable rural regions' (Council 17). (7)

2.3) The only choice consistent with the objectives of the EU legislator

'As a result of in-depth analysis and discussions, it was felt that the only choice capable of responding to these purposes is that of allocate production quotas to milk producers. Alternative solutions linked to the allocation of quotas to dairies / dairies would, on the other hand, be contrary to the aforementioned purposes of EU Regulation no. 261/2012. These shares take on the nature of an "intangible asset".

The operational programming tool consists in determining an additional contribution to the dairies and the amount of this contribution emerges from the comparison between the quantities of processed milk and the quotas (QLPR) supported by the processed milk. In consideration of the fact that about 20% of the production of Parmigiano Reggiano is obtained in mountain areas, in conditions of particular vulnerability and disadvantage, by virtue of Recital 17 specific rules have been defined to safeguard the production potential of these areas. ' (7)

2.4) Production reference points. Not the forms but the milk

'' The adoption of the Plan is linked to the definition of a basic tool, the register of the production reference points of the farmers, expressed in kg of milk suitable for the PDO, which assumes a structural significance for the supply chain (QLPR register).
The choice of changing the unit of measurement of the reference point from the number of wheels produced (which was the parameter adopted in the Consortium's previous production plan) to the kg of milk processed, first of all meets the need for eliminate distortions between subjects subjected to the Plan, where the average weight of the wheels often shows consistent differences between different dairies, due to the different production choices of the cheesemakers.

Consider that the distribution of average weights varies from 37 kg / shape up to weights higher than 43-44 kg / shape, therefore with relative differences up to 15/20%, which would be reflected with distorting effects on the application of the additional contribution. ' (7)

2.5) The value of the Latte PR shares

Assignment to breeders of the Parmigiano Reggiano Milk Quota (QLPR. 1 quota equals 1 quintal of milk) has generated a new economic value. The share is an intangible asset in the balance sheet 'that it is possible to sell, rent, pledge to obtain credit'. And it was created just when the old European milk quotas ceased to apply, on 1.4.15, which at the time had been the subject of even substantial investments (as well as atrocious problems still unresolved by Minister Stefano Patuanelli, in beard ai diktat of the EU Court of Justice).

The Latte PR Quota Register è online and from 12.11.14 and is public. Anyone can consult it, on the Consortium website, for the inspection of the producers operating in the area e their shares, in the name of transparency. Also showing their average monthly values ​​in both cases of sale and rent.

3) Grana Padano Consortium, no turning point

No breakthrough it was instead made at the Consortium of Grana Padano PDO. Signatures are still being collected for the posthumous approval of the seventh production plan (three-year period 2022-2024, effective from 1.1.22 with all due respect to the programming needs of those who raise continuous feeding cows. (8)

The 'reference point' - that is the production quota, and the relative value, in surplus in the balance sheet (9) - has remained with the dairies and its unit of measurement remains the cheese wheel, as already since 2006. The production plan is therefore exclusively compared with the markets and the respect of the objectives it concerns only the dairies, not also the breeders.

3.1) Grana Padano, the shares to the dairies

Dairies they therefore received a patrimony from the Consorzio del Grana Padano, the forma quotas, the value of which had been created by the farmers with investments in the community milk quotas which in the meantime have ceased to exist. A patrimony which corresponds to a contractual power which in turn is taken away from the breeders:

- the GP dairy he can produce the forms assigned to him, paying the ordinary contribution to the Consortium. That is, renting or buying 'form quotas' from other dairies, also in other Regions and Provinces, to increase production in the same measure without having to pay an additional charge,

- the GP stable it is not bound to maximum production thresholds, except for the risk of having to (s) sell the 'GP milk' for different destinations. Other local PDOs (eg Gorgonzola, Asiago, Taleggio, Provolone). But also how commodity for other uses (drinking milk, non-DOP cheeses and fresh dairy products), in competition with foreign milk suppliers.

3.2) Speculations on GP form dimensions

The establishment of quotas forms GP and the freedom to market them (sale and / or rent) without territorial constraints has given rise to speculations that have caused three consequences:

- the impoverishment of many territories, in the vast area of ​​Grana Padano PDO which includes 4 Regions (Piedmont, Lombardy, Emilia-Romagna, Veneto) and 2 autonomous Provinces (Trentino, Alto Adige)

- the concentration of manufacturing in a single Region (Lombardy, 73,9%) and in three Provinces. Mantua 30,4%, Brescia 22,1%, Cremona 17,5%. At a distance Piacenza 11,4% and Vicenza 6,6%. The other 3 Provinces are below 11% (source CLAL, data 2021),

- the surge in the value of the forma shares, from € 30 in 2014 to € 250 in 2016. I rumors refer to the sale of 35% of the forma shares - in 2017, to approx. € 300 - from private to cooperative dairies, for a total value of approximately 550 million euros. The farmers who are members of those cooperative dairies thus paid their 'old' milk quotas a second time.
In addition to the damage, the mockery.

4) Winners and losers

In both Consortia, for different reasons, the 'Padanisti' win. The 10 large groups that at the same time hold most of the shares in the GP form and in the 12th month purchase approximately 60% of the PR forms from the approximately 305 dairies. However, some differences remain, of no small importance:

- the 2.600 farmers who give the Parmigiano Reggiano PDO supply chain at least maintain the value of the Latte PR quotas and the related bargaining power,

- the 4.000 farmers who supply the milk for Grana Padano PDO undergo the production plans decided by the giants and the presidents of the cooperatives. (10) Without even receiving, with rare exceptions, that 'fair correlation' between the trend in GP prices and the price of milk to which they would be entitled.

5) Who represents which interests?

The fundamental step which allowed Parmigiano Reggiano DOP to make the leap in quality - from the form quotas to the Latte PR quotas - was the extension of the participation in the deliberative meetings of the Consortium to all the dairies, obtained on 28.4.10 after a period of lively debate.

Until that moment the deliberative assemblies were attended by a small number of dairies, delegated by the sectional / provincial assemblies of the Consortium and 'appropriately selected' by the agricultural confederations, under the hegemonic control of Coldiretti. As still happens in other Consortia, thanks also to a DM of very dubious legitimacy. (10)

6) Provisional conclusions

Emancipation at least partial of farmers by those representing party interests, armchairs and various other businesses - often in conflict of interest - has put an end to the method 'Divide and conquer'. And it allowed the rebirth of a system, the PR, which now works better than all the others.

Following of the aforementioned assembly 28.4.10 the agricultural confederations continued to participate in the assemblies of the Consorzio del Parmigiano Reggiano DOP, but the debate and the votes returned to the hands of those who work. And the milk is paid twice as much as elsewhere.

#Clean shovels

Dario Dongo

Notes

(1) Dario Dongo. Grana Padano and egg lysozyme, a necessary preservative? The Italic anomaly. GIFT (Great Italian Food Trade). 3.7.21/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/etichette/grana-padano-e-lisozima-da-uovo-conservante-necessario-lanomalia-italica/

(2) Dario Dongo. Unfair commercial practices, the woes of Legislative Decree 198/2021. GIFT (Great Italian Food Trade). 4.12.21/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-i-guai-del-d-lgs-198-2021

(3) AGCM, case I 569 - Grana Padano Consortium. Provision 24.6.04, n. 13300. https://bit.ly/3AVtuGm

(4) Law 11.11.05, n. 231. Conversion into law with amendments to Legislative Decree 9.9.05 n. 182, concerning urgent interventions in agriculture and for public bodies in the sector, as well as to counter anomalous price trends in the agri-food supply chains. On Normattiva, https://bit.ly/3gq4BJE

(5) EU Reg. 261/2012, so-called Milk Package, amending the reg. CE 1234/2007 [so-called single CMO] as regards contractual relationships in the milk and dairy products sector. Repealed by the subsequent reg. EU 1308/13, new single CMO (see art. 150, regulation of the supply of cheese with a protected designation of origin or protected geographical indication)

(6) Dario Dongo, Guido Cortese. Sardinia, the Antitrust investigates the prices of milk and pecorino. Some market data. GIFT (Great Italian Food Trade). 19.2.19, https://www.greatitalianfoodtrade.it/mercati/sardegna-l-antitrust-indaga-sui-prezzo-di-latte-e-pecorino-alcuni-dati-di-mercato

(7) Consortium of Parmigiano Reggiano DOP. Offer Regulation Plan, 2014-2016 three-year period. Application regulation for the establishment and operation of the Parmigiano Reggiano Milk Quota Register. https://registro.parmigianoreggiano.it/qlpr/linkDocument?n=Regolamento+Applicativo+Piano+2014-16+-Testo+integrato.pdf&a=true&f=true&d=true

(8) The production plan of the Grana Padano PDO Consortium is three years and must be approved by at least 2/3 of the dairies which represent 2/3 of the wheels produced and by 2/3 of the milk producers who represent 2/3 raw milk used to produce the cheese (see EU regulation 1308/13, art. 150.2)

(9) EU rules do not provide for (and do not even prohibit) the marketing of 'form quotas'. The MiPAAF instead envisaged it as possible, without even imposing as a logical duty to bind them to the individual provinces where they were originally issued.

(10) See MiPAAF decree 15.2.19, laying down procedures for submitting and approving the plans for regulating the offer of PDO or PGI cheeses. https://www.politicheagricole.it/flex/cm/pages/ServeAttachment.php/L/IT/D/e%252F3%252F3%252FD.7110ba98513e7be7cc7e/P/BLOB%3AID%3D13706/E/pdf

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Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.

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