Lactalis strikes price deal with French milk producers

By Sybille de La Hamaide and Pierre-Henri Allain

PARIS/RENNES (Reuters) - Lactalis, the world's largest dairy firm, reached a deal with French milk producers on Tuesday to raise prices paid to suppliers and farmers called off their week-long protests, the company and unions said.

Lactalis agreed to pay an average 275 euros ($307) per 1,000 litres of milk for the whole of 2016, Dominique Barrau, secretary general of France's largest farm union FNSEA, told Reuters.

"It brings Lactalis to the level of its competitors," Barrau said, adding that the union had called for an end to protests.

The offer was 10 euros higher than an initial proposal before the first talks on Thursday last week, but still well below production costs pegged at about 330 to 380 euros per 1,000 litres depending on the size of the farm, unions said.

Lactalis, which produces cheese, milk, butter and yoghurt with brands including President, Bridel, Galbani and Lactel, confirmed the agreement without giving any details.

French Prime Minister Manuel Valls called the deal a positive agreement on Twitter.

Between 2,000 and 3,000 farmers have protested since Monday last week outside the family-owned firm's headquarters in Laval, northwestern France, bringing hundreds of tractors, cows and trailers. Farmers also carried out protests in supermarkets and called on consumers to boycott Lactalis products.

European dairy farmers are struggling with a slump in milk prices caused by oversupply after the European Union scrapped quotas last year, Russia banned Western food imports and Chinese dairy imports weakened.

Lactalis will lift prices to 290 euros per 1,000 litres for the milk purchased between August and December, a member of a producers group said.

"It's much better than what Lactalis had offered so far," Pascal Clement, president of the FNSEA's regional branch for western France, said.

The rise in price, which will top 300 euros by the end of the year, will represent an additional cost of around 150 million euros for the group in 2016, Lactalis said in a statement.

"Lactalis Group is demonstrating though this agreement its willingness to support milk producers whose difficulties are real," the group said.

Separately, France said on Tuesday it would supplement a set of European subsidies announced last month to encourage milk producers to cut output and reduce overproduction to avert a collapse in prices.

Lactalis does not publish results but said on its website it has a turnover of 17 billion euros ($19 billion), employs nearly 75,000 people in 85 countries in Europe, the Americas, Asia and Africa, and has factories in 43 countries.

Lactalis stressed last week it faced strong competition elsewhere in the European Union, where milk prices have fallen more steeply than in France over the past year.

In June, raw milk prices paid to producers stood at 27.70 euros per 100 kg in France compared with 23.22 euros in top producer Germany, 25.12 euros in Britain and 25.00 euros in the Netherlands, European Commission data showed.

(Additional reporting by Pierre-Henri Allain in Rennes; editing by David Clarke and Adrian Croft)