Paris, Nov 2 - Supply contracts between dairy farmers and manufacturers would be the most effective response to price volatility affecting the dairy sector, France's competition authority said on Monday.
The body's recommendation was in line with the position of Agriculture Minister Bruno Le Maire who has been calling for such contracts in a sector where falling prices have sparked a wave of protests by European farmers this year.
The competition watchdog also came out in favour of two other proposals floated by Le Maire, the creation of a European dairy futures market and a change to rules governing the European dairy market to allow producers to organise themselves.
"Contracts over several years, defining volumes, prices -- and the conditions for their medium-term evolution --, and quality aspects, should allow the visibility necessary for producers and also processors," the authority said in a summary of an opinion requested by a French Senate committee.
To have adequate negotiating power, French producers would need to form cooperatives or marketing associations to conduct talks with industrial customers, backed by a change to European Union dairy rules, the watchdog suggested.
Contracts would also represent a successor to a previous system of price recommendations made by dairy sector body CNIEL and which was declared contrary to competition rules by another watchdog in 2008.
CNIEL, which represents both producers and processors, has since modified its price role to publish price indicators rather than recommendations, but the competition authority said this was also likely to fall foul of European rules.
The French government is planning to establish the principle of dairy supply contracts in legislation next year, and is also pushing for the EU to adopt further measures after short-term aid was approved at a European council last month.