• English Site
• >Germany
• >Globalization
• >

  Getting Milked: Surging Dairy Prices Cheer Some Farmers, Sour Consumers

Getting Milked Surging Dairy Prices Cheer Some Farmers, Sour Consumers

Part 2: Some Dairy Farmers Still Down in the Dumps

It would appear German farmers are on the verge of a golden era, but they continue to complain as they have in the past. The general mood even seems to have hit a new low point. At the regulars’ table in the Gasthof Ach pub in the tiny Bavarian hamlet of Etzgersrieth the dairy farmers are downright angry. They’d like to organize a “spectacular” strike that would “get the media onboard,” according to Josef Hägler. “We should declare a milk bath day,” says one of his comrades.

Another farmer suggests putting local beauty Barbara Meier, the 21-year-old who recently won the TV modeling show "Germany's Top Model," hosted by Heidi Klum, in a bikini in a giant tub of milk. They all think that’s a grand idea, but then Hägler emphasizes “the main point would be everyone realizes how bad off we are.” Despite the higher prices for milk and butter at the supermarket, “practically none” of the money is ending up in the farmers’ pockets. And that, of course, makes them angry.

They want at least 40 cents per kilogram of milk from the dairy producers. Otherwise, they're threatening to go on strike this autumn. They claim the 30 cents they get now, compared to the 27 cents last year, still doesn’t cover all their costs. While the prices in supermarkets surge, “we're getting nothing,” one farmer says in summing up the general opinion while pounding the table with his fist. They don’t want to put up with it anymore. Germany’s dairy farmers, long the best-behaved and quietest part of the country’s agriculture scene, are on the verge of a pitchfork rebellion.

Across the German countryside, they’ve put up banners and posters on their barns reading: “Farmers Need a Fair Price -- 40 Cents.” Around 25,000 of them protested in May during a nationwide “day of action.” Another 10,000 are planning to gather in Munich this week for a demonstration.

Dairy farmers have allegedly left the powerful German Farmers Association (DBV) in droves in recent months. They feel betrayed by the group’s president, Sonnleitner. Since dairy farmers rarely get the chance to leave their cows, they aren’t well represented in the lobby group, leaving it largely controlled by crop farmers and ranchers.

Feeling disenfranchised, they’ve attacked Sonnleitner in a public letter: “You have completely ignored the opinions of dairy farmers with an unprecedented level of arrogance.” And they called his intention to get rid of milk quotas “a slap in the face of all those who milk their cows twice a day, 365 days a year.”

The milk quota is a typical product of Europe’s agricultural policies. In 1984 -- a time of those proverbial seas of milk and mountains of butter -- the European Commission in Brussels set down maximum limits for each country that to this day dictate what each EU dairy farm is allowed to produce.

If farmers want to produce more than their quotas, they have to buy or lease the rights from other farmers who don’t want to milk that much. It has created a bizarre and flourishing trade for production rights. While work-shy farmers living off a decent income from selling or leasing their quotas are known as “couch milkers,” those hoping to expand their farms are saddled with extra costs.

Making matters worse is the fact that farms face steep fines when they produce more milk than their quotas allow. That has led to the absurd situation that milk -- in high demand around the world -- is often poured into pig troughs or even down the drain. Nobody likes the current system, but many are still afraid to change it.

Small farmers in the Alps and other mountainous parts of Germany are especially worried about changing the status quo for fear of greater competition. With little space and capital -- and often no alternative to dairy farming -- they are also frequently deeply in debt.

They’re afraid supply will soon outstrip demand if their larger competitors are allowed to keep and milk as many cows as they please. And that will cause prices to plummet. While given the current price explosion for milk that might sound almost ridiculous, scientific studies actually support the concerns of the small farmers. Some experts estimate prices for producers could drop by 10 to 30 percent if milk quotas are eliminated.

“That'll be the end of us all,” quietly sighs one of the dairy farmers sitting around the table at the Gasthaus Ach pub, although not all farmers feel that way.

“Nonsense,” says Jürgen Meier, a 43-year-old farmer from Beckdorf near the northern German city of Hamburg. “The quota was always nonsense.” His dairy, which he took over after his father’s death in 1983, originally had 35 cows. As other farmers in the area gave up, Meier decided to build a new barn. He paid around eight cents per kilogram of milk to lease his neighbor’s milking rights back then.

These days he has 110 cows. He buys the production rights at an auction that takes place three times a year. He won’t get rich with his bigger dairy stall either, but the current milk prices have certainly brightened his economic outlook a bit.

Last year Meier got 27 cents per kilo of milk from dairy company Nordmilch, but now he has buyers lined up paying at least 32 cents from July through December 2007. “Even when I only end up with one cent more per kilo because of rising feed and energy costs, it still brings in an extra €10,000 each year,” he says. But he’ll only be able to earn a lot more money “when the quota is gone.”

It will be phased out automatically in 2015, but farmers like Meier and many agricultural policymakers don’t want to put up with Europe’s command economy for another eight years. A study commissioned last year by German Agriculture Minister Seehofer argued there is no reason why the milk industry should “continue to be exempt from basic economic principles.” Udo Folgart, the head dairy farmer for the German Farmers Association, agrees. “The quotas hinder those farmers wanting the chance to profit from rising global prices,” he says.

However, the outgoing governor of the German state Bavaria, Edmund Stoiber, is fighting for milk production quotas even beyond 2015. The state has a relatively large number of small dairy farmers who have profited from the quotas. Plus he believes the limits have helped eliminate the surplus milk and butter of the past and he argues the hundred thousand dairy farmers create twice as many jobs as their crop planting counterparts. And, perhaps most importantly for a state that proudly touts its scenic Alpine region, Bavaria’s dairy farmers help preserve the environment and attract tourists. “Where there are no longer cows on the meadows, you can’t milk any more tourists,” quips Lutz Ribbe, the agricultural expert for the European Nature Heritage Fund.

Ribbe and other environmentally oriented scientists stand alongside the small dairy farmers in their fight for quotas -- but it’s a lost cause. It’s already clear where things are heading. Giant farms backed by well-funded investors will deliver the milk of tomorrow, just as similarly huge operations supply supermarkets with meat today. Dairy production will consolidate at the best locations where feed is readily available. In Germany that will be in the Allgäu, Brandenburg, the Lower Rhine region, and in the north near ports with access to cheap imported feed. Other grazing meadows will be plowed over for maize and rapeseed for biofuels or animal feed. Economically it makes sense, but “environmentally it’s a catastrophe,” says Ribbe.

The food industry is also already warning about the risks involved with switching agricultural priorities from foodstuffs to biofuels. The prices for palm oil, rapeseed oil, wheat and maize are already surging higher. “Expanding alternative energy sources cannot come at the expense of affordable food supplies,” the Federation of German Food and Drink Industries has demanded in a statement.

The world’s newfound thirst for milk will certainly change more than the price on a carton in a German supermarket. Food is becoming more and more an industrialized product held under the sway of market forces. Consumers will make the final decision. If they want everything to be as cheap as possible they will at some point be confronted with an entirely industrialized world. If they want something else, they’ll have to accept higher prices for food in the future.

JULIA BONSTEIN, ALEXANDER JUNG, RENÉ PFISTER, HANS-JÜRGEN SCHLAMP, WIELAND WAGNER