The New Milk Crisis: German Dairy Farms in Decline
Small German dairy farms are in worse shape than ever. Profit margins have shrunk, agricultural banks are in trouble, EU policies create huge milk surpluses and a recent spike in dairy prices has unbalanced many budgets. But resistance to the ravages of industrial farming has started to grow.
Berlin's Green Week used to be as popular as a celebration of natural food as it was notorious for strange propaganda. But the decline in popularity is one reason for organizers to act even more sensitive when it comes to explaining the farm industry to city folk. Now, for example, visitors can have themselves made up to look like a cow. There are also practice courses for would-be farmers and even agricultural package tours.
A milk-cow carousel in the town of Dedelow, outside Berlin.
Köster can no longer service his loans, which means spending a lot of time at his local savings bank. The advisors at the bank seem more nervous to him than usual, which isn't exactly surprising. The alliance of savings banks in the northern German state of Schleswig-Holstein holds a direct investment in the stricken HSH Nordbank.
Last summer, Köster took part in demonstrations calling for a milk price of 0.40 ($0.52) per liter. Now he gets only 0.22 ($0.29) from his local creamery, even though feed costs are on the rise. Köster doesn't know what to do anymore. He plans to sell his 160 cows in the spring. When he is asked when he last went on vacation, his wife, standing next to him, laughs.
Köster's grandfather began working as a dairy farmer almost 100 years ago. Now the grandson is about to put an end to the adventure.
The 2007 Milk Crisis
The Dithmarsch farmer is still an exception. Many farmers manage to survive with family members on the job -- a grandmother to do the milking or an uncle to drive the tractor. But more and more dairy farmers are showing up at their local agricultural commission for advice. And feed dealers, like other agricultural providers, are increasingly seizing EU compensatory payments directly from farmers at the start of the year.
"We were long ridiculed as a farmers' bank," says Torsten Jensen, the chairman of the Volks- und Raiffeisenbank, a local savings and loan, in the town of Niebüll in Schleswig-Holstein. There have certainly been farmers who have capitulated, he says, "but we haven't lost a single loan in the last 100 years."
Many farmers did not find themselves in hot water until last year. After worldwide shortages in the fall of 2007, milk prices suddenly shot up. Many farmers bought new equipment by taking out costly loans. And many were milking at levels far above their own quotas. But then prices fell as quickly. Once again there was a surplus of milk.
By May of 2008 the price dropped to rock bottom, and then something incredible happened. Under the leadership of Germany's Federal Association of Dairy Farmers (BDM), farmers staged a 10-day strike on milk delivery -- a minor revolution for the slow-moving German dairy industry.
Opinion polls revealed that the movement had strong popular support, although respondents in such surveys usually behave differently when they in front of refrigerated shelves in a supermarket. Even Gerd Sonnleiner, the president of the German Farmers' Association, muttered his approval at the time, and powerful discounters like Aldi and Lidl raised their prices for fresh milk.
But the price increase was short-lived. The PR campaign ended, and retailers imposed their supposed market prices on the creameries once again. More and more dairy farms are now falling victim to this trend. In 1984, when the milk quota was introduced to stabilize prices, there were just over 370,000 dairy farms in Germany. Today there are only about 100,000.
Oddly, the amount of milk produced has remained about the same. Fewer and fewer cows must now produce more and more milk, and the animals have become as vulnerable as professional athletes. They die at an earlier age, require more frequent visits to the vet and are fed sophisticated, soy-based, high-performance feed mixes, for which rainforests in South America are being cleared.
"Grow or make room" is the corresponding motto of the BDM and the industry. For many farmers, this means living on a treadmill. While trying to keep up with this pace of growth, Thies Köster fell out of step.
As his farm grew, so did his debts. In 10 years he quadrupled his herd and leased two more smaller farms. In the evenings, after milking, he did his best to understand the bank documents.
"Twenty years nonstop; I would've been better off working in a factory," says the 41-year-old today. He plans to grow corn for a biofuel plant in the future.
European Milk Lakes
A good farmer should be able to make do with 0.26 ($0.34) a liter, the milk industry stubbornly suggests. Of course, this requires a critical farm size, which is something that Edgar Coym's operation certainly has.
He is the managing director of the Uckermark Agricultural Society in the town of Dedelow outside Berlin, once a model farmers' collective in the old East Germany with 5,000 cows and an eight-kilometer (five-mile) underground milk pipeline running straight to a creamery in Prenzlau. Today it's a smaller agricultural factory -- with 2,500 cows -- but still one of the largest dairy farms in the country. Despite the size of his farm, though, Coym is hardly a star witness for the industry.
The milk spike
Volume restrictions within the European Union are slated for elimination by 2015. To soften the impact for some businesses, the new German agriculture minister, Ilse Aigner, plans to establish a milk fund. The market, she says, will take care of the rest. But it is a market full of absurdities.
That's because mergers of creameries are treated as market consolidation in the dairy business, whereas farmers joining forces are treated as anarchists. This market gradually needs government help -- in the form of support purchases -- again. EU Agriculture Commissioner Mariann Fischer Boel wants to reintroduce export subsidies for butter and powdered milk. Then the same market will flood Africa with products at dumping prices -- harming dairy farmers there.
European retailers, meanwhile, have started to sell large quantities of fresh milk that is not worthy of the name. "Milk is power, and we have the milk," BDM President Romuald Schaber told a crowd of cheering farmers last summer. But recent disputes over freshness show that the young farmers' movement is in trouble.
Retailers are in the process of depriving farmers of one of their last means of exerting pressure. Many stores no longer sell fresh milk in its natural state. Instead, supermarket shelves are increasingly filled with ESL milk, which has been homogenized and has a longer shelf life -- yet masquerades as fresh milk.
"It's clearly consumer deception," says Silke Schwartau of the Hamburg Consumer Assistance Office. Her office is receiving "angry calls by the minute." The use of ESL milk means that it can be transported to Germany from Europe's cheapest locations. Regional creameries, which transport milk across short distances -- which is better for the climate -- are left with nothing.
"In this concept, the farmer is no longer a market partner. Instead, he is downgraded to the role of a supplier of commodities," says Friedrich-Wilhelm Graefe zu Baringdorf, a member of the German Green Party and the European Parliament who also heads the Association of Rural Agriculture.
This dispute is about more than milk, the market and power -- it's about the future image of agriculture in Germany. The general trend is toward giant industrial farms.
The Greens are no longer the party making noises about the social and environmental damage caused by industrial agriculture. One practice they condemn is that of maintaining feed monocultures in developing countries -- so that even more milk can be produced in Europe, which then floods markets in Third World nations with European surplus. The World Agriculture Report recently initiated by the World Bank and the United Nations recently noted just how grotesque this practice is. In the report, 400 scientists have called for a radical shift in agrarian policy.
The German Farmers' Association, a sort of propaganda department for the industry, will strike a different tone at Green Week. The organization's president, Carl-Albrecht Bartmer, will call for productivity increases. He'll rave about deregulating the markets. But he won't mention that, according to estimates by experts, he collects several hundred thousand euros in government subsidies for his farm in eastern Germany.
Thies Köster doesn't have time for Green Week. He'll most likely meet with his bank advisors again. A few months ago he had a case of blood poisoning and had to spend 14 days in the hospital. On some mornings, after the doctor came to his bed, he would leave the hospital and go to work on his farm, and return to the hospital in the evening.
Translated from the German by Christopher Sultan
© SPIEGEL ONLINE 2009
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH