European milk farmers protest low prices/subsidies

[SwordoftheVistula]

http://graphics8.nytimes.com/images/2009/10/05/business/global/MilkProtest600.jpg

Article mainly posted for the hilarious picture...but if this is a chronic problem maybe that is a sign of overproduction, and that the least productive of the milk producers should be allowed to go out of business and find another line of work?

http://www.nytimes.com/2009/10/06/business/global/06milk.html?_r=2

BRUSSELS — After months of complaints by European dairy farmers angry over low prices, protesters in Brussels on Monday poured milk onto the streets, hurled eggs and other missiles, and started fires that filled the air with black smoke.

Police helicopters hovered overhead as hundreds of tractors — and some cattle — blockaded the area outside the European Union’s headquarters while agriculture ministers met in an emergency meeting.

The gathering of ministers, convened after pressure from France, failed to produce any breakthroughs apart from a decision to set up a committee to report on the dairy industry in June.

Monday’s protest was the latest by farmers who dumped around three million liters of milk on fields in Belgium last month.

“There’s a very serious crisis in the milk sector,” said the Swedish agriculture minister, Eskil Erlandsson, who headed Monday’s discussion. “We didn’t take any decisions today, but we identified areas where the future policy needs to concentrate on.”

The protest organizers, the European Milk Board, said that more than 1,000 tractors and 5,000 people took part on behalf of “more than 80,000 dairy farmers”.

The group said milk prices are below 75 percent of production costs. Another European farm union organization, Copa-Cogeca, says that milk prices have plummeted 30 percent in a year and that dairy producers will lose up to 14 billion euros before the end of the year if nothing is done.

The European Commission, however, said that the average milk price increased slightly in the last two months and that the price of butter and skimmed milk powder had risen 7 to 9 percent in three months.

The commission said it expected to spend up to 600 million euros supporting butter and skimmed milk prices this year and proposed to continue this policy throughout the winter.

In recent years the European Union has sought to reform its subsidy system and aims to phase out milk quotas, which limit production, by 2015.

Some 20 of the 27 countries in the European Union have called for changes that would give producers the ability to organize more effectively so as to increase their clout in dealing with supermarket chains and dairy companies.

Other critics want more export subsidies and some would like to keep the quotas — though that has been ruled out by the European Commission.

Harald von Witzke, professor of international agricultural trade and development at Humboldt University in Berlin, said the protests were the symptom of the pain caused by a gradual reform of rigid controls on the dairy sector.

“The system has postponed the pain being felt, but now the pain is even greater,” he said adding that making concessions to the farmers “would make matters worse in the long run.”

Unconfirmed reports state that in the future riot police will be issued gear more appropriate to the situation:

http://i37.tinypic.com/fmqd6v.jpg
Pic courtesy of 'Geek' on the NeoGaf gaming forum

[Skandi]

It is more a case of supermarkets forcing the price down to impossible levels.

[SwordoftheVistula]

It is more a case of supermarkets forcing the price down to impossible levels.

Isn't that good for consumers, keeps the common person's food costs down? Anyways, once some of the milk producers went out of business, the supermarkets would probably be forced to offer up more money to ensure a continuing supply of milk.

[Treffie]

Isn't that good for consumers, keeps the common person's food costs down? Anyways, once some of the milk producers went out of business, the supermarkets would probably be forced to offer up more money to ensure a continuing supply of milk.

Good for consumers, but terrible for the dairy farmers. Most creameries where I live (which is mainly dairy and sheep farming) have closed and now only the big multinationals are producing the milk. Supermarkets keep telling us that they've struck a deal with the farmers so that they can have a good living, but the situation is as bad as ever. I'd rather pay 10p more for a pint of milk, knowing that the farmers' future in my area is secure.

[Skandi]

As to overproduction the UK overproduced it's EU quota by 0.66% last year.

The supermarkets are buying milk at less than the cost to produce, and there is nowhere else for the farmers to sell too. If you push for higher production you increase the number of hormones and antibiotics used and you also have to bring the cows in and intensively farm them.

What I think should happen is that the government should set a minimum price that can be paid wholesale, it would only up the price by a couple of pence a pint, I think the consumers can manage that.

The farmer received on average 23p/litre in August of this year. Whereas the cost of production is just under 27p/l interestingly Tesco is the best of the supermarkets, paying 27p/l When we buy milk from them it costs us about 88p


Back in 1995 the average selling price was 42.1ppl with the retailer taking a margin of 1.3p, the processor 16.3p while the farmer was paid 24.5p. Last year (2006) the retail price had risen to 51.6p, the retailers' margin had been hiked to a massive 15.6p
I doubt that has gone down any but the farmers margin certainly has.

[Svarog]

Yeah, it is horrible, here they refused to sell milk for such low prices and spilled it on the floor saying they're rather gonna do that then sell for these kind of prices and quite frankly i am on their side, town cannot function without a village, if people in villages cannot make for the living they are gonna move into the towns as they already are doing in big numbers, if there is no one to produce food - not only milk, similar situation with grain too - we'll be forced to import it from the other countries and everyone is on the loss, customers for paying triple for imported goods, producers for not only producing and making money but also for buying goods they'd usually produce on track and country for importing the goods instead of using it's own goods, the only one who'd be winning would be export-import companies which i already dislike enough as it is kind of a mafia business, this is shameful - to throw food - that is the biggest luxury one can afford :mad:

[Lahtari]

Article mainly posted for the hilarious picture...but if this is a chronic problem maybe that is a sign of overproduction, and that the least productive of the milk producers should be allowed to go out of business and find another line of work?

Yes. The majority of EU budget is used on farmer subsidies. We need to decrease our food production closer to the level of the market demand, and rather sooner than later. The surplus farmers could as well be hired as work inspectors in the Soviet style - there would be no difference. So let them pour all the milk and make noise all they want.

European people need to learn to be more vigilant about their tax money. A counter-demonstration would be in order. "Stop pouring my money" ;)


It is more a case of supermarkets forcing the price down to impossible levels.

And why is it possible? The supermarkets need to buy milk from somewhere, so are they able to buy cheaper from abroad or is there an overproduction?

[Skandi]

And why is it possible? The supermarkets need to buy milk from somewhere, so are they able to buy cheaper from abroad or is there an overproduction?

Sorry I don't get the question, we don't produce too much no. but there is only one buyer and therefore no competition Farmers are left with a choice between a small loss and a large loss not much of a choice really. I don't think much milk is imported, the economics wouldn't be good.

[Lahtari]

Sorry I don't get the question, we don't produce too much no. but there is only one buyer and therefore no competition Farmers are left with a choice between a small loss and a large loss not much of a choice really. I don't think much milk is imported, the economics wouldn't be good.

Don't the farmers have any union to negotiate with it, and tell it that "you can't get any milk unless you pay a decent price?" Because if they need the milk, they will pay more than producing costs unless they can get cheaper from abroad.

[Skandi]

Don't the farmers have any union to negotiate with it, and tell it that "you can't get any milk unless you pay a decent price?" Because if they need the milk, they will pay more than producing costs unless they can get cheaper from abroad.

They do but it has no teeth. that is what they should do yes, but somehow it doesn't happen, interestingly this year they are getting 5p/l less than they were this time last year. And I think that the demand fro milk is going up.
One of our neighbouring farmers was phoned by a supermarket and offered a set price per cob of corn, if he could harvest it in two days, he said yes called in some favours and worked round the clock, they then said they didn't want it as they had got it cheaper else where, but he will still have to sell to them next year, as there is no viable option.

[anonymaus]

In recent years the European Union has sought to reform its subsidy system and aims to phase out milk quotas, which limit production, by 2015.

Some 20 of the 27 countries in the European Union have called for changes that would give producers the ability to organize more effectively so as to increase their clout in dealing with supermarket chains and dairy companies.

We have similarly stupid laws here, only the price of dairy products continually rises. :mmmm:

[The Black Prince]

At the moment there is a slight overproduction caused by the decreased question from Asia (especially SE-Asia). This kind of thing is the main problem of food on the free market. As soon as there is an surplus the prive lowers below costprice and as soon there's a shortage the price doubles..

This was the reason after WW-II that countries started to introduce a set minimum and a set maximum price. In this way making sure that their would never be a shortage on food. However since some surplus was made in the late 70's the markets were frozen by quota's. And because unlike the 1950's when one out of ten people throughout Europe worked on a farm (every familiy knew someone working in the agriculture), in the 1990's only one out of 50 people worked on a farm. Thus the system of minimum prices was slowly abandoned, cause we live in democratic states and most people nowadays don't care where their food comes from if it costs money..


But the second problem and the larger at the moment is indeed the monopolyzing nature of supermarkets.

As a dairyfarmer when you get only 18-28 cents, while the costprices varies between 27-35 cents the litre. And at the same time you see that a 0.5 litre of full milk costs 53 Eurocents in the supermarket.. Nah that ain't right.. it's legalized theft.
Farmers don't want to make big profits, most just like the work and want to earn a living with it. They want to go back to the system where there was a set maximum and a set minimum.


For the last decade and also still at the moment a lot of not agricultural related people complain that a large sum of the EU money is used as agricultural subsidising. However the bulk of it goes to subsidising governmental agricultural items like control units (inspectors), helicopter scouting and especially green projects which in the end take care for some job employment of governments clergy while the green farm itself only gets a tidbit of the money promised. And since a quarter of the f.i. Dutch soils are in the property of various Nature & Environment organization they get that part of the money.
I don't mind that those people get money.. but I do mind when people ignorantly say it goes to farmers.. the farmers see very little of that money.

Oh and the 300 million given by the EU, well this is nothing..
Let me take as example the Netherlands: We have 20,000 dairy farmers and the Netherlands get 21 million euro's. So every dairy farmer (minus 50% profit taxation) will receive 500 Euro this year.
Well that helps, this way we can keep the engine running..:icon_ask:

[Tabiti]

Here they buy the milk from the producers for less then 0.20 euro/liter and sell it in the market for 1 euro/liter. After all I wonder where is whole that milk disappearing since the investigation they've made on dairy products shown that sometimes there is no milk in the cheese...My family and many other people started to buy milk directly from the near farmers for cheaper price and better quality.

[la bombe]

I'd guess that the main cause of this problem is milk overproduction, which has been a consistent problem in Europe and North America for upwards of two decades. I recently read that some countries in the EU have gotten rid of their required quotas (and this article states that the EU plans on phasing out all quotas), which has led to even more overproduction and a decrease in prices.

[The Black Prince]

I'd guess that the main cause of this problem is milk overproduction, which has been a consistent problem in Europe and North America for upwards of two decades. I recently read that some countries in the EU have gotten rid of their required quotas (and this article states that the EU plans on phasing out all quotas), which has led to even more overproduction and a decrease in prices.
Quotas are still there, they will be abolished in 2015.

And concerning overproduction.. in 2007-early 2008 there was actually a global shortage of milk causing a short upward fluctuation towards 40 cents. Reason for some producers of milkproducts like cheesse, ice and milkpowder to use chemically altered products based upon genetically modified sojabeans to replace the milk part. Especially in Asia (remember the chemical scandal), however since these products are still used there there is less asking for dairyproducts causing the surpluss and the falling of the prices since late 2008.

[la bombe]

Quotas are still there dude, they will be abolished in 2015.

I know, I said the EU is phasing them out. But some countries, the one discussed in the article I read was Switzerland (my computer's being wonky, but this is the article I'm referring to http://www.swissinfo.ch/eng/front.html?siteSect=105&sid=11251701&ty=st ), have already gotten rid of them.

Here are a few articles from earlier this year about the whole quota debate. The dairy industry is really interesting IMO.
http://www.euractiv.com/en/cap/eu-farm-chief-rejects-calls-restore-milk-quotas/article-180581
http://www.euractiv.com/en/cap/16-eu-countries-back-new-milk-regulation/article-185238#

[The Black Prince]

Switzerland in not part of the EU. And concerning milk they have there own set minimum/maximum pricing and are offered protection by their government against bulk products from foreign markets (Swiss government wants to keep the cows in the Alp valleys, its good for tourism :)).

And yes the dairy industry is interesting as are agrarian marketstructures on a whole.;)

[SwordoftheVistula]

One of our neighbouring farmers was phoned by a supermarket and offered a set price per cob of corn, if he could harvest it in two days, he said yes called in some favours and worked round the clock, they then said they didn't want it

Wouldn't the supermarket be liable for damages to the farmer? That's the way it works here (our system is essentially copied from the English one), the supermarket would be required by law to pay the farmer the difference between the amount they promised and what he actually ended up selling it for.

Europe seems to be the same way:

http://www.jus.uio.no/lm/eu.contract.principles.1998/doc.html#499

Article 9.502 (ex art 4.502) - General Measure of Damages
500

The general measure of damages is such sum as will put the aggrieved party as nearly as possible into the position in which it would have been if the contract had been duly performed. Such damages cover the loss which the aggrieved party has suffered and the gain of which it has been deprived.



My family and many other people started to buy milk directly from the near farmers for cheaper price and better quality.

Probably the best option :thumb001:


As a dairyfarmer when you get only 18-28 cents, while the costprices varies between 27-35 cents the litre.

If this happens on a consistent basis, maybe time to farm sheep or pigs instead?

Also, is there not an agricultural commodities/futures market in Europe, so that the farmers can lock in a price beforehand, and avoid the risk of price drop later in the year?

[Skandi]

Wouldn't the supermarket be liable for damages to the farmer? That's the way it works here (our system is essentially copied from the English one), the supermarket would be required by law to pay the farmer the difference between the amount they promised and what he actually ended up selling it for.



not unless there is a written contract, and there wasn't in this case. He couldn't sell to anyone, the produce went to waste.

[The Black Prince]

If this happens on a consistent basis, maybe time to farm sheep or pigs instead?

Also, is there not an agricultural commodities/futures market in Europe, so that the farmers can lock in a price beforehand, and avoid the risk of price drop later in the year?

The European system is different, there is less land available, and the land available is very expensive. Here I give you some short basic information about the European Farming sytem, as example Ï use the Netherlands:

In the Netherlands the price for 1m2 of good grassland is around the 5 Euro meaning one hectare (100m*100m) costs ca. 50,000 euro. The average dairyfarm here has 50-60ha. If you have the best landquality you may keep 2.5 GVE (GVE=Groot Vee Eenheid= adult dairy cow; most Dutch farmground is permitted ca. 2.0 GVE) this is based upon the dung production. A calf (to 6mnd) f.i. counts for 0.4 GVE and a adolescent (6mnd-2yr) for 0.6 GVE, if you have the maximum amount GVE per hectare you may not use extra artificial fertilizer or purchase extra dung.
If you want to milk cows you need, nexto a barn and a milking stable, a contract with a dairy factory (which is usually a corporation) and a quota. During the '90s and the early 21th century the permit to deliver 1 kg of milk costed ca. 2 Euro in the Netherlands. This permit once purchased is bopund to your farm untill you sell it or lost when you don't milk your permit quota upto 75% of its size (so you can rent out 25% to another farmer).
Since 2005 the message came around that quotas will be abandoned in 2015 the prices dropped, however since no farmer wanted to sell his quota for such a low price there is not much free quota available, currently it is around the 21 cents a procent fat (most milk is 4.5% fat meaning 0.95 cents the kg milk).

Now back to your question: If you have a well equiped, modern Dutch farm of about 55ha, permitted to 2.0 GVE/ha, meaning 110 GVE maximum. You can have f.i. 70 cows, 30 calves and 40 adolescent (70+ (30*0.4) + (40*0.6) = 106 GVE) and use a little artificial fertilizer for the parts that need a little extra. With 70 cows of good quality you can milk a quota of 700,000 (In the EU hormones are forbidden, so in general the average good quality dairycow will give a 2000 kg milk less as his U.S.A. sister). With a milkprice of let's say 30 cents you have a bruto turnover of 210,000 Euro. Off course this is bruto, you have to feed your cows nexto grass some extra binding like corn for contemplating ureum and a base concentrate (so they get their basic vitamins and minerals). Also you need to to write off sums due, and you need to purchase something new in a while. Here I create a little chart of constant and variable costs this example farm has to face:

210.000 Euro turnover, minus:

-20,000 (write off barn, initial 600,000)
-10,000 (write off milking locale, initial 150,000)
-10,000 (100,000 initial loan for purchase of 2ha some yrs ago, 10yrs pay off)
-4000 (8% rent over loan, now being 50,000)
-25,000 (insurances stables, machinerie, cows, the man himself)

-35,000 (write off machinery, inc. tractors, wagons, other heavy material)
-5,000 (repairs this year on machinery)
-2,000 (fuel, oil, soap)

-25,400 (20,0 euro/100kg, feeding 5kg avg. per cow a day, ca. 127ton yearly)
-5,000 (veterinairy, medicines + operations + administrative costs etc..)
-3,000 (bookkeepercost, the year balances and calculating taxation etc..)
-5,000 (hiring experts a 50.- Euro an hour)
-7,000 (Watership costs)
-5,000 (things I forgot)

+ 10,000 (selling old cows, selling bull calfs and less quality cowcalfs)
+ 20,000 (EU subsidizing)

---

Netto turnover: 76,100.- Euros
minus profit tax (50%) = 38,050 Euro

for one man working 76 hours a week 38,050 euros netto is a reasonable income, this is however a modern well equiped farm facing no problems during this year.

With a milkprice of 25 or 20 cents the situation is entirely different:
Instead of 210,000 turnover theirs now resp. only 175,000 (20,550 euro income) or 140,000 (3,050 euro income).

---

Farming pigs is again different, but than you need a new barn and silo system, feeding system (investment costs could range from a million to more).
Concerning sheep, thy count as 0.15 GVE, so you could keep approx 733 sheep, offcourse part are sheep, the most are lambs for sale. You would need to build other sheds et such (costs in total perhaps 400,000), and the margin on sheeps is roughly a 10 to 20 Euro. Meaning for 500 sheep getting 750 lambs you might make a turnover of (100 sheep, 600 lambs) between 7000 to 14,000 Euro.... How on earth in that way you are going to pay of those new sheds, while making a living for yourself?..;)

On a sidenote concerning sheep:
Sheeps in the Netherlands are mostly kept for a hobby, there are but a few who do it to make a living out of it in whic case you need something around the 3000 sheep, meaning 450 ha. However you could do with more marginal land (across the dikes or poor sandy soils), across the dike means paying rent to certain governmental organisations a 300 euro's a year, and poor sandy soils may cost around 25,000 euro.

[SwordoftheVistula]

Netto turnover: 76,100.- Euros
minus profit tax (50%) = 38,050 Euro

Ouch...that also seems like a big part of the problem right there.


not unless there is a written contract, and there wasn't in this case. He couldn't sell to anyone, the produce went to waste.

That sucks...probably unwise to conduct business based on a phone order if it is not an enforcable contract through.