Moves to unshackle the European milk market and end production quotas don’t seem to be turning out as expected with prices plummeting, export markets underperforming and shoppers still paying dear.
If the days when wealth was automatically associated with a fine healthy four legged beast that produced over the odds had not gone out of the window decades ago, the end of EU ceilings on milk overproduction in April looks like making it a certainty. The EU ceilings were in force for decades to prevent so-called milk lakes and butter mountains, famed blights of the Common Agricultural Policy from the 1970s and 1980s.
The idea was that EU farmers would be freed to produce as much as they like and excess production could be exported to foreign markets where populations were, so to say ready to lap it up. Farmers in some countries clearly geared up in advance to produce more milk but the export markets don’t seem to have lived up expectations.
China and other Asian countries that were the target for the increased sales have stepped up their own milk production. Russia fell out of the export equation when last summer it banned EU milk exports as part of its retaliation against European sanctions over Ukraine and Crimea. The result appears to be overproduction and a sharp fall in prices price paid to dairy farmers.
Figures from the European Commission at the end of May show average milk prices so far in 2015 have fallen by around a quarter compared with a year earlier. The figures for the Czech Republic were lower but Czech milk prices were already below the EU average. Around 40% of Czech milk is exported with the rest consumed on the domestic market, so the steeper Europe-wide drop in prices is a factor for many as well.
Last week, the relevant committee of the Czech Agricultural Chamber demanded action in the form of export promotion, the purchase of milk and milk products for state reserves, and interventions to boost prices. The Czech Ministry of Agriculture says it will take up the gauntlet at the forthcoming EU meeting of farm ministers. It has already started to buy up milk products for the state’s emergency reserves. One of the country’s biggest dairy products companies, Madeta, says it is producing more dried milk, though even this is a loss making venture.
For Czech dairy farmers, a galling part of the current market situation is that the supermarket shelf prices for milk have not gone down with most shoppers still paying around 20 crowns a litre, around the same price as a year ago, so there is little chance that some of the extra production can be soaked up by higher domestic consumption. Dairy farmers though say that they are selling milk for less than seven crowns a little, so the mark ups seem considerable further down the line.
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