MIV warns of struggle for farmers and dairies
Both sides of the dairy industry, farmers and processors, are struggling with cost increases, which are not paid for by the market, the German Dairy Industry Association (MIV) warns. In addition, the pandemic has significantly reduced the profitability of the dairies. “Organisational expenses have increased enormously as a result of corona and pandemic plans are cost-intensive,” states Peter Stahl, chairman of MIV. The association says dairies and farmers have to work together to strengthen marketing and exercise their influence on agricultural politicians.
Meanwhile, the final negotiations on the reform of the Common Agricultural Policy (CAP) in 2023 are currently underway and the MIV continues to advocate a market-based approach without state volume control.
From its perspective, one building block for easing the situation is to further promote German exports in order to secure markets and thus ensure a good milk price in the long term. The ongoing trade wars with the US and Russia in particular are damaging milk marketing. The impending Brexit is making matters even more difficult, the association notes.
Quantity-restricting measures are only effective if it is made clear from the start, which countries should reduce their production. But current developments show a different tendency: all of the major dairy countries are expanding production.
“Politicians can help the dairy industry substantially by ensuring that dairies are not overwhelmed by cost increases, such as changes in packaging law or labeling law. It all costs money,” Stahl says.
In Germany dairy farmers have lately demonstrated frequently. One of the demands has been “at least 15 cents more per liter of milk” (an increase of 40%), which MIV views as unrealistic, as the market prices of raw milk are based on supply and demand. In addition, the markets are interconnected, so around 15% of European milk is sold on the world market at world market prices, which fluctuate and are influenced by volatile exchange rates.
About 50% of German milk products are sold abroad, most of them in the EU internal market. In addition, Germany is a major importer of milk products. Therefore, MIV states the price increase is not easy to implement.
The MIV does not in the short term expect any drastic supermarket price increases. The German milk price is mostly the average of its European neighbours and that is unlikely to change.
The MIV also points out that some cost items on the farms, which make it difficult for the dairy farmers, can be ascribed to the profession itself, as higher rents/land prices are negotiated directly between the farmers themselves.