Milk Crisis

Last summer, German farmers dumped their milk down the drain to protest low milk prices. Yet prices have fallen to half of what they were little over a year ago, with German farmers getting a mere 20 to 25 cents per liter ($1 to $1.28 per gallon) of milk.

Germany and several other European countries now want the EU to postpone a planned milk quota increase which they fear could further hurt milk prices.

"The situation has changed dramatically as far as price is concerned," German Agriculture Minister Ilse Aigner said as she arrived at a meeting in Brussels on Monday, March 23, to discuss the milk issue with her EU counterparts.

Dairy farmers considering more strikes

Prices under 40 cents a liter mean a loss for farmers, Aigner said. And dairy farmers are going out of business at a rate of three to five percent each year, Reinhard Pauw, head of the dairy farming association for the state of North Rhine-Westphalia, said at a press conference on Monday.

"Twenty-five cents per liter is not even enough to cover production costs," Pauw said. It is not enough to live on and certainly not enough to make investments with."

He noted that butter is currently as cheap as it was in 1948.

German milk exports are down, Pauw said, while countries such as the United States are exporting milk at high volumes. Pauw said farmers were also getting squeezed by grocery store chains who want to offer low prices while still making a profit.

Germany's milk producers federation BDM has said it might launch additional "milk strikes" unless prices increase. Some 8,000 farmers across eastern Europe protested falling prices earlier this month.

EU says decision is final

Yet EU leaders said they are not eager to re-open the milk issue. The EU's decision to gradually lift milk quotas was part of a broader dairy reform agreed to by all 27 member countries just last year.

"I am not ready to discuss a complete re-orientation of the EU dairy policy as suggested by some of you," EU Agriculture Commissioner Mariann Fischer Boel said at Monday's meeting.

"The problem we are facing today is not the result of increased production in the EU but rather the combination of increased production in a number of third countries... and a decreasing demand in the EU and on the world market," she said.

Quotas were introduced in 1984 to try and do away with Europe's "butter mountains" and "milk lakes." Last November, the 27 EU agriculture ministers agreed to lift milk quotas by one percent each year before doing away with them altogether by 2015.

EU wants quotas lifted

Germany, Austria, Hungary, Slovakia and Slovenia circulated a joint note to the European Commission and other national EU delegations which said that "unconventional approaches" are needed to stop prices from falling further.

"If it was up to me, we'd keep the milk quotas in some form or another," because "we have to be very careful not to exacerbate the current overproduction," French Agriculture Minister Michel Barnier said.

But the EU insists that quotas are not the problem.

Fischer Boel pointed out that EU milk production was 4 percent below the maximum allowed quota this year and that the same was expected for next year.

"This clearly shows that farmers understand that it is market prices and their cost structure rather than the quota levels that should determine their production decisions," she said. "Quotas are not an obligation to produce, but a possibility."

"We should therefore stop this purely political discussion and focus on the real economic problem," Boel told the ministers.