According to a study commissioned by the European Milk Board (EMB) and the MEG Milch Board (the German Milk Board), only 77% of the production costs in the German dairy sector are covered by the farm-gate price.
The latest cost study, established by the German Office for Agriculture and Agricultural Sociology (Buro fur Agrarsoziologie & Landwirtschaft, BAL), was carried out in January 2017. It found that the average price of 33.76c for one kilogram of milk covered only 77% of the costs for German farmers (43.74c).
The study calculates the current costs of German milk production from EU figures and releases them on a quarterly basis.
On this topic, EMB President Romuald Schaber said: “The voluntary supply reduction scheme in the EU has curbed the growth in surpluses, putting a halt to the downward trend in prices”.
Examples of this recovery of prices are Belgium and Lithuania. In July 2016, milk prices in Belgium and Lithuania were at around 22c and below 17c respectively. Due to the voluntary milk supply reduction scheme, prices recovered to 34c and 30c respectively.
However, this is unlikely to last long – with increasing signs of a longer-term decline for milk prices on the horizon.
Schaber said: “It is important that we quickly establish a legal framework in the EU to enable us farmers to produce responsibly.
Without such a set-up in place, dairy farmers would effectively be forced by critical price scenarios to increase production, despite the fact that this would damage the entire market.
As a result, the EMB is calling on EU Commissioner Phil Hogan and the Ministers of Agriculture of the Member States to introduce a milk market crisis instrument based on the Market Responsibility Programme (MRP).
Schaber added: “In recent years we farmers and the policy-makers alike have come to the clear realisation that an overflowing milk market is extremely damaging to us in many areas.”
“With a crisis instrument in place, that automatically sets off stabilisation measures – such as a voluntary restraint on supply in times of market turbulence – the EU could finally contend with the chronic crisis in the milk market.”