« Would you take a thirty percent salary cut? » asked an angry dairy farmer. « That’s what we have been forced to do. » And this is the reason why French dairy farmers are taking to the streets today all over France.
The journalist reduced the problem into simple terms that even I could understand.
A couple of years back, the whole world wanted milk. Demand was outstripping supply. Therefore milk producers had to produce more milk. They couldn’t get the cows to work overtime, so they bought more cows, though to have more cows, the cows themselves need to produce more cows. It takes two years to raise a cow from birth to the first drop of milk. So the dairy farmers started to breed even more cows. They built new sheds for the cows and they invested in new, bigger, better and faster milking machines. The price of milk was high, dairy farmers were making a reasonable living, and they were investing a large amount of their new found wealth in new infrastructure. No one thought that the price of milk would fall, but it did. A 30% fall. The fell came, just as the dairy farmers had started to produce the colossal amounts of milk that the world needed. The fell came just as there was a massive drop in demand. People ain’t buying as much milk as they did.
In the good old days, the European Union would have bought the surplus and stored it in a vast « milk lake », just next to the famous butter mountain. Only problem, the EU doesn’t do that anymore, neither does the EU fix strict milk production quotas. Gone too is the guaranteed price for milk, that was normally renegotiated every month between those who produced the milk and those who bought it and then flogged it on to the public. Fixing milk prices smacked of unfair competition, so now it is left to market forces. Milk prices are fixed by the huge retail chains. They are paying the producers less per litre, but they aren’t passing on the price differential to the hard-pressed consumer.
Result, dairy farmers are in the « merde » and quite a few of them are going to go under.
Back in May 2008, dairy farmers were paid roughly 320 Euros per thousand litres of milk. Recently this price had dropped as low as 200 Euros, which means farmers are getting 20 Euro Centimes a litre. The « on-the –shelf » price in the supermarkets varies from 65 to 90 Euro centimes for a litre of half fat UHT milk – the standard milk in France. The cheaper milk will come in wax cartons, and the more expensive stuff in a real plastic screw top bottle. Even with the cost of conditioning, transport and packaging, the supermarkets have a pretty good profit margin, mind you the large retail groups argue that increased fuel costs, and the price of raw materials (presumably for the packaging) mean that prices are not scheduled to come down. Strangely enough, prices for other dairy products have come down. Butter has decreased by as much as 40%, whilst yoghurt prices have decreased by around 10%. As for that nation’s large dairy groups such as Danone, they have not reduced the price they pay to their milk suppliers, roughly 27 Euro centimes per litre. Milk produers themselves would like to fix a national price for milk of between 25 and 27 Euro centimes per litre
So, today, hundreds of dairy farmers, along with their cows, will take to the streets for a series of national demonstrations. They are calling for government help to save their industry – act now or lose your dairy industry forever -. Is the message from the nation’s 90,000 milk- producers. With the drop in demand and prices, many dairy farmers reckon that they are 3000 Euros worse off per month. Many are in negative equity, having to pay back the huge loans they took out to improve their infrastructures in the first place, to meet the huge global demand for milk two years ago.