DAIRY CRISIS: Milk industry going teats up
20 October 2009
Over the last few months the collapse of milk prices in Europe has meant that many dairy businesses are operating at a loss, and some farmers have been forced to send their herds to the abattoir — a critical situation, which has added to the ongoing controversy over milk quotas and subsidies. La Repubblica reports from northern Italy.
"There wouldn't be a problem if cows were entitled to unemployment benefit." Alessio Palestra, age 32, is a dairy farmer in Belgioioso, near Pavia. Like many of his colleagues, he assumes an especially gentle and attentive air when he speaks of his cattle. "We usually take the cows out of the barn in summer. And this year, we took out twice as many as last year." But this year, the cows were not on the way to the summer pasture, but to the abattoir. Until recently, farmers would keep dairy cattle for as long as possible, taking advantage of six or seven births over a seven- or eight-year life span. "Now that there is no more money, we have to react immediately. If a cow is not on form, she is taken out of the barn. That way we have fewer head, and we can save a little money on feed. Of course, it also brings in a bit a of cash, which we really need. It is a terrible thing to send a cow to the abattoir before her time. But today, all the dairy farmers are in a terrible situation."
When the European Agriculture Council gathered on 19 October, thousands of farmers traveled to Luxembourg to protest outside the meeting. When he completed his agricultural studies in 2004, Alessio Palestra took over his uncle's farm. At the time, he was able to sell his milk for 33.83 cents per litre, a year later it fetched 33.76 cents per litre. Last year, the price rose to 39.48 cents. "Now I only get 29 cents a litre, and I'm making a loss. I have a contract with a factory, which paid 32 cents a litre at the beginning of the year. Then they wrote to say that the competition was offering a price that was lower than ours. If we wanted to continue working, we would have to accept a price cut. It is called a unilateral contract change. 'If you're not happy with that, you can terminate the contract and sell to whoever you like,' is what they wrote. Other dairy farmers are even worse off. The ones who are working for the big parmesan and gorgonzola makers, are only getting 27 or 28 cents a litre, even though the production cost for a litre of cow's milk is 30 cents – and that is just for cattle feed."
Delocalising to Romania
Alessio Palestra is also the president of the local milk producers' branch of the farmers' union, and he is a fund of facts and figures on the crisis: "according to our figures, a farmer with 60 dairy cattle is losing about 4,000 euros a month. If he has a herd of 200, he is losing about 15,000 euros. A lot of farms are about to go under, especially the ones that rent their land. I have colleagues that are going to the wall. They are spending their savings on fodder and "concentrate" – a protein based mix of oats, and sunflower and soya meal. If the situation does not improve very soon, they will be bankrupt. The enthusiasm Alessio once had for his profession is now a distant memory. "My milker gets up in the middle of the night, at 1:30 AM. Then he comes back later for his day shift at 1:30 PM. I'm out of bed at 5:30 AM, and I work all day until evening. Sometimes one of the cows gives birth while you're having dinner and you have to go out to the barn, or you are up all night because one of the calves is sick. And to think we're doing all that to make a loss."
It costs a fortune to set up a dairy farm. "In our region," says Ettore Prandini, the owner of the Morenica estate in Lonato, near Brescia (700 cattle, including 300 dairy cows), "if you want to buy 220 head so as to have 100 cows that are always ready for milking, it will cost you 250,000 euros. You also need a barn and a milking parlour, which, with the machinery, will cost about one million euros. But the most expensive item is the land, which around here costs 120,000 euros a hectare. For a herd of 220 head, you'll need 66 hectares: so another 7,920,000 euros. Anyone who is renting right now is likely to lose his shirt. If the price of milk does not go back up, about 15% of farmers will give up the business in the coming year. Some of them have already delocalized to set up in Romania, Bulgaria, and Estonia."
Playing the label card
Ettore Prandini is the chairman of the Brescia branch of the Coldiretti farmers' union: "The other day, we managed to negociate an agreement with local industry representatives, who promised to pay 31 cents a litre. It's not a fair price, which would be around 36 to 37 cents a litre, but it might be hopeful sign." "Between 2007 and mid-2009, our costs fell by about 12 or 13%," he adds, "but milk prices fell from 42 to 28 cents a litre – not that the consumers noticed. Retail prices are still at €1.30 to €1.55 a litre. In 2007, industrial buyers paid about €6.40 euros per kilo for grana padano cheese. Today, they are paying a euro less, but supermarkets still are selling grana padano for 11 euros a kilo, like they did in 2007."
The milk crisis has also been aggravated by the lack of an appropriate labelling system: "We don't want to close borders," says Prandini, "and a price war would be catastrophic. Now that there are no more subsidies for making powdered milk, powder producers are selling their product for less than 20 cents a litre. All they need is a profit of two or three cents a litre, so there is no way we can compete with them. Consumers will have to decide if they want a quality product or not, and the only way they can do that is if the label indicates where and how milk is produced." A few days ago, as part of a protest in Pavia, northern Italy, dairy farmers staged a mock funeral behind a Friesian cow bearing two placards, which read: "3.5 litres for a coffee" and "17 litres for the price of a drink." With prices so low, no wonder farmers are willing to spill milk onto the streets.