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German milk prices expected to fall again

DDP/The Local · 10 Jun 2008, 12:25

Published: 10 Jun 2008 12:25 GMT+02:00

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Discount grocery chain Aldi used full-page ads in national newspapers to announce Tuesday that they would raise milk prices by €0.07, and take on the additional €0.03 in costs to meet dairy farmer demands. The action is meant to allow dairy farmers cost-effective production, but experts are sceptical that the industry will be able to maintain the cost increases farmers have demanded.

"It's expected that the milk prices will sink again," head of economic research institute RWI Essen, Roland Döhrn, told German daily Bild on Tuesday. "The milk price is a so-called signal price, where the competition and cost pressures are especially high for retail chains."

Head of Germany's fifth largest milk processor Ehrman, Werner Hahn, also told Bild that the higher prices are not sustainable. "Because of the dairy farmer strike there are mind-boggling quantities of milk around, at least two days worth more than usual," he said.

The country's largest creamery, Nordmilch, also told Bild it is highly sceptical that the dairy farmer's goal to increase prices to €0.43 per litre would be successful. "The milk price can't just be arranged, but needs to reflect the market," head of Nordmilch Martin Mischel said. "When one grocery chain raises prices it doesn't mean that the others will eventually follow."

President of the German dairy farmer's federation (BDM), Romuald Schaber, was outraged at these statements, according to Bild. "If milk prices fall, it's rubbish," Schaber told the paper. "These statements reveal that the creameries don't really want to seriously negotiate a higher price for milk on a permanent basis." Schaber threatened the creameries with renewed strikes if prices fall again.

Story continues below…

The BDM staged a 10-day delivery strike beginning on May 27 to protest prices they said were too low to support their costs. Prices were between €0.27 to €0.35 per litre. Farmers openly threw surplus milk down drains, fed it to their calves, or spread it over crops. Meanwhile some consumers had difficulty finding milk on grocery store shelves.

The strike ended last Wednesday when major German grocery chains Lidl, Rewe, Netto and Plus agreed to raise prices.

DDP/The Local (news@thelocal.de)

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