"Germany is well supplied when it comes to milk, and even more so now that the Russian market is closed, " Dr. Michael Lohse, spokesman for the German Farmers Association (DBV), told The Local on Thursday.
Aldi announced at the start of the week it would be lowering the price of a 250 gramme package of butter from 99 cents to 85 cents. This comes on the heels of a previous price reduction in March from €1.19 to 99 Cents. Lohse said both price drops have been in response to Aldi taking advantage of the uncertain eastern market resulting from the Ukraine crisis.
"Aldi is the market leader and so when they demand the price be lowered from the dairies, the other retailers follow suit and benefit from their market position," Lohse said, adding that there wasn't much farmers could do against the Aldi price pressure.
"The ten cents consumers are saving [by going to Aldi] does not mean much for their bottom line – they can still probably pay their rent, but consumers are consumers and they will go to where the prices are lowest."
Russia has placed a one-year ban on meat, fish, dairy, fruit and vegetables from the US, the EU, Canada, Australia and Norway in response to economic sanctions put in place due to the Ukraine crisis.
The DBV has yet to publish exact figures on how German farmers have been financially impacted by the Russian embargo.
Last week, the EU Commission pledged emergency support for the dairy sector but only for products that can be stored long term, which includes, in a limited capacity, butter. The Commission will help finance the cost of temporary storage from 90 to 210 days of cheese, skimmed milk powder and butter, buying producers more time to find new markets for their products.
"Price signals on the European dairy market show that the Russian ban is starting to hit this sector," EU Agriculture and Rural Development Commissioner Dacian Ciolos said in a press release.
Lohse says that the Commission measures are very limited, as cows continue to produce milk, no matter what the market conditions are. "A cow is not like a beer tap that can be simply turned off."
And the milk glut in the country will see other prices dropping as well, says Lohse.
"Today the subject is butter, but we can expect the pressure to come to other milk products as well, such as yoghurt and cheese," he said.
Milk prices for farmers started at 40 cents at the beginning of 2014 and have dropped to 37.5 cents, according to most recent data from the Agricultural Market Information Association (AMI). Butter prices have dropped from €4.30 per kilogramme to €3.15 per kilogramme since the beginning of 2014, data from the South German Butter and Cheese Stock Exchange Kempten show.
While consumers are winning, buying more cheap butter isn't going to do much for the German farmers.
"Unfortunately, telling people to spread on the butter thicker is not really recommended from a health standpoint. We're now pushing for new export markets, looking to Asia to start accepting European dairy," said Lohse.