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Resource centre on India's rural distress
 
 

When milk turns sour -Jitendra
-Down to Earth

Farmers worldwide face existential threat as milk prices slump but dairy processing giants are making a windfall. Down To Earth travels to Germany, Kenya and several Indian states to take stock of the global crisis

Call it the fallout of faulty farm policies of the rich or simply a demand-supply gap, dairy farmers across the world are crying for help as global milk prices slump. In India, the biggest producer of milk in the world, aggrieved farmers took to the streets in June and August after wholesale prices of cow milk collapsed to below the cost of bottled water in several states. At places, farmers emptied cans of milk on roads. “Milk procurement price in my district has reduced to Rs 15-20 a litre this year from Rs 28-32 three years ago, whereas the cost of production is more than Rs 32,” says H Venkanna Reddy, a marginal farmer from Telangana’s Jangaon district who supplements his income by selling milk. “My earning has halved in the past three years,” he adds. Reddy is among the 73 million small dairy farmers who have helped India surpass the European Union (EU) to attain the superlative in milk production in 2017-18.

According to the National Dairy Development Board, the country’s milk production has grown at 6.3 per cent a year during 2014-18, surpassing demand for packaged milk. Usually dairy units procure the excess milk and convert it into skim milk powder (SMP) to be sold in the international market. But the global price of SMP too has fallen—from $3,519 per tonne in 2014 to $1,959 in 2018—creating a glut and price drop in domestic market.

Halfway across the globe in Germany, a similar glut has forced Christian Sebastian to wind up his family farm in Hagelloch village in Swabian region. “We are suffering since the government has lifted the milk quota,” says the 62-year-old.According to European satistics body Eurostat, dairy market of the continent was quite regulated till the early 2000s due to a quota system introduced in 1984. Under the system, milk was produced as per the decided quota to control surplus production and thereby regulate the price. Following 2003-04, EU started relaxing the quota so that farmers can produce more and export. In 2006, production touched a record high of 133 million tonnes which led to the first price crash. Abolition of the quota system in 2015 acted as the last straw. “Though my farm had incurred losses several times over the past decade, I used to sell a litre of milk for 40 cents (about Rs 32 or $0.4) in 2014. The rate dipped to 24 cents by 2016. It has improved to 38 cents this year, but it is still far below our cost of production of 45 cents a litre,” says Sebastian. He was among the hundreds of farmers who protested in front of the EU agriculture office in Brussels in 2015.

His son has now sold most of his 28 cows to big dairies and shifted to beef business. He also rents a considerable part of his cowshed for horse stables. The village with rolling hills and lush green meadows wears a deserted look as several other dairy farmers have either followed suit or taken up small jobs in nearby towns. Across Germany, dairy farmers’ number had reduced by 42 per cent to 76,470 between 2001 and 2014. Post- 2015 reforms, another 12,000 have quit business. Yet milk price remains low as the small farms have now been acquired by big dairies who are churning out more milk than before.

In New Zealand, the world’s largest milk exporter which exports 95 per cent of its dairy products, farmers are faced with a peculiar situation. Most of the country’s 12,000 farmers are reeling from heavy debts. Mathew Hilhorst, a dairy farmer who owns 350 hectare (ha) in Taupo province, says his family has been supplying raw milk to the country’s multinational dairy cooperative Fonterra. Last financial year it reported $196 million net loss and has reduced its milk procurement price. To pay off the family loan, Hilhorst has mortgaged 250 ha of his farm to a Chinese company and works there as a tenant farmer.

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