China’s new appetite for milk forces price rise in Germany

China’s new appetite for milk forces price rise in Germany

=B7 Cost of dairy products expected to rise by 50%
=B7 EU rules stop farmers increasing production

Kate Connolly in Berlin
Thursday August 2, 2007
The Guardian

Demand for milk in China is soaring thanks to president’s ‘dream’ of
half a litre a day for all, especially children

They have been blamed for putting up the price of everything from
bicycles to garden fences.
Now the Chinese have been dubbed “milk snatchers” by German consumers
for buying so much milk that prices of dairy products in Germany are
expected to soar by 50%.
The Germans are being made to feel the effect of China’s new-found
taste for milk, sparked by a remark by China’s president Wen Jiabao:
“I have a dream – a dream to be able to provide all Chinese,
especially our children, with half a litre of milk a day.”
The result has been a huge increase in milk consumption in China and
demand is growing at a rate of around 25% a year.
Because China has no tradition of dairy farming, there is a shortage
of home-produced milk. A third of all the milk produced worldwide is
now being transported to China, much of it from the EU and a
significant amount from Germany, which produces 27bn litres a year.

EU dairy farmers would like to increase production to cope with a
current shortfall, but are prevented from doing so by EU milk quotas,
imposed in 1984 and in force until 2015. Instead German dairy farmers
have taken the obvious step of putting up their prices, which they
have long claimed were artificially low. Blaming the Chinese has
helped to deflect criticism from the farmers.
A litre of milk in Germany, currently around 64 cents (40p), is due to
go up by 50% in the next few weeks. Other products, such as butter,
quark and yoghurt, are expected to rise accordingly. Across Europe the
prices of dairy products are rising for the same reasons, but not so
dramatically as in Germany, where cheap groceries are seen as a basic
right.
Thanks to the lobbying power of Germany’s huge number of discount
supermarkets, groceries cost around 63% less than in Iceland and 15%
less than in Britain.
Now outraged consumer groups and politicians have called for the
government to raise unemployment benefit to cover the rise.
Yesterday supermarkets across the country reported that shoppers were
panic buying dairy products in an attempt to beat the price increase.
The only effective way to increase global milk yields without breaking
the milk quotas, according to experts, is to encourage the breeding of
cows outside the EU. German dairy farmers have duly been selling
their best high-performance milk cows to Chinese farmers, who are
receiving government subsidies if they switch to dairy farming.