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Dairy farmers to grow co-ops

Higher prices ought sought on the shelves for milk products

By Paul Voosen
Staff Writer, The Prague Post
November 15th, 2006 issue

To boost dairy farmers' bargaining power, the Agrarian Chamber (AK) is pushing to escalate their participation in regional sales cooperatives. The chamber hopes that the move will pressure dairies to raise buying prices and, in a cascade effect, increase the prices for supermarket retailers of milk, cheese and other dairy products.

Twenty-seven regional sales cooperatives represent 65 percent of milk produced. Jan Veleba, director of the AK, an amount well behind that of other countries.

"We only want to do what works abroad," said Veleba. "In France, some 90 percent of milk producers are co-op members, and, in the United States, it is just about the same."

The price of milk from farmers to dairies in the Czech Republic fell 6 percent this year, matching a Europe-wide trend. Prices have dropped 8 percent in Austria and 12 percent in Hungary due to increased competition between European farmers and dairies.

Farmers are paid 7.60 Kč (35 U.S. cents) per liter (1.06 quart) on average, AK spokeswoman Eugenie Línková said. For farmers to cover costs, she said, they need the price of milk to be between 7.90 and 8 Kč.

Dairy farmers make 10 hellers for every liter sold, while domestic dairies make 1 Kč and supermarkets, 4 Kč, according to the AK. Farmers and dairies say that the supermarkets use their dominant positions to dictate low prices, lower than what would exist in a free market.

The chamber hopes, Línková said, that cooperatives' increased bargaining position will push dairies to form a negotiating partnership that can match the weight of supermarkets.

European Union accession strained the relationship between farmers and dairies. Farmers, frustrated by dairies' inability to raise prices, exported milk to Germany, where prices are higher. This led to domestic shortages for dairies, which then imported milk from Poland and Slovakia. Imports made up for a third of milk lost to exports, and several dairies didn't survive the subsequent belt-tightening.

Czech farmers export about 15 percent of milk they produce.

Dairies are evaluating the AK's hopes, said Michal Němec, director of the Bohemian-Moravian Dairy Association, and are withholding judgment until approval for the sales cooperatives' increased influence comes from the Anti-Monopoly Office. The chamber says that the cooperatives will continue to observe Czech and EU anti-trust laws.

The cooperatives have Agriculture Ministry support.

"The state supports the creation of new cooperatives and sales organizations for farmers," ministry spokesman Hugo Roldan said. "This will help them achieve a better position on the international market."

Asked if dairies could also form a cooperative to negotiate with retailers, Němec said the only long-term option he saw would be a consolidation of properties and businesses.

Meanwhile, the harried dairies, pressed by farmers and retailers alike, have another concern: the 51 percent increase in dairy imports from Poland and Germany during the past year.

Since EU accession, Czech farmers posted profits of 7.6 and 8.9 billion Kč in 2004 and 2005, respectively, and EU subsidies will continue to increase. For the five years prior to 2004, the industry lost money.

Petr Kašpar contributed to this report.

Paul Voosen can be reached at pvoosen@praguepost.com


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