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Milk prices rise on Chinese interest

Local farmers fail to capitalize on demand

By Michael Heitmann
Staff Writer, The Prague Post
October 3rd, 2007 issue

COURTESY PHOTO
A disparity in dairy prices has led farmers to begin exporting milk.
There’s no surer sign of the country’s increasing integration into the global economy than this: China’s newfound zest for milk and a drought in Australia have caused a recent uptick in dairy prices.
“Production of milk has dropped not only in Australia, but also in Argentina and Brazil,” said Michal Němec, director of the Bohemian-Moravian Dairy Association, “this while milk consumption has increased in some regions of Asia, in particular China and India.”
Since traditional suppliers cannot fulfill Asia’s demands — last year, China’s prime minister said he had a dream that everyone in China would have a half-liter of milk a day — the eastern giants have taken to importing powdered milk from across the world, putting a strain on global supplies.
“There is a worldwide shortage amounting to 3 million to 5 million metric tons [3.3–5.5 million short tons] of milk,” said František Zobal of the Agricultural Chamber. “Stocks of butter and skim milk are almost nil.”
“Currently, demand outpaces supply [in the Czech Republic],” confirmed Jiří Nikl, executive director of the Mlékárna Hlinsko dairy wholesaler, better known by its Tatra brand name. And since the supply situation is no better in any other neighboring country, his company is not importing milk to ease the squeeze, he said.
According to simple economics, then, consumer prices have seen a marked increase, with the cost of milk, cheese and butter rising 1.8 percent, 4 percent and 2.8 percent in August, respectively. A liter of low-fat milk cost 15.47 Kč (79 U.S. cents) in September, up from 14.61 Kč a year ago, according to the Czech Statistical Office.
But, while end prices have grown, the country’s farmers have not benefited.
“In all of Europe, [production] prices have gone up 20 percent to 25 percent compared to last year, but the Czech Republic is an exception,” Zobal said. “During the past seven months, prices even went down 1.14 percent.”
Dropping production prices are a result of farmers being too tentative to speak up for themselves, Zobal said.
“The farmers would get paid fair prices if only they asserted their demands,” he said.
Dairies in Germany, where consumer prices have gone up 50 percent in recent months, pay 9.50 Kč per liter for raw milk, compared to an average 7.90 Kč in the Czech Republic. Because of this disparity, a growing number of farmers have begun exporting their milk, boosting annual exports to 400,000 metric tons this year, according to Agriculture Ministry projections.
Indeed, unlike many other European Union member states, the Czech Republic is not flush against the cap placed on it by the EU’s Common Agricultural Policy, initially designed to curb the overproduction of milk. Czech farmers — or their half-million cows, to be precise — are expected to put out 2.7 billion liters (713,265 gallons) of milk this year, 50 million liters short of the ceiling.
These quotas are partially responsible for the current worldwide shortage, according to observers. And, while the EU announced plans to ease production limits on wheat last month — another commodity in short supply — no similar measures for dairy farming are planned.
While the battle for quantity continues to rage, consumers may also be missing out on quality, at least on the nutritional side, Zobal added. A third of the milk sold in the Czech Republic is now skim milk, a trend he deplores.
“It’s widely known that animal fat carries vitamins and minerals, dissolved in the fat,” he said. “That’s why whole milk with a 3.5 percent fat content is much healthier.”

Michael Heitmann can be reached at mheitmann@praguepost.com


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