What is life like for the farmers who produce our milk? Do farmers really have to get up at the crack of dawn? More importantly, are they making a living? Take a closer look at the lives of two dairy farmers and their families in different countries. Click on the photos to find out more. Mary Malcolm is a dairy farmer in Jamaica. She and her husband have a small herd of dairy cows. They used to make a good living from milk, but subsidised milk powder, imported from Europe, has recently been threatening their livelihood. John Lougher is a dairy farmer in Wales. He has a herd of about 80 pedigree cows on his farm near Bridgend. People say that dairy farmers in the European Union have an easy time because their livelihood is protected by subsidies and quotas. Is this true? Problems In Jamaica! Mary and her fellow dairy farmers are facing a number of serious problems. Which do you consider to be the most serious? Make a list, putting the most serious problem at the top. Compare your list with those of your classmates. Do you agree? Talk about the reasons for your choices. The price of milk has dropped! Prices paid by the island's major milk processor, Nestlé International, were recently reduced. Mary gets only 18 Jamaican dollars per litre, compared with more than 22 Jamaican dollars before. I'm not allowed to sell as much! Nestlé International has imposed a quota on the co-operatives. Mary's co-op used to sell 18,000 litres of milk per week, but now Nestlé will buy only 6,000 litres from them. Mary and her fellow co-op members are now literally pouring excess milk down the drain. The market is shrinking! There is less demand for fresh milk in Jamaica now. Flavoured milk and condensed milk, which are largely made from milk powder, are popular. Ice cream is imported from abroad. 1
My running costs are high! Mary s income has effectively been cut by two-thirds because the price of milk has fallen, and the amount she is allowed to sell has been reduced. At the same time, costs have risen sharply. Electricity is very expensive, and water rates, feed costs and labour costs are also very high. Mary says that these costs have gone up by 100 per cent in the last six years. The EU is dumping cheap milk powder on Jamaica. Cheap milk powder is being imported into the country from the European Union. This milk powder is cheap because it is subsidised by the EU. The import tax on it is very low between 0 and 5 per cent. Local farmers simply can't produce their fresh milk as cheaply as this they do not receive subsidies. They cannot compete with the price. Solutions for dairy farmers in Jamaica? What can be done? Here are some possibilities... Jamaican dairy farmers have already become more efficient and increased production to 38 million litres per year. This sounds good, but because of powdered milk imports, tighter quotas and rising costs, they have had to reduce production, and they still cannot all sell their milk. The Jamaican dairy farmers appealed to their government to prevent milk powder being dumped on the island. The government responded by conducting a survey to examine the impact of imported powdered milk on the dairy industry. Because of the effects that this was having on farmers like Mary and Lanlie, they recommended an import tax on milk powder of 137.5 per cent, and the setting up of a national dairy board. Two years on, these recommendations have yet to go through Parliament for approval 2
The Jamaican Dairy Farm Federation is hoping to sell its members milk direct to schools through a new government initiative the School Feeding Programme. It is also hoping to sell condensed and flavoured milk, and so increase profits for its members. The Jamaican Dairy Farm Federation is itself now processing milk to make products such as flavoured milk drinks. With government help, it has opened its first processing plant and hopes to build a brand new one in the future. Problems in Wales! John and his fellow dairy farmers are facing a number of problems. Which do you consider to be the most serious? Make a list, putting the most serious problem at the top. Compare your list with those of your classmates. Do you agree? Talk about the reasons for your choices. The price of milk has dropped! John gets a lower price for his milk than he did in the 1970s. Things were easier for UK farmers in the 1970s and 1980s, when the Milk Marketing Board controlled prices. However, the UK government has abolished the Board, as it said that the system was unfair. One result of this is that small dairy farmers, however efficient they may be, are struggling to make a living. I have to sell my milk for less than the cost of production! In order to break even, John would have to sell his milk for 20p a litre. In order to have money to reinvest in his farm, or to make a profit, he would have to sell the milk for 22p a litre. Today, John sells his milk for 16p a litre, which is why he is losing money. The market is shrinking! People in the UK are consuming less and less milk. In the past, nearly everyone had milk delivered to their doorsteps, and this meant they used more milk. They also cooked more, and ate food which contained more milk for example, rice pudding or custard. Nowadays, people buy more ready meals, go out for meals more, drink less tea and coffee, and prefer fizzy drinks and water to milk. I have to compete with cheap imports from Ireland! When Irish farmers produce too much milk, they sometimes sell the left-over milk in the UK. UK companies can buy it cheaply, because the national currency in Ireland is the Euro, which is at a low level compared with the pound. People paying in pounds for goods priced in Euros get a good bargain. However, this is bad news for Welsh farmers, who regard it as unfair competition. 3
The dairies have to sell the milk to supermarkets at low prices John says that the supermarkets force the dairies to sell them milk at lower and lower prices. The dairies have to comply, because otherwise they will lose sales. Now that there is no longer a central organisation which sells all the milk, the supermarkets, dominate the marketplace, and can decide what price they are prepared to pay. Solutions for dairy farmers in Wales? What can be done? Here are some possibilities... If there were another Milk Marketing Board, farmers would get a higher price for their milk. However, this is regarded by the government as unfair. They say farmers should compete on the open market, as other producers do. Perhaps farmers can find another way of increasing their bargaining power. In some other EU countries, dairy farmers are doing better than they are in the UK. One reason for this is that the supply chain is shorter. Farmers' co-operatives sell milk directly to shops and supermarkets. They also own (or have shares in) milk-processing factories. The profit which can be made on dairy products is higher than it is on raw milk, and so the farmers make more money by processing their own milk. Farmers are trying to encourage people to drink more milk. People are rediscovering the health benefits of milk through schemes in schools. John's co-operative is working with local schools to install milk dispensers, instead of machines selling soft drinks John and Liz have converted two of the old stone buildings on their farm into holiday 4
cottages. The rent from these gives them an income which, along with Liz's salary, enables them to keep the cows going until the price of milk rises again. Does John get any help from the EU? Contrary to what many people think, the European Union does not give direct financial support to UK dairy farmers. Instead, it takes steps to keep the milk price stable, by imposing quotas (limits on the amount of milk each farm is allowed to produce), in order to prevent any EU country from producing too much milk. Because more milk is produced in the spring than the autumn, the EU buys milk at this time of year and stores it as milk powder. The EU also imposes import tariffs on foreign milk, in order to minimise competition from cheap imports. In spite of the quota system, the EU does produce surplus milk and, in order to remove it from the marketplace, it sells it to other countries at low prices. Supply and demand: Remember that the law of supply and demand says that the price of a product goes down as the availability of that product increases. The EU tries to protect its farmers against low prices by restricting supply. For more information about the economic issues, read the issues. Milking it, www.oxfam.org.uk website, visited Tuesday, 13 October 2009. 5