Dairy price fluctuations are a logical consequence of political decisions

25 June 2009

The chairman of the Deutscher Raiffeisenverband (DRV, the umbrella organisation for cooperatives in Germany), Manfred Nüssel, says that the dairy price fluctuations in Europe are the result of decisions made by European and national politicians.

Politicians are opting for less market intervention. The price fluctuations for dairy are a direct result of the gradual abolition of the quota system. In itself, this need not cause a problem, provided all parties involved, including politicians, are aware of the consequences, says Nüssel.

Market participants need to adapt to the changing market
For dairy farmers, the new playing field means that they should focus less on quota in their planning. They need to look more to the market, according to Nüssel.

The dairy cooperatives, too, need to respond to the new situation. Nüssel says that the cooperatives have already adapted in recent years, particularly through alliances and mergers. In Germany, the number of dairy cooperatives has fallen from 115 to 62 over a period of ten years. The largest five dairy companies account for just over 66% of the revenue of German dairy cooperatives. They also collaborate on tenders, processing, marketing and sales channels.

Continue the new course
According to Nüssel, we need to continue the course of collaboration and market focus. It is important that we concentrate on expanding the product range, increasing value and boosting exports. One good example, according to Nüssel, is the collaboration between Nordmilch and Humana. Nüssel believes that it is beyond dispute that this can be achieved in the short term. Significant investments are required. But the financial effort will result in increased payments to dairy farmers in the long term.