In 2024, milk prices have risen nearly 25%, benefiting farmers like Manfred Schneider, who operates a dairy farm in Unterallgäu. Despite this, market volatility remains a concern, with pricing influenced by factors such as oil prices and geopolitical events. Organic farming offers more stability, as seen with Siegfried Villing’s transition to organic practices. Farmers advocate for fairer market conditions against large retailers, while supermarkets reject claims of unfair pricing. Proposals for regulatory changes aim to enhance price stability, though uncertainties persist.
Shoppers at supermarkets are surely aware: In 2024, the price of milk has surged by nearly 25%. This rise indicates a positive trend for farmers, who are seeing improved earnings again. Nevertheless, the market remains unpredictable.
In the picturesque region of Unterallgäu, specifically Ottobeuren, Manfred Schneider operates a traditional dairy farm with around 150 cows. Currently, he can support his family through milk sales, but the future remains uncertain.
The pricing of milk is typically determined on a monthly basis with his dairy cooperative. Payments are finalized based on sales performance, and at present, conventional milk is fetching just over 50 cents per liter. This figure is significantly higher than the lows seen over the past decade; for instance, in 2016, prices plummeted to just over 22 cents. By the end of 2022, after a notable increase following geopolitical tensions, it climbed to nearly 60 cents.
In November, producer prices for agricultural goods saw a notable increase.
The Uncertainty of Pricing
While farmers can reference previous month’s figures, Schneider notes, “The milk billing often brings surprises: Will the price rise, drop, or remain the same?” This unpredictability poses challenges for many farmers. They need to manage their finances meticulously, especially when considering loans for new facilities like barns or silos. Decisions on such capital investments often rely on intuition, as Schneider remarks, “If you choose to build a new barn today, you must be confident in managing it for the next 25 years.”
In Bad Grönenbach, also located in Unterallgäu, Siegfried Villing has transitioned to organic farming five years ago, investing in a new barn as part of the process. He benefits from a more stable income stream, as organic prices tend to fluctuate less. According to Villing, organic milk and its products are traded more on a local or national scale, reducing their exposure to volatile global market prices.
“This stability provides a level of assurance when it comes to financial forecasting,” Villing explains. The average price for organic milk nationwide has varied between just under 47 and just under 62 cents over the past decade, showcasing much less volatility compared to conventional milk.
Navigating Price Volatility
Thomas Schmidt, a milk production advisor at the Bavarian Farmers’ Association, explains that milk prices often move in tandem with oil prices. He recalls how the milk price saw a significant drop in 2016 due to an increase in production triggered by a fracking boom after oil prices peaked in 2011/2012. This situation indirectly impacted milk pricing through broader economic shifts.
The next downturn in milk prices occurred during the COVID-19 pandemic in 2020, though not as dramatically as with oil. Recently, however, milk pricing trends have started to diverge from oil prices.
With the growing popularity of organic food, the sector continues to expand steadily.
Farmers Seek Greater Market Influence
Despite a fairly stable market for organic milk, farmer Siegfried Villing desires a stronger position for farmers against retail giants. The Federal Ministry of Agriculture (BMEL) has stated its commitment to fostering fair competition and equitable prices in the food sector, emphasizing the need to rectify the power imbalance that many small producers face against larger processing and trading firms.
Villing concurs, pointing out that a handful of large corporations dominate the food retail market. Without changes to this structure, smaller dairies will continue to struggle against these major players.
Supermarkets Respond to Criticism
Large supermarket chains refute claims of price dumping. Rewe has stated that they reject the notion of ‘dumping practices,’ clarifying that there is “no direct link between consumer prices and producer payments.” They argue that the concentration in food retail benefits consumers, as Germany boasts some of the lowest consumer prices in Europe due to fierce competition.
Edeka highlights that they have invested hundreds of millions of euros since 2015 to assist farmers in upgrading to animal welfare standards. Lidl claims to prioritize delivering high-quality products at competitive prices, while Aldi generally refrains from commenting on pricing strategies.
Many farmers continue to grapple with low prices for their products.
Path to Stability
For enhanced price stability among producers, a proposal from the Federal Ministry of Agriculture aims to amend the Agricultural Organizations and Supply Chains Regulation. The intention is to mandate dairies to provide offers for at least 80% of the milk supplied over a specified period. However, the Milk Industry Association (MIV) has expressed concerns that such regulations might undermine contractual freedom and cooperative autonomy. The outcome of this proposal remains uncertain.
Currently, Manfred Schneider from Ottobeuren finds his situation relatively stable. With the present income levels, he is able to “build reserves” for future uncertainties. As he prepares for the morning milk collection, he takes comfort in knowing today’s price is favorable, yet he acknowledges that the future could hold different circumstances.
This topic was reported by the tagesthemen on January 19, 2025, at 21:45.