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Germany

Are subsidies driving dairy farmers into bankruptcy?

Many dairy farmers work long hours though their pay is dropping and a growing number of farms are going bankrupt. They have a low opinion of subsidies. DW's Jan Walter spoke to a dairy farmer in western Germany.

Michael Greshake is struggling with

low market prices

for the dairy products put out by his farm in Velbert, in the state of North Rhine-Westphalia. His main buyer, a Dutch company, has contractually agreed to buy a set amount of milk. However, Greshake's farm assumes

the risk for overproduction.

If contracted farms such as Greshake's suddenly produce a surplus - and demand fails to grow -

purchase prices sink.

That is why Greshake does not think much of subsidies. "They distort the market," the 52-year-old said. He was referring to

the bonuses the EU pays

per hectare (2.5 acres) of agricultural land, the milk quota that was abolished in 2015 and investment aid. "Without them, many fellow farmers would not be on the verge of bankruptcy today," Gershake said.

German farmers

have turned to global markets for business, and the federal government supports them in this. Promoting national investment has encouraged many farmers to build huge cattle barns. The dairies work at full capacity to pay back loans that can reach six or seven figures, but milk is still produced more cheaply elsewhere.

'Milk summit'

In 2015, the European Union promised to provide farmers with 500 million euros in liquidity assistance. Of those funds, German dairies will receive 70 million euros ($78 million) in 2016. The German Farmers' Association is now asking for help from the federal government. Moreover, Food and Agriculture Minister Christian Schmidt is meeting with industry representatives on May 30 for a "milk summit" to discuss a "fair distribution of market risks" within the value chain.

Bernhard Rüb, spokesman of the German Chamber of Agriculture (LWK), does not believe that the summit will prevent the decline of milk producers. "The current low price may accelerate this development," Rüb said, "but, despite everything, this trend has been progressing for years." Since 2000, the number of milk cow owners in German has almost halved, to about 73,300.

Rüb does not agree with the widespread notion that only small farms are closing. "Former co-op farms in eastern Germany with up to 1,000 cows are liquidated quite quickly if they become unprofitable, because they belong to investor groups and not families," he said. Also, he said, the success of a milk producer depends more on management skills than the size of the farm.

Michael Greshake

Greshake has tried to make up for the losses by selling his cattle for slaughter

Cows a hassle

With 60 cows, Greshake operates a slightly larger dairy farm than the German average. He estimates his weekly worktime at 60-70 hours; he does not take holidays. Cows must be milked two times a day. His only employee works part-time. Sometimes he gets a hand from his children, who have just reached adulthood. Although Greshake does the work of two people, his income is still below the German average.

By no means does Greshake intend to give up. He'd rather downsize: He takes some of the less productive cows to the slaughterhouse. Cows must calve once year in order to produce. So Greshake has decided to cross cow breeds to grow cattle for meat as well. "The desire for milk wanes when I look at the current milk price," he said. He would rather spend his time carrying out potentially expensive repairs on the farm.

Meat production, however, is also not a real option. The Chamber of Agriculture recommends that farmers operate agricultural biogas plants or install photovoltaic systems. Greshake is skeptical: "As though it were a sure-fire success!" He feels that nobody has asked about the farmers' personal situation or whether a family business can afford such large investments, which can place a great burden on relations.

The Greshakes have found another source of income. Michael's wife, Claudia, hosts school excursions and children's birthdays at the farm. He does not view this as a diversification of his farm; he says it is her job.

Despite the hard work and long hours, Michael Greshake enjoys his profession. He opposes subsidies because he feels that they sustain poorly managed and unprofitable businesses. This makes things harder for people like him, who are willing to sell smaller amounts of milk for lower prices. Greshake fears that a "milk summit" would only produce a "milk chasm."

Watch video 01:37

EU farmers worry as milk prices hit new low (17.05.2016)

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