Dairy crisis in the European Union

Since May 2014 the selling price of the milk has begun to fall. Thus farmers and dairymen lose their main source of income and are forced to slaughter cattle, or in the worst case, selling the whole farm. This economic trend is caused by the overproduction of milk, when the supply exceeds demand, so the reserves of unsold dairy products start accumulate.

It started when the average price of milk reached a record 37,3 cents per liter. The market reacted to the higher prices by expansion of dairy products. However, even though there would be expansion, the possibility of overproduction should be regulated by milk quotas. After 31 years on 1st April 2015, the European Union abolished quotas and with them also the sanctions for exceeding the production limits. This led to unregulated and high-volume production and a rapid decline in prices.

The abolition of quotas was not the only one cause of this economic crisis. The European Union expected also a growth in demand from China, but China abandoned the market. Russia as a retaliatory measure after sanctions prohibits the importation of dairy products from the European Union, which for some farmers and dairymen (mainly in Poland) was an act of bankruptcy because Russia was a single purchaser for them.

Nowadays, the European Union is increasing the fund system in agriculture, which should help farmers and dairymen in the crisis. However, as a matter of fact, there is a very strong imbalance (between state of the European Union) in redistribution of those subsidies. That mean that some states of the Union gained much more subsidies than other states. Thanks to that, states with higher subsidies can export products at a lower price and the states with the lower fund system stopped producing because they can’t balance the price with a competitive state.