ECONOMY

Small milk producers reel under EU quotas and big dairy firms

Ilias, a 40-year-old dairy farmer in eastern Macedonia, runs a medium-sized family unit with 100-150 cows for milk production. After long trials and tribulations, today he is trying to make his business grow by putting in endless hours until late at night, seven days a week, including holidays. A few years ago, his herd was virtually wiped out through disease. His options were limited; he either shut the unit down or bought new animals. Prices for «good,» that is productive, animals averaged around 600,000 drachmas (1,760 euros) per head. He got a bank loan, ordered the animals from abroad and started anew. But increasing production to ensure that he met his increasing financial obligations led him to exceed his quota according to European Union norms and to a fine of about 4.5 million drachmas (13,000 euros). Despite this setback, which meant delayed installments and higher interest charges, he managed to stay afloat after several years of stubborn hard work when everything seemed to hang in the balance. Today, Ilias seems to have put the worst behind him. Others were not so lucky. «What happened to them?» «They lost all chance of escaping from being held hostage.» «By the banks?» «No, by the big dairy firms. Today, there are big farms of between 200 and 500 animals, producing 50-100 tons of milk daily. For Greece, these are huge concerns. But any producer with such a unit cannot be independent; he not only works for the big companies, he is held hostage by them. «It works like this: the firms offer to finance the producer’s animal feed, the cost of which can reach 30,000-45,000 euros a month, and he repays gradually, interest-free. Repayment used to be done through the dairy firm retaining part of the money it owed the producer for the milk – at a price set by the firm, of course. This would continue for some time, until at some point the producer found himself in financial straits; the industry would send advisers along, who proposed raising production. This required more animals, and capital, which the producer could not easily obtain. «The big firm would come in again, giving promisory notes to big farms abroad for purchasing animals. «The producer would buy the animals but now he owed everything. By increasing production he reduced debt but was faced with overshooting the quota; the firm undertook to meet the cost of the fine, but the producer was now indebted to the firm and when, for some reason, the producer faced a shortfall in production and could not meet his quota, it was payback time; the dairy firm would now block the unfulfilled part of the quota against the debt.» «The quota is the producer’s most important asset,» says Ilias. «I know producers who owe up to 450,000 euros to the industries. They are tied down for the rest of their lives. The big dairy firms have no quotas. If they wish to become producers themselves they have to buy them. «It was in this way that animal farming disappeared among the Pomaks in Thrace. They had developed family units, with 10-15 animals. Milk collection was costly to the industries, and for this reason they paid low prices, 70-80 drachmas (20-23 cents) a kilo. Eventually they stopped buying milk and the farmers were forced to sell their animal stock and the quota, the price of which per kilo was about 50-65 drachmas (15-19 cents). «A little while later, the country’s biggest dairy firm opened a big model milk-producing unit in the area,» Ilias recalls. Price control The dairy industries manage to keep prices at desirable levels by exercising control over producers. The basic price of milk today is about 26 cents a kilo. This price is raised by one third of a cent for every percentage point of fat above 3.5. A quantity bonus is also added: This is just over one cent per kilo for production up to eight tons a month and can reach about 3.5 cents per kilo for up to 30 tons. The average price is about 30 cents a kilo. There is also a quality bonus of 3-4 cents a kilo for low germ content. At best, the price a producer gets is no more than 38 cents per kilo. The EU milk quota for Greece was set in the late 1980s and came into force in 1991-92. This came to about 700,000 tons, or 1 percent of the EU total. This quota still applies today, when Greece is short of milk and is forced to import huge quantities of powdered milk; by contrast, Portugal has a quota of 1.6 million tons with a number of animals smaller than Greece’s 300,000.