August 3, 2007

China's milk demand causing sharp price increases in Germany

China is buying up much milk that it is causing milk prices half a world away, in Germany, to rise sharply. 

Milk demand in China is growing at around 25 percent a year.

China now imports a third of all the milk produced worldwide, much of it from the EU, specifically, Germany.

Although EU farmers would like to increase production, the EU milk quotas prevent them from doing so. The EU milk quota was put in place in 1984 and is slated to last until 2015.

German farmers are taking the opportunity to raise prices to make up for all the years when prices were forced to be artificially low by supermarkets.

As German milk prices are expected to rise 50 percent in the next few weeks, prices of dairy products are expected to rise as well, sparking a wave of panic buying.

Consumer groups and politicians have called for the government to raise unemployment benefits to cover the rise.

To maintain the milk quotas and cater to local demand, Germany would have to seek ways to help China produce her own milk, experts said. This is why German dairy farmers have been selling their best dairy breeds to China in recent years.