August 16, 2007

 

Swiss dairy farmers requesting price hikes on high global milk costs

 

 

Dairy farmers in Switzerland are asking for a price increase in their products in the wake of high milk costs worldwide as well as shortage of global milk powder and butter.

 

The price of low-fat milk powder has more than doubled on international markets since the beginning of the year, which is pushing Swiss dairy farmers for additional cost.

 

A tonne of milk powder is currently worth up to SFr6,000 (US$5,000) internationally, while Swiss prices have remained stable at SFr4,500.

 

The increase should allow Swiss producers of low-fat milk powder - used in chocolate or for whipped cream - to make a healthy profit, since they also benefit from a state subsidy of SFr770 per tonne.

 

In the past most Swiss farmers struggled to keep up with their counterparts in neighbouring European Union countries and depended on subsidies and other state pay-outs.

 

The suggested mandate to scrap subsidies as part of parliament's drive to liberalise the agriculture sector and adapt to global markets is also threatening dairy farmers.

 

Meanwhile, producers of fresh milk are still feeling the squeeze.

 

The Association of Swiss Milk Producers has called for a staggered increase of seven centimes per kilogramme of milk by the end of the year.

 

The association's president Albert Rösti said while demand is high, supply is low and farmers have a low income.

 

Milk prices in the EU - of which Switzerland is not a member - are expected to rise by up to 20 percent this year and are having an impact on the Swiss dairy market.

 

The association is confident that it will find a solution in negotiations with the dairy and retail industries, the association's deputy director Stefan Hagenbuch said.

 

The federal authorities have only limited means to influence the markets, according to Andreas Galler of the Federal Agriculture Office.

 

As of September 2007, subsidies for low-fat milk powder will be suspended. Export subsidies will be scrapped from the end of next year as part of revised legislation.

 

Andreas Galler of the Federal Agriculture Office said this move is a call for milk producers for higher prices.

 

On the other hand, it remains unclear what impact the current prices will have on exploratory talks between Bern and Brussels on a free trade accord on agriculture.

 

Galler says the more favourable position of Swiss farmers could potentially make it easier to find support for a deal.

 

But the rightwing Swiss People's Party, which claims to represent farmers' interests, is sticking to its position.

 

The party's spokesman Roman Jaggi said the free trade accord with Brussels remains forbidden as open markets will put Swiss farmers in a very difficult position.

 

This underscores the temporary nature of the dairy price hike, says the Farmers Association.

 

The association's spokesman Urs Schneider said the gap between Swiss farmers and in EU has narrowed a result of high prices but won't solve fundamental problems.

 

He added that negotiations within the World Trade Organization had wider ramifications for the industry than a possible EU deal.