Dairy Glut

Milking the Chinese Market

milk_reuters
Giving it all they've got.
  • Why it matters

    Why it matters

    Rising prices have led to a milk glut in Europe and the lifting of E.U. milk quotas next year is likely to make matters worse. Foreign markets are soaking up some of the surplus but they may not be enough to stop prices from falling.

  • Facts

    Facts

    • German diary farmers currently get €0.33 ($0.41) per liter of milk, up from €0.20 in 2009.
    • Prices are heavily influenced by the international, not domestic, market.
    • Chinese demand for German long-life milk is expected to double this year.
  • Audio

    Audio

  • Pdf

A wall of long-life, shelf-stable milk looms over Jia Jiangping. The head of purchasing at Jenny Lou’s, a Chinese supermarket chain, lovingly runs his hand along the pallets of blue and white cartoons, pointing out some German brand names; Rheinburg, Oldenburger, Weidendorf.

“In just a short time, German milk has become one of our most important product groups,” said Mr. Jia. He notes that the customer is buying a feeling of security with the imported milk, known in Europe as UHT after the ultra-high temperature process used to pasteurize it. “Anyone who can afford it prefers products with the German colors on it.”

European cows produce much more milk than is consumed in the regional market. The major dairies sell the excess all over the world, usually in the more durable form of powdered milk or cheese.

Much of the European dairy industry is organized into co-operatives, with the Deutsche Milchkontor (DMK) being the largest in Germany. Traditionally, the co-ops buy every drop of milk from dairy farmers, and then look for markets in which to sell it. This means that it isn’t the major supermarkets in Germany, such as Aldi or Rewe, that determine the prices but rather international markets.

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