Hamburg, April 16 - Banner-waving farmers surrounded dairies in Germany and protested in Spain on Thursday against a dramatic fall in European Union milk prices that they say will force farms to close.
But dairy industry associations said farmers were protesting against market forces that have been introduced by EU reforms into a sector previously enjoying almost guaranteed prices.
Farmers in Germany staged a day of protests outside dairies complaining about a collapse in milk prices to around 24 euro cents (32 cents) a litre against 40 cents in early 2008 and a minimum of 30 cents needed to cover their costs.
"The situation on the milk market is catastrophic," said Udo Folgert, head of milk at German farmers' union DBV. He said farmers could not live with the low prices and faced closure.
The global economic crisis and a collapse in exports, especially to east Europe, had caused a dramatic fall in prices, the DBV said. It has called for an expansion of EU export subsidies announced in January and special financial help for farmers facing cash flow problems.
Spanish dairy farmers also demonstrated, saying they are losing one million euros a day with milk costing 35-40 euro cents a litre to produce but prices at 20-30 cents.
The Asaja union said Spanish dairy farming "will disappear if steps are not taken at national and European level."
Britain's dairy farmers have faced a drop in prices and have been leaving the sector at a steady pace, said David Cotton of the Royal Association of British Dairy Farmers.
Cotton said the milk price paid to farmers had fallen to about 22 to 23 pence (34 cents) per litre, from around 26 to 27 pence late last year.
In France, milk prices paid to producers dropped 20-25 percent on the year in the first quarter of 2009, said Florence Loyer of French dairy farmers' association FNPL.
"On the export and industrial markets prices have collapsed and that has an impact on prices paid to producers," she said, stressing that domestic demand and prices remained stable.
"They (dairy farmers) are very worried for the future and looking at the dark side of things for the rest of the year as there is no sign of a recovery in prices or a boom in demand," she said.
In non-EU member Switzerland farmers are gravely concerned, said Albert Roesti of Swiss dairy farmers' organisation SMP.
"Switzerland is experiencing a milk crisis mainly because production increased by 7 percent between 2006 and 2008 and demand only increased by 2 percent in that time," he said. "The farmers are incredibly scared...many fear for their existence."
EU REFORM SEEN AS CAUSE
But the milk processing industry says farmers are feeling the pain of EU reforms aimed at bringing more market forces to a sector that used to have protected production quotas and almost guaranteed prices.
In November 2008, the EU agreed an annual increase in production quotas that effectively lifts production limits and increases volumes of milk freely traded on the market. In March, the bloc refused to postpone the reform.German dairy association MIV said the price falls were the "dark side of market liberalisation."
Prices in the milk market were increasingly being set by supply and demand instead of EU market regulation and, with the increased supply, prices were falling, MIV said.
"Retailers can currently obtain lower purchasing prices from dairies," it said. "The result is that dairies in Europe are no longer in the position to pay milk prices which pay farmers the cost of milk production."