Huge Glut in European Dairy Cows and Milk Coming Up

Spain is truly going off the deep end in numerous areas lately. As noted previously, citizens have received huge fines for being disrespectful of police (See Progression of the Police State Spanish Style; Law of Simmering Social Pots).

In another recent example, a citizen was fined for posting on Facebook, the image of a police car parked illegally.

Today, let's discuss dairy cows. There are so many dairy cows in Spain that farmers have not been able to make any money. There is a glut of milk.

The government solution, amazingly, is to Give 300 Euros Per Cow to Farmers With Insufficient Profitability.

The Minister of Agriculture, Food and Environment, Isabel García Tejerina, announced on Saturday that the Ministry will grant direct aid of 300 euros per cow for those farms that are selling milk below profitability. The measure will benefit 2,500 to 3,000 farms according to estimates by the Ministry.

Tejerina is "working at full speed" to prevent milk being sold at prices that are unprofitable.

Too Many Cows, Too Much Milk

Any rational person would suggest there are too many dairy cows and perhaps too many farms.

But instead we see articles like this one from El Confidencial: Do you buy milk at less than 60 cents? This is what you're doing to farmers.

The prices in the dairy sector have plummeted in recent months by the combination of several factors. Historically Europe produces more milk than it consumes and therefore dependent on international markets to survive. Especially Asians. And China has stopped buying milk in recent months. To this must be added the effects of Russia's veto imports of fresh products. The result is that the European market does not absorb all the milk generated and there is an excess of 'stock' that brings down prices.

Milk quotas also come into play. Since Spain joined the European Union countries production was limited in order to avoid surpluses. In particular, Spain had a limit of 6.5 million tonnes of milk annually.

To this system, countries like the Netherlands, UK and Germany have greatly increased their production, creating fierce competition for the Spanish market. Keep in mind that a 12% market share in our country is in the hands of the French giant Lactalis.

"What you buy below 55 cents indirectly causes the closure of farms", points out Andoni Arriola Garcia, spokesman for COAG (Coordinator of Organizations of Farmers and Ranchers).

"They are using the deregulation of the market to offer the farmer a ruinous prices," said García Arriola.

Count the Cows

Mind you, closure of farms is precisely what needs to happen (given the inane sanctions on Russia).

By country, here is a Dairy Cows Count for every country in the EU.

As of 2013, Spain has 857,000 cows. Assuming there are no more cows in Spain now than in 2013, the cost of the guarantee would be €257,100,000.

Pity the Farmers?
Instead of blaming farmers for producing too much milk, and instead of blaming inane sanctions on Russia, the government and news outlets blame people for paying too little for milk.

"This is what you are doing to farmers," states the inane headline on El Confidential.

Given there is already a glut of milk and cows, guaranteeing a profit on cows is a 100% surefire way to ensure the glut further expands.

In a free trade setup, unprofitable farms would go out of business, but there would also not have been a ridiculous set of sanctions on Russia in the first place.

Mike "Mish" Shedlock