Leading Czech dairy producer loses milk supplies to Bavaria

Less than a year after the country's admission to the European Union Czech dairy producers have started feeling the pinch of tough competition on the EU market. Not because of cheaper, heavily subsidized goods from EU member states - as was their main concern - but because Czech milk suppliers have started selling their milk to neighbouring Germany at more advantageous prices.

In the last few months farmers and dairy producers in the Czech Republic have been at loggerheads over the price of milk. Unhappy with what dairy producers were offering for milk per litre, farmers simply turned elsewhere and accepted a better price from milk processing companies in Bavaria. Since the beginning of this year milk exports to Bavaria have trebled, and the country's main dairy producer Madeta has lost a third of its supplies, facing losses to the tune of one billion crowns. Milan Teply is the company director:

"The loss of milk supplies was quite substantial and has hit two of our companies - export oriented companies, as it happens, rather hard. About 300 people will have to be laid off. We are in a ludicrous position - Czech milk is going to Germany and we in turn are now having to buy German milk for our production."

Milan Teply, photo: CTK

Other Czech dairy producers are buying milk from Slovakia and Poland but with Madeta located in the south-west of the country the cost of transport would be too high. As a result Madeta is furious with the milk exporters and says that they are damaging Czech interests by taking away jobs from local milk processors. Indirectly, it has called on the agriculture ministry for support. Milan Teply again:

"I expect the Czech government to act similarly as the German government would if farmers who were subsidized not just by EU funds but also by national funds -took their produce with its tax revenue potential to another state."

Although the Czech Agriculture Ministry has rapped a few of the milk exporters over the knuckles, it has said that this was not a favour to Madeta. Hugo Roldan is the ministry's spokesman:

"The ministry of Agriculture has no intention of putting any barriers in the way of free trade. However it has recently got the suspicion that some milk producers are supplying milk to brokers instead of supplying processors directly, which infringes on EU trade rules, and this is why the state agrarian fund had to intervene. I would like to emphasize that this mission has nothing to do with the farmers' right to sell their production to whoever they want."

Madeta's director says the company will withstand the pressure - going to Germany for its milk supplies if need be. The question is what will the additional cost of transport do to the price of dairy products - sold both on Czech and EU markets. Furthermore, Mr. Teply points out that dairy farmers could pay dearly for their short-term profit - noting that many of them are signing 5 year contracts with German milk processors with no guarantees as to price or the course of the crown against the euro in future years.