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Europaudvalget 2011-12
EUU Alm.del Bilag 88
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Milking the poor

How EU subsidies hurt dairy producers in Bangladesh

September 2011

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3 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Contents

Introduction

Milk production in Bangladesh

– A way out of poverty

The problem of cheap imports

Arla foods:

profiting from exports of subsidised milk

The root of the problem: EU subsidies

Denmark’s milk production: A cash cow?

Conclusion

Annex

Endnotes

page 04

page 05

page 07

page 10

page 12

page 20

page 22

page 23

page 24

Milking the poor

How EU subsidies hurt dairy producers in Bangladesh

Authored by Mark Curtis, www.curtisresearch.org

Research by Danwatch, www.danwatch.dk

Published by ActionAid

September 2011

This independently researched report was commissioned by ActionAid. The views in this report do not neces-

sarily represent the views of the organisation. We are grateful for the work of Mark Curtis, who researched and

wrote this report, and for additional writing, research and editing by Steve Tibbett. We thank Danwatch for field

research and background material.

Cover photo: CARE Bangladesh

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4 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

5 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Introduction

“The rate we get for milk doesn’t suffice.” -

Hossain Fakir, Bangladeshi farmer

For decades, European dairy farmers have

been given massive subsidies under the Com-

mon Agricultural Policy (CAP) of the European

Union (EU). This has enabled them to export

cheap milk powder, among other products, at

prices lower than production costs. The EU’s

dairy regime has routinely damaged developing

countries in three main ways: by undermining

domestic dairy producers, by depressing world

market prices, and by pushing developing coun-

try exporters out of third markets.

In 2005, however, the EU decided to change the

nature of those subsidies by ‘decoupling’ them

from the production levels of farmers.

The aim was supposedly to avoid distorting

international trade and prices for agricultural

products. But the amount spent on subsidies re-

mains the same; it is only the way they are given

that has changed. The decoupled subsidies are

placed in what the World Trade Organisation

(WTO) refers to as the ‘Green Box’, which are

measures that have no, or at most minimal,

trade-distorting effects on production. Howe-

ver, this report shows that the EU’s decoupled

subsidies are continuing to hurt dairy farmers in

developing countries.

Looking at the case of Bangladesh, where mil-

lions of poor people support their low incomes

through milk production, the report reveals that

milk imports are continuing to undermine poor

farmers, competing on unfair terms with locally

produced milk and suppressing investment in

the dairy industry. It also shows that the giant

Danish-Swedish dairy company, Arla Foods, is

profiting from EU-subsidised milk powder sales

to Bangladesh which are harming Bangladeshi

milk farmers.

The report highlights the fact that many Euro-

pean farmers - including Danish farmers - are

selling below production costs and that some

would not even be able to maintain production

without EU subsidies, and thus those exports

are only possible thanks to the continuation

of subsidies. At the same time, Denmark and

the European Commission (EC) are funding aid

programmes in Bangladesh to reduce poverty,

including those designed to support agricultural

development.

The EU is preparing a comprehensive reform of

the CAP, which is expected to come into force in

2014. Most of the negotiations will take place in

autumn 2011 and spring 2012, when Denmark

will hold the presidency of the EU. According to

the United Nations Special Rapporteur on the

Right to Food, the reform of the CAP offers a

“unique opportunity” to take into account the

impact of the EU’s agricultural policies on the

right to food in developing countries.

Indeed,

CAP reform is the ultimate test of the EU’s wil-

lingness to fulfil its treaty-bound obligations to

ensure that all its policies are coherently promo-

ting development in poor countries.

Milk production in Bangladesh

– A way out of poverty

Around 150 million farm households across the

world are involved in milk production, amounting

to some 750 to 900 million people (or 12-14 per

cent of the world’s population)

. In Bangladesh,

1.4 million family dairy farms, comprising around

7 million people, work very small plots of land

and typically own two cows. Amongst these

dairy farmers are some of the poorest and most

marginalised women.

Amidst widespread poverty milk-producing

cows are one of the most valuable assets rural

households can own. Cows can provide farmers

with a regular cash flow from milk sales, nutritio-

nal milk for home consumption, draught power

and manure for fertiliser.

Milk, the source of

vital vitamins and minerals, is a crucial source

of nutrition in a country which has one of the

highest rates of under-nutrition in the world; 48

per cent of Bangladesh’s children are chronically

undernourished and 30 per cent of the total

population is below the minimum level of dietary

energy consumption.

However, the incomes of most dairy farmers are

extremely low, usually ranging from Taka 31 – 60

(€ 0.30 - 0.59) per day.

Many dairy farmers

both consume and sell some of their milk,

generating income for the family. More than 90

per cent of small farmers’ milk is sold through

informal channels, such as to neighbours or at

the local market; less than 10 per cent is sold to

formal milk processing companies.

Dairy farming is a potential pathway out of

poverty for millions of Bangladeshis. Indeed,

the country has already developed successful

examples of commercial dairy farming whereby

tens of thousands of smallholders, organised

in hundreds of cooperatives, provide milk to

commercial enterprises which is then proces-

sed and distributed throughout the country.

By some estimates, tens of thousands of poor

rural households have already graduated out of

poverty as a result of such models.

Studies

suggest that dairy production, processing and

marketing in Bangladesh generate more regular

cash income and employment per unit value

than crop farming.

Bangladesh is also internationally well placed

to produce milk - what some economists might

call a ‘comparative advantage’. Along with many

other developing countries, Bangladesh is a

relatively low cost producer of milk, in contrast

to high cost producers in Europe and the US.

One recent analysis found that a typical farm in

Bangladesh (with two cows) produces milk 50

per cent cheaper than a typical farm in Germany

(with 31 cows.) The same study found that for

every million kg of milk produced by EU dairy

farmers, 7.6 jobs are created, but in Bangladesh

the number is 350 jobs – 46 times as many.

Indeed, the milk industry in Bangladesh also has

a huge potential for growth due to the growing

domestic demand for milk that comes with rising

Poverty in

Bangladesh

Bangladesh has a

population of over 160

million of whom 72 per

cent live in rural areas.

Around half the rural

population live below

the poverty line

More than half of rural

dwellers own less than

0.5 acres and the po-

orest 40 per cent pos-

sess just 3 per cent of

the land.

Agriculture

employs 70 million

people and accounts

for 20 per cent of the

national GDP.

The supply chain of milk in Bangladesh

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The problem of cheap imports

Dairy Farming: A powerful tool for reducing poverty

A recent study by the UN’s Food and Agriculture Organisation (FAO) notes

that small-scale milk production not only improves the food security of

milk-producing households but also helps to create numerous employ-

ment opportunities throughout the dairy chain, such as in small-scale rural

processing and intermediary activities. The strengths of smallholder dairy

systems include low production costs, relative resilience to rising feed

prices and low liabilities. The study also notes that the overall profitability

of milk production appears to be higher in developing countries than in

industrialised countries, mainly because of the lower costs of feed and

the overall ‘low-tech’ approach. It argues that, if they are well-organised,

smallholder producers should be able to compete with large-scale, capital

intensive and ‘hightech’ dairy farming systems in industrialised countries.

Smallholder dairy farming has been shown to be successful in a number

of countries, notably in India and Kenya. However the study finds that one

threat to this potential is from policy support for (and competition from)

dairy farmers in OECD country governments for their farmers. Other chal-

lenges to small producers include access to technical knowhow, support

services and credit, and poor milk quality.

milk

, and the growth rate of livestock is less

than 4 per cent.

Yields can also be increased.

They are currently low and largely variable

because of poor feed resources and the breed

of cattle typically owned.

Among small produ-

cers, a typical cow yields 721 kg per year,

far

less than cows in neighbouring countries such

as Pakistan and India.

Bangladeshi milk pro-

ducers also face many other challenges, notably

the lack of availability of appropriate feed at low

prices and livestock health care.

The potential for increased production is shown

in the 16 per cent spike in production in 2007/8,

which coincided with a ‘melamine scare’ – the

fear that a potentially toxic chemical compound

was present in some brands of powdered milk

from China. This caused some consumers of

powder milk to shift to raw or pasteurized milk

creating. The scare created a temporary extra

demand for fresh milk.

Private sector entrepreneurs have already ventu-

red into the growing market of the dairy sector,

supporting small farms with improved dairy

breeds, quality input supplies, as well as marke-

ting facilities for milk products.

With higher milk

prices, private participation in the development

of the sector can be anticipated to increase.

In its ’Poverty Reduction Strategy Paper’ of

2009, the Bangladeshi government states that

it is striving to be self-sufficient in food by 2013,

taking all possible measures to ensure food

security for all its citizens. One of the identified

requirements to reach this goal is to create “a

level playing field to compete with others and

reap the benefits of a globalized world”

. The

government recognises that it is important to

support the milk sector and has taken several

steps to do so in recent years.

A key factor undermining Bangladesh’s milk

industry is imported milk powder. Whole milk

powder is imported and marketed directly to

consumers, and skimmed milk powder is im-

ported and used for production of dairy pro-

ducts. For one thing, this is a massive cost to

the country. In 2007-08, 41,000 tonnes of milk

powder were imported at a cost of Taka 10.5

billion (€ 102.5 million).

Overall, Bangladesh

imports around 27 per cent of its milk consump-

tion needs

and between 20 and 50 per cent

of imports of skimmed milk powder have come

from the EU in recent years.

With the right support and further development

of the dairy sector, these imports could have

been produced by Bangladeshi farmers them-

selves. Not only do imports cost a lot, they often

enter Bangladesh at prices competitive with

domestic milk and are heavily marketed and

branded, undercutting local producers of fresh

milk and domestic processors of milk powder.

Importers have considerable market power,

especially in urban markets.

In Bangladesh, the price of fresh milk is also

influenced by milk powder prices because milk

powder is a substitute for fresh milk. Local milk

processors will increase their use of skimmed

milk powder instead of fresh milk if the price of

imports, including tariffs, falls below the local

milk price.

The EU exported 378,000 tonnes of skim-

med milk powder around the world in 2010,

up 63 per cent from 2009; a further 11 per

cent increase is projected for 2011.

EU milk

powder exports go mainly to developing coun-

tries, particularly in Africa and the Middle East.

Indeed, the EU supplies around 70 per cent of

sub-Saharan Africa’s dairy imports.

Imports of

skimmed milk powder are the greatest concern

Cheap imports with devastating effects

In 2009, the Bangladeshi media reported that prices of imported milk

powder fell close to US$ 2,000 (€ 1,510) a tonne from more than US$

4,500 (€ 3,398) in 2008. The retail price of a litre of milk fell from Taka

33 (€ 0.32) at the beginning of 2009 to around Taka 26 (€ 0.25) by

mid-year.

This price fall inspired sweet makers, who buy much of the

milk produced in Bangladesh, to shift from purchasing milk produced

by local farmers to purchasing imported milk powder.

In April 2009,

hundreds of dairy farmers poured milk onto highways to protest against

falling prices and cheap imports.

Both large and small dairy farmers

suffered and many said that the price they received was now below the

costs of production. Some farmers saw their incomes from milk fall by

40 per cent.

incomes and changing diets. Current consump-

tion of milk and milk products in Bangladesh is

low; the average Bangladeshi consumes 42 ml

of milk per day – mainly for drinking in tea.

This is significantly less than the average for

developing countries (120 g) and well below

the 280 g per day recommended by the FAO

and the World Health Organisation (WHO)

However, milk demand in Bangladesh is already

greater than the current production of 2.7 million

tonnes of milk a year, with one estimate being as

high as 7.2 million tonnes.

Recent figures cited

by Community-based Dairy Veterinary Founda-

tion suggest that in order to be self-sufficient

in milk production by 2021, Bangladesh has to

produce 17.9 million tonnes of milk, and to meet

growing customer demand, the industry would

have to grow by more than 10 per cent.

Domestic production can indeed be increased.

Currently, only 3.5 million cattle out of a total

cattle population of 24 million actually produce

The problem with importing

EU milk powder

“The availability of EU powdered milk on the

world market remains unfair competition, limiting

the growth of the dairy sector in developing

countries and undermining the incentives for

farmers to boost local production to keep track

with the growing demand.” (Recent analysis by

Trinity College Dublin

)

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Noorjahan, a dairy farmer

Dairy farmer Noorjahan lives in a small house with her daughter and

one cow close to Sirajganj city in central Bangladesh. The cow gives

her milk, which she sells to the dairy company, Milk Vita, for Taka 30 (€

0.29) per litre. The income from the milk covers most of her household

costs and enables her to pay for her daughter’s preparation classes

for college. But Noorjahan argues that dairy processors like Milk Vita

should pay a larger share of the retail price to farmers. Noorjahan

thinks she should get at least 40 taka (€ 0.39) per litre. Currently, the

farm gate price of milk does not leave much profit after the costs of

rearing the cows are met.

to milk producers in the African, Caribbean and

Pacific (ACP)

states with whom the EU has

formal trade and aid agreements. Even relatively

small volumes of EU exports to smaller ACP

markets can have an impact on the local dairy

sector, given the volume of EU exports relative

to national ACP market demand. Increased milk

powder imports can reduce both demands for,

and prices of, locally produced milk, disrupting

the development of local supply chains.

NGOs

have long shown the devastating impacts of

cheap dairy imports in Africa and the Caribbean,

as a result of the CAP.

In Bangladesh, the Bangladesh Milk Producers

Cooperative Union, known as Milk Vita, had vir-

tually collapsed by the mid-1980s, with problem

attributed to unfair competition from imports

flooding in from subsidised over-production in

Europe.

At Milk Vita, the gap between milk

supply and demand was originally met by re-

combining butter oil and skimmed milk powder

(that DANIDA and the EU provided) into liquid

milk. By the end of the 1970s, village coop-

eratives had been established and annual milk

collection from some 36 000 smallholders had

been built up to 15 million litres. But by the mid

1980s, Milk Vita had virtually collapsed, collec-

ting less than 3 million litres of milk a year. The

collapse was attributed to unfair competition

from imports flooding in from subsidized over-

production in Europe. At this time whole milk

powder was retailing at less than 20 percent of

its cost price in Europe and one-third of the cost

of milk production in Bangladesh.

A counter-argument put forward by some is

that the EU milk powder imports increase the

availability of dairy products, particularly in

urban areas, and benefit consumers who might

not otherwise be able to afford them. In many

African countries, for example, domestic supply

cannot keep up with the growth in domestic de-

mand. In Bangladesh, the domestic supply can-

not meet the demand because of the continued

underdevelopment in the sector. In addition to

this, the middle and upper class tend to prefer

milk powder due to its practicality, reliability and

marketing. The poorer sections of the population

tend to avoid consumption of milk due to limited

availability and high prices. Increased domestic

production and availability of fresh quality milk

would help solve these problems.

Milk powder imports increase competition with

domestic milk producers and reduced incentives

for domestic investment and expansion and

also deter small producers from producing more

milk to satisfy local demands. Looking at recent

prices it is important to note that although local

milk is currently slightly cheaper than imported

milk, imported milk powder is not only compa-

rable in terms of price, but also more intensively

marketed than local milk.

To support dairy farmers the Bangladeshi

government has imposed a certain level of trade

tariffs on imported milk powder. Tariffs have fal-

len in recent years from as high as 75 per cent in

2007 to a proposal in the last budget to reduce

them to as low as 5 per cent.

This prompted

protests from local milk producers for whom ta-

riffs are their only protection against competition

from developed countries’ milk powder brands,

including subsidised EU milk.

A local entrepreneur in the dairy sector said:

“The local dairy industry is not getting mom-

entum because of the government’s excessive

liberal policy”.

Domestic milk prices are no longer controlled,

and the government eliminated direct subsidies

to farmers in 1996 and only temporarily rein-

stated smaller subsidies in 2002 before soon

discontinuing them.

The government provides

subsidies only to Milk Vita in the form of low

Milk Prices in supermarkets Dhaka-Bangladesh

– July 2011

Local Fresh Milk:

Milk Vita 1 liter = 52 Taka

Aarong (BRAC) 1 liter = 52 Taka

Powder Milk:

(400 g of powder makes 3.1 litres of milk)

400g Aarong 180 Taka (local)

400g Starship 180 Taka (Australia)

400g Marks 195 Taka (New Zealand)

400g Farmland 200 Taka (New Zealand)

400g Dano 210 Taka (Denmark)

400g Red Cow 215 Taka (New Zealand)

400g Diploma, 220 Taka (New Zealand/Australia)

400g Anchor 245 Taka (New Zealand)

500g Milk Vita 210 Taka (local)

500g Aarong 240 Taka (local)

500g Pran 240 Taka (local)

500g Dano 257 Taka (Denmark)

Note: During Ramadan and Eid, fresh milk prices tend to rise to 70

Taka per litre.

Waz Ali, a dairy farmer

Waz Ali is a dairy farmer in Sirajganj, a major dairy hub, who owns 23

cows producing 100 litres of milk a day – a relatively large farmer for

Bangladesh. He said that his income fell from Taka 24,000 (€ 234) a

week before the price was cut to Taka 18,000 (€ 176) a week after. “I

sold one of my cows last month to pay micro credit instalment as my

weekly income from milk sales dropped by Tk 6,000 (€ 59) because of

the price cut”, said Waz Ali.

interest loans, grants and project funds – useful

support to the company but which prevents

other milk processing firms from competing in

the market.

The dairy industry’s contribution

to the national GDP is around 2.7 per cent, yet

the government’s budget allocation to the sector

is ten times less, at just 0.27 per cent.

Thus,

the government in Bangladesh should seek to

employ a comprehensive strategy to ensure that

its dairy farmers are supported and invest in the

dairy sector so that it develops its potential and

competitiveness.

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Arla Foods: Profiting from

exports of subsidised milk

One of the biggest exporters of milk powder to

Bangladesh is the Danish-Swedish dairy giant

Arla Foods, which has supplied between 3.700

and 6,000 tonnes of milk powder to Bang-

ladesh per year in recent years.

Arla Foods

manufactures the leading foreign milk powder

brand in Bangladesh – Dano, which has recently

accounted for over 20 per cent of all milk sales

in the country.

Dano milk powder is mainly

exported as bulk and repacked into consumer

bags at a plant in Bangladesh that employs

around 50 people.

The box below

shows that Arla has been a

large exporter of milk to Bangladesh for many

years and that a fall in Arla’s exports coincided

with the melamine scandal in 2008. Since then,

exports have started to pick up again.

Arla has received nearly one billion Euros in

subsidies from the EU since 2000

, allowing it

to establish a strong position in the Bangladeshi

dairy market. Although direct EU support to Arla

has reduced in recent years, the farmers supply-

ing Arla continue to receive substantial subsidies.

Arla Foods’ literature does not mention the

adverse impacts that its milk powder exports

might have on Bangladeshi dairy farmers. By

contrast, the most recent press release (from

2007) mentioning Dano on Arla Foods’ website

is entitled ‘Dano sales are booming in Bangla-

desh’, and notes that “Dano milk powder is a

real hit with Bangladeshi consumers”. In 2006,

they drank 240 million glasses of the product.

”We’ve succeeded in doubling sales over nine

years, a result we’re very proud of,” a company

spokesperson was quoted as saying.

The trade is certainly profitable. Arla Foods’

milk powder for consumers

, which is exported

primarily to developing countries, generated

revenues of DKK 831 million (€ 112 million) in

2010 (1.7 per cent of total company revenues).

According to Arla Foods, sales of milk powder

in developing countries generate more earnings

than sales of high quality cheese to Danish

consumers.

Around 15 per cent of Arla Foods’

whole milk powder exports go to Asia, but the

company does not provide figures on how much

profit it makes from sales in Bangladesh.

ethical business practices.

Arla Foods states

that it:

“has a responsibility for society, the environment

and the people who interface with our pro-

ducts and production...Arla Foods addresses

ethical and quality matters in a sustainable and

responsible manner, in order to safeguard the

company’s reputation and profitability. Our ob-

jective is to develop our business on a founda-

tion of long-term perspectives with respect for,

and in harmony with, our surroundings.

”

In the company’s code of conduct - called ’Our

Responsibility’ - Arla Foods states:

“We support competition on equal terms... We

interact with local communities and contribute to

their development... In the markets in which we

are a major player, we have the added responsi-

bility of not abusing our position.

”

Some of these claims - e.g. that Arla Foods

contributes to the development of local commu-

nities - are questionable in light of Arla Foods’

subsidised milk powder exports to Bangladesh.

Arla Foods’ only CSR project in Bangladesh is

called “Children for Life”, which provides one

glass of milk a day to around 800 children in three

countries – Vietnam, the Dominican Republic and

Bangladesh. The project costs DKK 1 million (€

134,228), which amounts to 0.08 per cent of the

company’s net profits in 2010. In Bangladesh, the

project begun in 2010 and “provides teaching,

food and milk” for 235 pupils at a school in the

slum area of Korali on the outskirts of Dhaka.

Arla Foods’ primary donation in the project is

Arla’s own imported milk powder. Yet, a 2007

study for the FAO states: “School milk feeding

schemes based on imported pre-packed milk

are seen as counter-productive to sustainable

smallholder dairy development”.

Arla Foods

Arla Foods is a global dairy company and a co-operative owned mainly by

Danish and Swedish dairy farmers, plus a small number of German far-

mers. Arla Foods has a virtual monopoly on milk and dairy production in

Sweden and Denmark and is Scandinavia’s biggest producer of milk pow-

der, which it manufactures in two factories in Denmark and its newest one

in Sweden

. It has production facilities in 13 countries and sales offices

in a further 20, with more than 16,000 employees. Its best known brands

include Arla, Lurpak and Castello, which it sells to over 100 countries.

Arla Foods’ largest market is the UK, where it is the second largest dairy

company; it is currently building the world’s largest milk dairy in London.

In 2010 the company’s turnover was DKK 49 billion (€ 6.6 billion); and its

net profit was DKK 1.27 billion (€ 170 million).

Corporate social responsibility

Arla Foods Exports of Milk Powder to

Bangladesh 1988-2008

Arla Foods says it is a socially responsible

company and produces an annual corporate

social responsibility (CSR) report. Since 2008,

Arla Foods has also been linked to the Global

Compact, a UN voluntary initiative to promote

Furthermore, the company’s CSR report is ex-

plicit in stating that this CSR project is intimately

related to its sales strategy. Its 2010 report sta-

tes: “The Children for Life project was conceived

...by the department responsible for sales of milk

powder across the world”. It also states: “Apart

from the three countries in which the Children

for Life project is currently running, Nigeria and

China are also important markets for Arla Foods’

milk powder. For this reason, there are plans to

set up similar projects there”.

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12 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

13 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

The root of the problem:

EU subsidies

At the root of the problem of cheap milk powder

imports in Bangladesh are the massive subsi-

dies given to European dairy farmers.

These

subsidies contrast with the plight of Bangladeshi

milk producers, who, as noted, receive no direct

support from their government:

• The ‘single payment’ scheme of decoupled

payments

delivers a massive € 5 billion per

year to EU dairy farmers. This level of sup-

port has risen from around € 2.75 billion in

2005 and € 4.5 billion in 2007.

• In addition, EU dairy farmers are protected

by high

EU import tariffs,

which effectively

close the EU market to dairy imports from

third countries (apart from the limited

volumes which enter under quota arrange-

ments and preferential agreements).

• The EU also maintains a policy of direct

intervention

to buy farmers’ outputs at a

certain period of the year to maintain market

prices.

• In addition, the EU has in recent years

initiated major

‘safety-net’ support

programmes

for dairy farmers to sustain

milk production in the face of price declines.

In 2009, for example, the EU spent an

additional € 600 million on top of the € 5

billion in direct payments in response

to low prices at the time.

• The EU also pays farmers an export

subsidy

(or ‘refund’) at times when

Europe an dairy prices are higher than

world prices to enable them to access

world markets. During 1996 to 2006, EU

export subsidies on dairy products were

high, ranging from € 475 million to € 1.8

billion.

Overall, export subsidies have been

reduced in recent years and, since the

end of 2009, have been set at zero.

They were revoked for the first time in

40 years in 2007, but revived in January

2009 to help the industry cope with a global

price slump.

At this point, the EU began

offering subsidies of up to 50 per cent on

its milk powder, butter and cheese exports.

At the 2005 WTO negotiations, it was

agreed that all export subsidies should end

by 2013, provided that a full multilateral

trade agreement had been reached,

but these negotiations are still ongoing.

260 (€ 35) per 100 kg,

and corresponds to

15 per cent of the export price, meaning that

without the subsidies, Arla Foods would have

had to raise the export price 15 per cent to earn

the same income. This cost was covered by

European taxpayers.

‘Decoupled’ payments increase

production and reduce world prices

Proponents of decoupled payments claim that

after having switched from traditional subsidies

that increased as production rose, the new

system has no impact on production or interna-

tional trade flows. Yet, several recent academic

studies show the opposite, that decoupled

payments do indeed increase production in the

EU and help to reduce international prices, and

thus may inflict economic injury upon third coun-

tries.

Similarly, a 2010 report by the Danish

Economic Council, states that the CAP ”leads

to a higher level of production compared to a

free market situation” and that Danish agricultu-

ral production, for example, would fall if the EU

subsidies were phased out.

The effect on prices is serious in that low prices

for milk sales is a major problem faced by Bang-

ladeshi milk farmers, evidenced in the recent

protests noted above. In a 2008 survey of dairy

farmers in northern Bangladesh by CARE-Bang-

ladesh, low price was identified as the major

challenge, mentioned by 42 per cent of those

surveyed.

The EU as a milk producer and exporter

The EU with its 27 member countries is the world’s biggest producer

of milk, accounting for around a quarter of the world total, ahead of the

United States and India.

The EU is also the world’s second largest

exporter of milk (after New Zealand), and accounted for 26 per cent of

whole milk powder exports and 27 per cent of skimmed milk powder

exports in 2010.

There are over one million milk producers in the EU.

Export subsidies and Arla Foods

When dairy prices fell in early 2009, the EU

reintroduced both export ‘refunds’ and milk pre-

miums for farmers based on the amount of milk

produced: an aid package of € 280 million for EU

dairy farmers was agreed on and € 600 million

budgeted for market measures.

In Denmark,

4,300 milk producers received DKK 73.3 million

(€ 9.8 million) in milk premiums.

Danish milk

processed by Arla Foods in 2009/10 was sup-

ported with approximately DKK 64.1 million

(€ 8.6 million).

Export subsidies were also

reintroduced in Denmark. All of this was in ad-

dition to the normal subsidies granted to farmers.

In the first nine months of 2009, Arla Foods

exported 1.5 million kg of milk powder to

Bangladesh at the price of DKK 26 million (€ 35

million).

This was subsidised at a rate of DKK

The Common Agricultural Policy (CAP)

The CAP was one of the first policies of the European Community in

the 1950s – aimed at making Europe self-sufficient in food by ensuring

a stable supply of food for European citizens at a low price, and a rea-

sonable selling price for farmers. Although the level of farm subsidies

has reduced since the 1950s, the CAP remains the biggest item on

the EU budget, accounting for 40 per cent of the total EU budget in

2011.

In 2010 the CAP budget amounted to € 43.8 billion.

Direct

farm subsidies are by far the largest expenditure of the CAP. Studies

show that many of the recipients of CAP subsidies are not small

farmers but large landowners and agribusiness, over 1,000 of whom

have become ‘farm subsidy millionaires’.

EU export subsidies also

reduce world prices

The EU’s export subsidies, by encouraging

production and export, have also tended to

lower world market prices for milk. Without the

subsidies, the EU would produce less and have

fewer goods to export at low prices, which

would increase world market prices, and shift

the balance of trade towards third countries.

102

CAP Expenditure and CAP Reform

While the form of subsidy has moved away from coupled payment and

export subsidies, the overall level of farm subsidies is still comparable

with the level of the early 1980s in terms of the proportion of EU GDP

it represents. Overall - in part due to the expansion of the EU - the level

of support has increased. As well as undermining developing countries’

milk producers by promoting cheap imports, these EU subsidies also

depress world market prices.

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14 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

15 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

tA b l e

‘Green Box’ subsidies can be trade-distorting

Since the EU argues that decoupled payments have no impact on

production or international trade flows, they are placed in what the

WTO refers to as the ‘Green Box’ in international trade discussions. Yet

the ‘Green Box’ designation is disputed by several actors. Some argue

that subsidies in the form of decoupled payments allow for “effects

on farmers’ ability to cover fixed and/or variable costs; ... isolates the

farmer from market signals and reduces risks, etc”. It is also argued

that, out of all the ‘Green Box’ direct payments, ‘decoupled’ income

support programmes distort trade the most.

A study by researchers at Humboldt university in Berlin found that

decoupled payments are not production neutral, but act to stimulate

production and investment in agriculture compared to a situation

with no subsidies. In particular, decoupled EU farm subsidies provide

funding to producers, reduce risk and generate the expectation on

the part of the recipients that future changes in agricultural policies

may also be based on past production, as they currently are. All of this

ensures that farmers maintain production at a higher level than without

such subsidies.

100

Similarly, a recent analysis by the International Centre for Trade and

Sustainable Development in Geneva concludes that “evidence … sug-

gests that the sheer volume of subsidies provided may have risk/insu-

rance effects on production - even if such support is provided through

relatively decoupled policies.” It also notes that “existing studies show

that Green Box subsidies encourage agricultural production by creating

a guaranteed income stream and a lower perceived risk for farmers,

which raises the potential for overproduction”.

101

price would lead to a loss of income for a typical

Bangladeshi dairy farm of Taka 3,425 (€ 36) per

year – a reduction in dairy income of 43 per cent

and a loss in overall household income of 7–16

per cent. Around 7 million people would be af-

fected by these income losses.

104

Farmers surviving only by subsidies

“European producers [of basic milk products

such as butter and milk powder] have only been

competitive on world markets when prices have

been high. Outside these periods, they can only

export with the assistance of the Community

budget.”

106

As the above quote from the European Court

of Auditors suggests, many EU dairy farmers

who are effectively competing with, and under-

mining, their Bangladeshi counterparts, could

not survive without subsidies. Other evidence

supports this view. A recent study by academics

at Humboldt University in Berlin, for example,

found that during 2004-08, the returns to dairy

farmers in Germany amounted to just 49-59 per

cent of their costs. Thus “the Common Agricul-

tural Policy has enabled and continues to enable

farmers to sell below cost”.

107

The table shows the proportion of dairy farmers’

gross income accounted for by subsidies paid

to them. The figures range from a massive 77

per cent in Finland to 16 per cent in Italy for

2006. In Denmark, 31 per cent of dairy far-

mers’ gross income was made up of subsidy

payments in 2006 – a proportion that has risen

considerably since 2000.

Other sources suggest that many EU farms

(not just dairy farms) would simply close down

without subsidies. The EU figures show that the

share of direct payments and total subsidies in

agricultural factor income is 28 per cent and 40

per cent, respectively, for the EU-27, suggesting

that much EU agricultural production would not

be economically sustainable in the absence of

this support.

109

In 2005/06, only 35 per cent

of farms in EU-25 were able to cover all costs.

This was especially the case for small farms.

The share of profitable large farms was only just

above 62 per cent.

110

s u b s i d i e s A s A s h A r e o f G r o s s i n co m e o f d A i ry fA r m s

tAX e s A

e v i e (

gross income of

2006 )

Subsidies

n d

2000, 2004 A n d

dairy farms

before taxes and levies (2000, 2004 and 2006)

108

2000

Belgium

Czech Republic

Denmark

Germany

Greece

Spain

Estonia

France

Hungary

Ireland

Italy

Lithuania

Luxembourg

Latvia

Netherlands

Austria

Poland

Portugal

Finland

Sweden

Slovakia

Slovenia

United Kingdom

16 %

18 %

72 %

36 %

32 %

31 %

15 %

10 %

22 %

18 %

14 %

12 %

32 %

33 %

42 %

22 %

11 %

35 %

43 %

58 %

12 %

44 %

22 %

27 %

73 %

41 %

43 %

37 %

23 %

11 %

2004

19 %

44 %

28 %

31 %

2006

28 %

60 %

31 %

36 %

46 %

17 %

43 %

40 %

41 %

36 %

16 %

37 %

46 %

63 %

23 %

42 %

35 %

37 %

77 %

56 %

65 %

37 %

34 %

According to the Agritrade:

“While the EU routinely cuts export refund

levels for dairy commodities when world

market prices rise, it is the opposite

trend, of increasing export refund levels

when world market prices fall, which is

the major source of concern in Africa.

While the export of milk powder as raw

materials for use in newly established

African dairies can enhance capacity utili-

sation and financial viability while dome-

stic supplies are built up, this requires a

carefully conceived import-management

policy linked to a national dairy-sector

development, if unregulated dairy imports

are not to undermine local investor

confidence in the returns which can be

obtained from dairy-sector investments.

This is the principal concern regarding

the impact of EU dairy-sector policies....

The EU’s active use of a range of support

measures to sustain and promote dome-

stic EU dairy production, many of which

have important external implications ...,

by insulating EU milk producers from the

worst effects of price declines, sustain

EU milk production and subsequent

exports at levels which would simply not

be the case in the absence of this range

of safety-net interventions. Being unable

to benefit from similar support measures,

dairy producers in ACP countries would

have to bear the full risk of severe dairy-

market price volatility, particularly during

periods of declining prices.”

105

Although export subsidies are currently set at zero,

they can be reimposed, as they were in 2009.

In a 2009 study, the International Farm Compa-

rison Network (IFCN) estimated that the removal

of EU export subsidies would increase world

dairy prices by 16.7 per cent.

103

Its analysis also

showed that an EU export subsidy of € 5 per

100 kg of milk – which prevailed in 2009 when

the EU reintroduced export subsidies – redu-

ces the world market price by € 2.5 per kg. In

Bangladesh, the impact on family farm income is

significant. Such a reduction in the world market

S ource:

fadn gross farm income before taxes, levies and vat = gross farm income

(se 410) — the balance of current farm subsidies and taxes (se 600) + total farm

subsidies (se 605).

special report no 14/2009 – Have the management instruments applied to the market in milk and milk products achieved their main objectives?

special report no 14/2009 – Have the management instruments applied to the market in milk and milk products achi

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2400

2200

16 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

EUR / 100 kg milk ECM

BDT / 100 kg milk ECM

2000

1800

1600

1400

1200

1000

800

600

17 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Quota costs

Opportunity costs

Cost P&L - non milk returns

Milk price

400

200

Jan. 06

Feb. 06

Mrz. 06

Apr. 06

Mai. 06

Jun. 06

Jul. 06

Aug. 06

Sep. 06

Okt. 06

Nov. 06

Dez. 06

Jan. 07

Feb. 07

Mrz. 07

Apr. 07

Mai. 07

Jun. 07

Jul. 07

Aug. 07

Sep. 07

Okt. 07

Nov. 07

Dez. 07

Jan. 08

Feb. 08

Mrz. 08

Apr. 08

Mai. 08

Jun. 08

Jul. 08

Aug. 08

Sep. 08

Okt. 08

Nov. 08

Dez. 08

Jan. 09

Feb. 09

Mrz. 09

Apr. 09

Mai. 09

Jun. 09

Opportunity costs

Cost P&L - non milk returns

Milk price

Income from dairy farming

114

1400

1200

EUR / 100 kg milk ECM

BDT / 100 kg milk ECM

1000

800

600

400

Jan. 06

Feb. 06

Mrz. 06

Apr. 06

Mai. 06

Jun. 06

Jul. 06

Aug. 06

Sep. 06

Okt. 06

Nov. 06

Dez. 06

Jan. 07

Feb. 07

Mrz. 07

Apr. 07

Mai. 07

Jun. 07

Jul. 07

Aug. 07

Sep. 07

Okt. 07

Nov. 07

Dez. 07

Jan. 08

Feb. 08

Mrz. 08

Apr. 08

Mai. 08

Jun. 08

Jul. 08

Aug. 08

Sep. 08

Okt. 08

Nov. 08

Dez. 08

Jan. 09

Feb. 09

Mrz. 09

Apr. 09

Mai. 09

Jun. 09

-5

Decoupled payments f. goverment

Dairy farm income

Dairy farm income + decoupled payments

Family living requirements*

200

Dairy farm income

Family living requirements*

Jan. 06

Feb. 06

Mrz. 06

Apr. 06

Mai. 06

Jun. 06

Jul. 06

Aug. 06

Sep. 06

Okt. 06

Nov. 06

Dez. 06

Jan. 07

Feb. 07

Mrz. 07

Apr. 07

Mai. 07

Jun. 07

Jul. 07

Aug. 07

Sep. 07

Okt. 07

Nov. 07

Dez. 07

Jan. 08

Feb. 08

Mrz. 08

Apr. 08

Mai. 08

Jun. 08

Jul. 08

Aug. 08

Sep. 08

Okt. 08

Nov. 08

Dez. 08

Jan. 09

Feb. 09

Mrz. 09

Apr. 09

Mai. 09

Jun. 09

Index: Dairy income vs. Family living needs

260

240

Index family living requirements = 100

220

200

180

160

140

120

100

260

240

Indeed, as the UN Special Rapporteur on the

220

200

Right to Food, Olivier de Schutter, has recently

180

noted, “Without these various forms of support,

160

the EU producers would not be in a position to

compete on world markets, since the social and

140

environmental conditions under which they ope-

120

111

rate would not allow them to be competitive”.

100

Currently, many European dairy farmers are in-

curring losses. In December 2010, for example,

Dairy farm income + decoupled payments

During

Dairy farm income

scandal, when consump-

the melamine

the UK National Farmers’ Union claimed there

Family living requirements*

tion of imported milkpowder was low, farmers in

was a gap between the price paid for milk and

Bangladesh had an income well above living re-

the costs of producing it of some £ 330 million

quirements. At other times the price was around

(€ 389.4 million), with British farmers losing an

Method assumptions

the same level as living requirements

average of 3 pence (€ 0.35)

112

, on every litre of

Calculations done based on the farm economics figures for calender year 2008. To show monthly farm economics for 2006-6/2009 the milk price have been changed proportionally to national milk prices

2006-6/2009. Purchase feed costs have been changed proportionally to

This poor financial

All other cost and returns have been adjusted by inflation.

or even below.

milk they produced.

national feed prices 2006-6/2009.

situation

Jan. 06

Feb. 06

Mrz. 06

Apr. 06

Mai. 06

Jun. 06

Jul. 06

Aug. 06

Sep. 06

Okt. 06

Nov. 06

Dez. 06

Jan. 07

Feb. 07

Mrz. 07

Apr. 07

Mai. 07

Jun. 07

Jul. 07

Aug. 07

Sep. 07

Okt. 07

Nov. 07

Dez. 07

Jan. 08

Feb. 08

Mrz. 08

Apr. 08

Mai. 08

Jun. 08

Jul. 08

Aug. 08

Sep. 08

Okt. 08

Nov. 08

Dez. 08

Jan. 09

Feb. 09

Mrz. 09

Apr. 09

Mai. 09

Jun. 09

* Familiy living requirments: Share of dairy farm income on household income multiplied with basic family living requirements. Example: DE-31: 90% * 33000 Euro/year), Bd-2: 16%* 50.000 BDT/year)

is attributed to ”the huge increase in feed and

bedding costs” and the absence of a ”fair” milk

price.

113

Jan. 06

Feb. 06

Mrz. 06

Apr. 06

Mai. 06

Jun. 06

Jul. 06

Aug. 06

Sep. 06

Okt. 06

Nov. 06

Dez. 06

Jan. 07

Feb. 07

Mrz. 07

Apr. 07

Mai. 07

Jun. 07

Jul. 07

Aug. 07

Sep. 07

Okt. 07

Nov. 07

Dez. 07

Jan. 08

Feb. 08

Mrz. 08

Apr. 08

Mai. 08

Jun. 08

Jul. 08

Aug. 08

Sep. 08

Okt. 08

Nov. 08

Dez. 08

Jan. 09

Feb. 09

Mrz. 09

Apr. 09

Mai. 09

Jun. 09

Jan. 06

Feb. 06

Mrz. 06

Apr. 06

Mai. 06

Jun. 06

Jul. 06

Aug. 06

Sep. 06

Okt. 06

Nov. 06

Dez. 06

Jan. 07

Feb. 07

Mrz. 07

Apr. 07

Mai. 07

Jun. 07

Jul. 07

Aug. 07

Sep. 07

Okt. 07

Nov. 07

Dez. 07

Jan. 08

Feb. 08

Mrz. 08

Apr. 08

Mai. 08

Jun. 08

Jul. 08

Aug. 08

Sep. 08

Okt. 08

Nov. 08

Dez. 08

Jan. 09

Feb. 09

Mrz. 09

Apr. 09

Mai. 09

Jun. 09

Income from dairy farming

Index: Dairy income vs. Family living needs

The graph above covering a three-and-a-half

year period show that only for a few short

months did the EU dairy farmers receive an

income above their living requirements without

need for a subsidy. For the rest of the time,

farmers’ incomes were only above living re-

quirements thanks to decoupled subsidies. This

clearly shows that the EU farmers are for the

most part selling below production costs.

According to Agritrade, it is precisely the EU’s

direct aid payments – which currently amount to

3.4 euro cents per litre of milk produced - which

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18 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

19 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Bangladesh is also one of the main recipients

of Danish development aid. In 2010, the Danish

International Development Agency (DANIDA)

spent DKK 471 million (€ 63 million) in Bangla-

desh.

119

Agriculture is one of DANIDA’s priority

areas, and agricultural development is identified

as essential for poverty reduction in Bangladesh.

In the 1970s, DANIDA supported the establish-

ment of the Bangladesh Milk Producers Co-ope-

rative Union Limited (BMPCUL) which produces

milk under the trade name Milk Vita.

120

DANIDA correctly notes that increasing agri-

cultural production and income improves food

security, reduces vulnerability of farming house-

holds and reduces malnutrition and mortality

amongst children.

121

In 2004, before decoupling

of subsidies, Carsten Staur, Chief of DANIDA

stated: “It is clearly a problem that agricultural

subsidies are contributing to maintain a produc-

tion in the world, which is not appropriate on the

basis of an idea of the global division of labour.

We are maintaining a production in Europe,

which is not competitive.”

122

EU milk powder imports also undermine aid

directed specifically to Bangladeshi milk powder

producers. It was announced in June 2011 that

the International Finance Corporation (IFC), the

private sector lending arm of the World Bank, is

providing a € 5.3 million loan to PRAN Group –

the largest food processing company in Bangla-

desh - to expand its local dairy procurement and

processing capacity.

The IFC says this will help increase the incomes

of about 17,000 Bangladeshi dairy farmers and

contribute to the country’s food security. It also

notes that “Bangladesh has one of the lowest

per capita milk consumption levels in the world

and imports milk powder to meet 15 per cent

of its dairy demand”. IFC’s investment will help

PRAN raise processing capacity across its

product range, including ultra-heat-treated milk,

pasteurised milk, and milk powder, and increase

raw milk procurement from local dairy farmers.

“PRAN’s expansion will help increase the local

supply of value-added dairy products, contribu-

ting to food security in Bangladesh,” said an IFC

spokesperson.

123

In the 2005 “European Consensus on De-

velopment”, the issue of Policy Coherence for

Development was identified by the EU as a

pioneering concept for achieving the Millennium

Development Goals. The EU has committed

itself to ensuring that its various policies do not

undermine social and economic progress in

developing countries. Article 208 of the 2009

Lisbon Treaty states that: “Union development

cooperation policy shall have as its primary

objective the reduction and, in the long term, the

eradication of poverty. The union shall take ac-

count of the objectives of development coopera-

tion in the policies that it implements which are

likely to affect developing countries.”

In the spring of 2010, the EC conducted a

public hearing online, and in the Commis-

sion’s summary, it states: “The EU should avoid

damaging the economies or food production

capacities of developing countries.”

124

However,

in the Commission’s communication on the CAP

post-2013, published in November 2010, no

reference is made to the effect of the CAP on

developing countries, except in the context of

food security, where it is stated that EU agricul-

ture should contribute to world food demand by

maintaining and improving production capacity,

while respecting EU commitments in interna-

tional trade and Policy Coherence for Develop-

ment.

125

As this report shows, it is precisely

the high production level that has a damaging

effect on agricultural development in developing

countries.

are sustaining UK milk farmers in business,

despite the losses they are incurring.

115

Agritrade notes:

“In the absence of direct aid payments, it is

likely that a significant number of EU dairy

farmers who currently face losses on the market

price received for their milk would review their

ongoing engagement in dairy production. This

would not be immediate, but would occur when

reinvestment decisions need to be taken, and

would be likely to reduce overall levels of EU

milk production. Given that around 5 per cent

of EU dairy production is exported, even a small

reduction in overall EU milk production would

carry important implications. This is particularly

the case for lower-value dairy products, such as

skimmed milk powder. With more EU milk being

used for higher-value products, production of

skimmed milk powder and other bulk dairy com-

modities would be likely to decline most dra-

matically. There have been numerous reports of

EU exports of milk powder undermining efforts

to promote local dairy production to meet local

market needs in Africa, particularly in West and

Central Africa.”

116

Giving with one hand, taking with

another: The EU’s incoherence

The EU and Denmark are supporting Bangla-

desh through aid while simultaneously under-

mining it through trade policy. While EU milk

powder imports are harming Bangladeshi dairy

farmers, the EC is, for example, funding a Natio-

nal Food Policy Capacity Strengthening Pro-

gramme (to the tune of € 3.3 million

117

) helping

the Bangladeshi government promote a national

food policy.

118

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20 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

21 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Denmark’s milk production

The farmers that own and deliver milk to Arla

Foods are direct beneficiaries of EU subsidies

under the CAP. The following Table 2 shows

an example of a typical Danish dairy farmer

receiving over DKK 330,000 (€ 44,295) a year

in subsidies. Some farmers, however, receive as

much as € 500,000.

126

This is not the sum total of EU support to

Danish dairy farmers. The dairy sector is

supported through a range of other measures,

such as a premium for male animals (of DKK

735-1174 (€ 99-158)) depending on the age

when slaughtered and whether the animal is

steered),

128

support for school milk schemes,

support for storing of butter and aid for the

disposal of skimmed milk.

129

Our analysis in the previous section suggested

that although subsidies have been decoupled

from production, they enable otherwise loss-

making EU milk producers to stay in business.

Below, we calculate the costs and cost-

effectiveness of Danish dairy farmers.

130

Table

3 shows that, without subsidies, Danish dairy

farming was unprofitable for both large (+200

cows) and small (0-100 cows) farms in 2009.

The value of production covered only 88 per

cent of costs for small farms. In 2008 only large

farms were profitable, and only by a margin of 4

per cent of costs.

Moreover, as Denmark is the country with

highest yield per cow in the EU and Danish farms

are bigger than in most other EU countries

131

many farmers in other countries are also likely to

mean even more farmers would be loss-making.

Thus EU subsidies that enable these otherwise

loss-making dairy farmers to continue exporting

in ways that undermine many milk producers in

poorer parts of the world.

Cost effectiveness of dairy production, 2008 and 2009

132

2008

Milk production, kg per cow

Value of milk production

Value of manure

Total costs

Net profit

Returns in per cent of costs

Small farms

8,114

DKK per cow

20336

22342

-1950

91.3

Large farms

8,775

DKK per cow

21992

132

21179

945

104.5

All farms

8,659

DKK per cow

21702

21878

-88

99.6

2009

(Detailed presentation of cost for 2009 is provided in annex A on page 21)

Small farms

Large farms

Milk production, kg per cow

7,956

8,979

DKK per cow

Value of milk production

17150

19355

Value of manure

256

252

Total costs

19682

20166

Net profit

-2276

-559

Returns in per cent of costs

88.4

97.2

All farms

8,810

DKK per cow

18991

213

20195

-991

95.1

Danish farmers and subsidies

133

Example of subsidies to a milk producer with milk production of 500 tons, 92 hectares of tilled

fields, 8 hectares of fallow land and 8 hectares of permanent grazing fields

127

Type of area with

payment entitlement

Area in ha Base rate per

payment entitle-

ment (DKK)

2300

500

Milk addition per

payment entitle-

ment 2006 (DKK)

965

Total subsidies per

payment entitle-

ment 2006 (DKK)

3265

2300

1465

Subsidies

granted

in 2006 (DKK)

300380

18400

11720

DKK330500

(€44362)

The Danish dairy farmer Niels Kristian Jørgensen has 230 cows. He receives DKK 739,000

(€ 99,195) in EU subsidies, and says that the price he gets for his produce does not cover

his costs. He explains that, without the subsidies, consumers would pay three times the

current price for one litre of milk. When asked if he could keep farming if the subsidies were

abolished, he answers: “Not unless the prices go up significantly and the costs are kept

steady - and I consider this a utopia!”

Henning Skov Andersen runs a farm with 95 cows and 85 hectares. He says that with the

high costs of production in Denmark, the DKK 300,000 (€ 40,268) he receives in subsidies

are needed to make ends meet. Without the subsidies, he would have a deficit every year,

and in the end he would need to close down the farm.

Michael Kristensen, with 160 cows and 140 hectares, receives subsidies worth DKK

480,000 (€ 64,430) every year, and says he could not keep farming without them. He thinks

that the farm subsidies should have never been introduced in the first place.

Tilled fields

Fallow land

Permanent grazing fields

Total

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22 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

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Conclusion

For decades, European dairy farmers have been

given massive subsidies under the EU’s CAP.

This has enabled them to export cheap milk

powder, among other products, on international

markets at low prices. In 2005, however, the EU

decided to change the nature of those subsidies

by ‘decoupling’ them from the production levels

of farmers. However, this report shows that the

EU’s decoupled subsidies are continuing to

damage dairy farmers in Bangladesh, where mil-

lions of poor people support their low incomes

through milk

production.

At the root of the problem of cheap milk powder

imports in Bangladesh are the massive subsi-

dies given to European dairy farmers. European

and Danish taxpayers are continuing to fund

EU farmers to harm the livelihoods of poor dairy

farmers in Bangladesh, at the same time as

funding aid programmes designed to help them.

Whilst the EU has committed itself to promoting

Policy Coherence for Development - ensuring

that its various policies do not undermine social

and economic progress in developing countries

- this aim is being undermined by cases such as

the one illustrated in this report.

The EU is preparing a comprehensive reform of

the CAP, which is expected to come into force in

2014. Much of the negotiations will take place in

early 2012, when Denmark will be hold the pre-

sidency of the EU. This represents an important

political opportunity to reform the CAP in a way

that ends all damaging subsidies and will be

a test of the EU’s willingness to ensure that its

policies are coherently promoting development

in poor countries.

Annex

Annex A

Costs of production, Danish dairy farmers, 2009

Costs of milk production

( DKK per cow)

Operating (variable) costs

Insemination

Feed

Veterinary and medicine

Other operating costs

Machinery costs

Energy

Interest on operating inputs

Partially variable costs

Hired and opportunity costs of labour

Maintenance of equipment

Depreciation of equipment

Interest on equipment

Fixed costs

Real estate tax and energy levy

Insurance

Maintenance and depreciation, buildings

Interest on buildings

Other fixed costs

Total costs

2009

Small farms

11544

258

8295

696

731

689

464

410

5914

4068

820

793

234

2224

133

738

956

344

19682

2009

Large farms

11982

293

8572

664

937

618

484

414

5309

2753

850

1294

412

2875

109

1069

1363

273

20166

2009

All farms

12012

285

8542

712

907

660

486

421

5493

3105

855

1166

367

2690

117

962

1250

300

20195

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24 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

25 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Endnotes

Interview by Danwatch, June 2011

2002. ‘Milking the CAP: How Europe’s Dairy Regime is Devastating

Livelihoods in the Developing World’. Oxfam Briefing Paper, 34.

Available at: http://www.oxfam.org.uk/resources/policy/trade/downloads/

bp34_cap.pdf, p. 16.

Office of the United Nations High Commissioner for Human Rights.

2011. The Common Agricultural Policy towards 2020: The Role of the

European Union in Supporting the Realization of the Right to Food,

Comments and Recommendations by the United Nations Special Rap-

porteur on the Right to Food, 17 June, p.1.

Hemme, T. & Otte, J.. 2010. Status and Prospects for Smallholder Milk

Production: A Global Perspective. Rome: FAO, p.6.; Trinity College Dublin.

2010. ‘EU dairy policy reform and developing countries’. Available at:

http://www.tcd.ie/iiis/policycoherence/eu-agricultural-policy-reform/dairy-

case-study.php.

Siddiquee, N.A. & Southwood, R. 2011. ’Strengthening the dairy Value

Chain in Bangladesh’. Slideshow presented at the Gender and Market

Oriented Agriculture (AgriGender 2011) Workshop, Addis Ababa, Ethiopia,

31 January–2 February. Available at: http://www.slideshare.net/ILRI/

strengthening-the-dairy-value-chain-in-bangladesh-changing-lives-for-

dairy-farmers.

CARE. n.d. ‘Strengthening the Dairy Value Chain Project: Bangladesh’.

Available at: http://edu.care.org.

CARE. n.d. ‘Strengthening the Dairy Value Chain Project: Bangladesh’.

Available at: http://edu.care.org.

FAO. n.d. Bangladesh Country Profile. Accessed: 28/07/11.

http://www.ruralpovertyportal.org/web/guest/country/home/tags/bang-

ladesh

Embassy of Denmark, Bangladesh, http://www.ambdhaka.um.dk/en/

menu/DevelopmentIssues/Businesstobusiness%28B2B%29Programme/

B2B+Bangladesh+as+a+Partner+Country/Economic+Overview; available

at: https://www.cia.gov/library/publications/the-world-factbook/geos/

bg.html.

International Farm Comparison Network. 2009. Dairy Policy Impacts

on Bangladesh & EU 15 Dairy Farmers’ Livelihoods, p.2, 5; CARE Bang-

ladesh. 2008. ‘Pro-Poor Analysis of the Dairy Value Chain’, p. 20; Dairy

farming provides an average of around 16 per cent of family income, the

rest provided by other farming activity and off-farm income.

International Farm Comparison Network. 2009. Dairy Policy Impacts

on Bangladesh & EU 15 Dairy Farmers’ Livelihoods, p.2.

Siddiquee, N.A. & and Southwood, R. 2011. ’Strengthening the dairy

Value Chain in Bangladesh’. Slideshow presented at the Gender and

Market Oriented Agriculture (AgriGender 2011) Workshop, Addis Ababa,

Ethiopia, 31 January–2 February. Available at: http://www.slideshare.net/

ILRI/strengthening-the-dairy-value-chain-in-bangladesh-changing-lives-

for-dairy-farmers.

Haque, S.A. 2007. Lessons Learned Study: Bangladesh – Smallholder

Milk Producers, Nutrition, Incomes, Jobs. Rome: FAO, p.13.

Shamsuddin, M. et al. 2006. ‘A Survey to Identify Economic Opportu-

nities for Smallholder Dairy Farms in Bangladesh’. Journal of Tropical Ani-

mal Health and Production, 38(2), p. 131-140.; The livestock sub-sector

contributes only 3 per cent of Bangladesh’s GDP but provides employ-

ment to around 20 per cent of the rural population by some estimates,

and is one of the most important economic activities in the country;

PRAN-RFL Group. 2007. Report on the Development of Dairy Industry in

Bangladesh, p.2.

Hemme, T. & Otte, J. 2010. Status and Prospects for Smallholder Milk

Production: A Global Perspective. Rome: FAO, p. 6-7.

Trinity College Dublin. 2010. ‘EU dairy policy reform and developing

countries’. Available at: http://www.tcd.ie/iiis/policycoherence/eu-agricul-

tural-policy-reform/dairy-case-study.php.

International Farm Comparison Network. 2009. Dairy Policy Impacts

on Bangladesh & EU 15 Dairy Farmers’ Livelihoods, p. 2, 4.; A 2004 study

found that dairy farms costs in Bangladesh were around 20 per cent lower

than the costs of production in the EU. Hemme, T. et al. ‘A Review of Milk

production in Bangladesh with Particular Emphasis on Small-Scale Pro-

ducers’. PPLPI Working Paper No.7. Kiel: International Farm Comparison

Network (IFCN), p. 3.

Hannan, M.M. et al. 2010. ‘Household demand for dairy products in

Bangladesh: An Application of AIDS Model’. Journal of Bangladesh Agri-

cultural University, 8 (1), p. 121–6.

FAO/IDF. 2003. Dairy Development Newsletter. August, Issue no. 7.

Available at: http://www.fao.org/ag/againfo/themes/en/dairy/documents/

newsletters/newsletter-7-English.pdf.

‘Dairy industry seeks greater policy support’, Independent (Bangla-

desh), 20 June 2011.

Katherine Barker and Michael Hinsch, ‘Tetra Pak in Bangladesh: Part-

nering to Improve Nutrition and Develop the Dairy Industry’, undated

‘Dairy industry seeks greater policy support’, Independent (Bangla-

desh), 20 June 2011

Hemme,T. et al. 2002. ‘A Review of Milk Production in Bangladesh

with Particular Emphasis on Small-scale Producers’. Available at: http://

www.fao.org/ag/againfo/programmes/en/pplpi/docarc/execsumm_wp07.

pdf.

Hemme, T. Et al. 2009, ‘Dairy Policy Impacts on Bangladesh & EU 15

dairy farmers’ livelihoods: Dairy Case Study’. Kiel: IFCN.

Hemme,T. et al. 2002. ‘A Review of Milk Production in Bangladesh

with Particular Emphasis on Small-scale Producers’. Available at: http://

www.fao.org/ag/againfo/programmes/en/pplpi/docarc/execsumm_wp07.

pdf.

CARE Bangladesh.2008. ‘Pro-Poor Analysis of the Dairy Value Chain’,

p.18.

Ministry of Finance. 2010. ‘Bangladesh Economic Review, 2009’.

Dhaka: Government of Bangladesh.

Government of Bangladesh. 2009. ’Steps Towards Change’, p.32.

Available at: http://www.lcgbangladesh.org/prsp/docs/PRS%20Bangla-

desh%202010%20final.pdf.

Ministry of Fisheries and Livestock Government. 2005. ’Livestock

Policy And Action Plan’. Dhaka: Government of Bangladesh.

Government of Bangladesh. 2009. ’Steps Towards Change’, p.29.

Available at: http://www.lcgbangladesh.org/prsp/docs/PRS%20Bangla-

desh%202010%20final.pdf.

Bhuiyan, E.R. ‘US$150 million for milk powder import’, Financial Ex-

press, 18 February 2010.

CARE. n.d. ‘Strengthening the Dairy Value Chain Project: Bangladesh’.

Available at: http://edu.care.org.

IFCN. 2009. Dairy Policy Impacts on Bangladesh & EU 15 Dairy Far-

mers’ Livelihoods, p. 2.

CARE. n.d. ‘Strengthening the Dairy Value Chain Project: Bangladesh’.

Available at: http://edu.care.org.

Hemme, T. Et al. 2009, ‘Dairy Policy Impacts on Bangladesh & EU 15

dairy farmers’ livelihoods: Dairy Case Study’. Kiel: IFCN.

Parvez, S. & Jibon, G.M. ‘Dairy farmers hurt by low-cost milk powder’,

Daily Star, 15 May 2009.

‘Bangladesh dairy farmers spill milk in price protest’, Reuters, 12 April

2009.

Ibid.

Hemme, T. Et al. 2009, ‘Dairy Policy Impacts on Bangladesh & EU 15

dairy farmers’ livelihoods: Dairy Case Study’. Kiel: IFCN.

Interview by local researcher in Bangladesh hired by Danwatch, 8 June

2011.

Parvez, S. & and Jibon, G.M, ‘Dairy farmers hurt by low-cost milk

powder’, Daily Star, 15 May 2009.

Trinity College Dublin. 2010. ‘EU dairy policy reform and developing

countries’. Available at: http://www.tcd.ie/iiis/policycoherence/eu-agricul-

tural-policy-reform/dairy-case-study.php.

Agritrade. 2011.‘USDA review of EU dairy sector development’,

Agritrade News Update, July, http://agritrade.cta.int/en/Commodities/

Dairy-sector

Agritrade. 2011. ‘Farm-gate milk prices lag behind rising dairy com-

modity prices’, Agritrade News Update, May. Available at: http://agritrade.

cta.int/en/Commodities/Dairy-sector.

The EU has made special trade and development agreements with the

ACP states through the Lomé Conventions and the Cotonou Agreement.

Agritrade. 2011. ‘Farm-gate milk prices lag behind rising dairy com-

modity prices’, Agritrade News Update, July. Available at: http://agritrade.

cta.int/en/Commodities/Dairy-sector.

See, for example: Green, D. & Griffith, M. 2002. Dumping on the Poor:

The Common Agricultural Policy, the WTO and International Development.

Cambridge: Catholic Fund for Overseas Development (CAFOD).; Oxfam.

2002. ‘Milking the CAP: How Europe’s Dairy Regime is Devastating Live-

lihoods in the Developing World’. Oxfam Briefing Paper, 34. Available at:

http://www.oxfam.org.uk/resources/policy/trade/downloads/bp34_cap.

pdf.

FAO. 2009. ‘Smallholder dairy development: Lessons learned in Asia’.

Bangkok: FAO Regional Office for Asia and The Pacific. Available at: ftp://

ftp.fao.org/docrep/fao/011/i0588e/i0588e00.pdf.

Haque, S.A. 2007. Lessons Learned Study: Bangladesh – Smallholder

Milk Producers, Nutrition, Incomes, Jobs. Rome: FAO.

Price checks in Bangladeshi supermarkets in May and July 2011.

100 litre whole milk equals 13 kg whole milk powder: Pearce, K.N.

”Milk Powder”. Food Science Section, New Zealand Dairy Research Insti-

tute. Available at: http://www.nzic.org.nz/ChemProcesses/dairy/3C.pdf.

Government of Bangladesh. 2010, ‘BUDGET 2010-11, Ministry of

Finance, Budget Speech’ by Abul Maal Abdul Muhith, Minister of Finance;

‘Bangladesh dairy farmers spill milk in price protest’, Reuters, 12 April

2009.

‘Govt urged not to cut tariff on milk powder import’, Daily Star, 19 June

2010. Available at: http://www.thedailystar.net/story.php?nid=143261.;

‘Dairy Farm Owners’ Assoc opposes budget proposal’, Financial Express,

20 June 2010. Available at: http://www.thefinancialexpress-bd.com/more.

php?news_id=103607.

PRAN-RFL Group. 2007. Report on the Development of Dairy Industry

in Bangladesh. Available at: http://www.undp.org.bd/library/policypapers/

Dev%20of%20Dairy%20Indus(English).pdf, p.6.

PRAN-RFL Group. 2007. Report on the Development of Dairy Industry

in Bangladesh. Available at: http://www.undp.org.bd/library/policypapers/

Dev%20of%20Dairy%20Indus(English).pdf, p.2, 6.

‘Dairy industry seeks greater policy support’, Independent (Bangla-

desh), 20 June 2011.

Statistics Denmark. http://www.statistikbanken.dk, Search on Rev4-

SITC: 02222; ‘Dano sales are booming in Bangladesh’. Arla Press

Release, 29 June 2007. Available at: http://www.arla.com/press/archive/

dano-sales-are-booming-in-bangladesh/.

Our calculations for 2008 is based on Statistics Denmark (http://www.

statistikbanken.dk, Search on Rev4- SITC: 02222) and FAOSTAT.; Merrett,

N. ‘Bangladesh success reflects Arla’s Asian ambition’, Dairy Reporter,

3 July 2007; ‘Bangladesh ponders production: the Bangladeshi dairy

community is awaiting investment in domestic milk supply in order to

expand production’, Dairy Industries International, 1 January 2008.

‘Arla opens packing plant in Bangladesh ‘. Arla Press Release. 23

December, 2004. Available at: http://www.arla.com/press/archive/arla-

opens-packing-plant-in-bangladesh/.

Figures from Statistics Denmark.

http://farmsubsidy.org.

‘Dano sales are booming in Bangladesh’. Arla Press Release, 29 June

2007. Available at: http://www.arla.com/press/archive/dano-sales-are-

booming-in-bangladesh/.

Not for industrial use

Correspondence with Arla Foods, 16 June 2011

‘Mælkepulver mere værd end Klovborgost’, Landbrugsavisen, 11

March 2011

‘Mælkekonserves’, Landbrug og Fødevarer, 2010, http://www.

lf.dk/~/media/lf/Talper cent20ogper cent20analyser/Aarsstatistikker/

Mejeristatistik/2009/7per cent20maelkekonserves.ashx

‘New Milk Powder Factory in Vimmerby, Sweden’, Arla website acces-

sed 1st August 2011

Arla Foods, Annual Report 2010, p.6

http://www.arla.com/about-us/our-company/

http://www.arla.com/our-responsibility/our-responsibility1/arla-and-

global-compact/

http://www.arla.com/our-responsibility/our-responsibility1/preface/

Arla Foods. 2009. ‘Our Responsibility - Arla Foods’ corporate social

responsibility - Code of conduct’, p.22, 23, 25. Available at: http://www.

arla.com/Upload/Arla%20COM/Sustainability/CoC_UK.pdf.

Arla Foods. 2009. ‘Our Responsibility - Arla Foods’ corporate social

responsibility - Code of conduct’, p.32-33. Available at: http://www.arla.

com/Upload/Arla%20COM/Sustainability/CoC_UK.pdf.

Haque, S.A. 2007. Lessons Learned Study: Bangladesh – Smallholder

Milk Producers, Nutrition, Incomes, Jobs. Rome: FAO, p. 13.

Arla Foods. 2009. ‘Our Responsibility - Arla Foods’ corporate social

responsibility - Code of conduct’, p.32-33. Available at: http://www.arla.

com/Upload/Arla%20COM/Sustainability/CoC_UK.pdf.

Agritrade. 2011. ‘USDA review of EU dairy sector development’,

Agritrade News Update, July. Available at: http://agritrade.cta.int/en/Com-

modities/Dairy-sector.

European Court of Auditors. 2009. ‘Have the Management Instruments

Applied to the Market in Milk and Milk products Achieved Their Main

Objectives?’. Special Report No.14, para II.

Trinity College Dublin. 2010. ‘EU dairy policy reform and developing

countries’. Available at: http://www.tcd.ie/iiis/policycoherence/eu-agricul-

tural-policy-reform/dairy-case-study.php.

IFCN. 2009. Dairy Policy Impacts on Bangladesh & EU 15 Dairy Far-

mers’ Livelihoods, p. 3.

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26 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

27 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh

Merrett, N. ‘EU export subsidies revoked as dairy prices rocket’, The

Dairy Reporter, 18 June 2007; Chaffin, J. ‘EU revives dairy export subsi-

dies’, Financial Times, 16 January 2009.

Palmer, D. ‘EU subsidies a threat to Aussie dairy: Opposition’, Austra-

lian Food News, 30 January 2009. Available at: http://www.ausfoodnews.

com.au/2009/01/30/eu-subsidies-a-threat-to-aussie-dairy-opposition.

html.

EU Budget 2011. Available at: http://ec.europa.eu/budget/figu-

res/011/2011_en.cfm.

84 Civitas Institute for the Study of Civil Societies. 2010. ‘Common Agri-

cultural Policy’. Available at: http://www.civitas.org.uk/eufacts/download/

AG.3.CAP.pdf.

See www.farmsubsidy.org; Jack Thurston, ‘ EU boots farm subsidy

millionaires by more than 20 per cent in 2009’, http://capreform.eu/2009-

data-harvest/; Heather Stewart, ‘Who’s creaming off EU subsidies?’,

Observer, 21 May 2006

United States Department of Agriculture (USDA) Foreign Agricultural

Service. http://www.fas.usda.gov/psdonline/psdQuery.aspx search on

exports of ’Dairy, Dry Whole Milk Powder’.

USDA Foreign Agricultural Service. 2010. ’Cows Milk Production and

Consumption: Summary For Selected Countries’.

European Court of Auditors. 2009. ‘Have the Management Instruments

Applied to the Market in Milk and Milk products Achieved Their Main

Objectives?’. Special Report No.14, para 38.

European Court of Auditors. 2009. ‘Have the Management Instruments

Applied to the Market in Milk and Milk products Achieved Their Main

Objectives?’. Special Report No.14, para 1.

EC. 2010. Report from the Commission to the European Parliament

and the Council: Third Financial report on the European Agricultural Gua-

rantee Fund 2009 Financial year. Available at: http://eur-lex.europa.eu/

LexUriServ/LexUriServ.do?uri=COM:2010:0502:FIN:EN:PDF.

Danish Ministry of Food, Agriculture and Fisheries, personal communi-

cation, 4 April 2011.

Calculated as DKK 0.015 per litre milk (according to Danish Ministry of

Food, Agriculture and Fisheries, Correspondence, 4 April 2011), multiplied

with an estimation of Arla Foods’ processed Danish milk calculated in the

quota year 09/10 as: ¾ of the 4253 mill. litres milk received from Danish

farmers in 2009 and ¼ of the 4345 mill. kg milk received from Danish

farmers in 2010 (according to Arla Foods’ financial report 2009)

Statistics Denmark, search on rev5 sitc 02222.

DKK 2.60/kg of milk powder according to Arla Foods; http://www.arla.

dk/da/Arla-Forum/Spoergsmaal-svar/Arla-Foods/Virksomheden/Arlas-

handelssamarbejde-med-U-lande/. Converted to US dollars at the 2009

rate of 5.36 DKK/$.

Waite, R. 2011. ’CAP Reform across Europe – A view from the Euro-

pean Commission’ Available at: http://www.eblex.org.uk/documents/con-

tent/publications/nc_roger_waite_eu_commission_view_of_cap-2011_04.

pdf.

See von Witzke, H. et al. 2010. ‘Decoupled Payments to EU Farmers,

Production and Trade: An Economic Analysis for Germany’, Humboldt

University Berlin Working Paper, Number 90/2010, which reviews other

studies and conducts its own analysis.

De Økonomiske Råd. 2010. ’Økonomi og Miljø (Economy and Environ-

ment)’, p. 465. Available at:

http://www.dors.dk/graphics/Synkron-Library/Publikationer/Rapporter/

Milj%F8_2010/Milj%F8%202010/Hele%20pub.pdf.

CARE Bangladesh. 2008. ‘Pro-Poor Analysis of the Dairy Value Chain’,

p. 20.

ICSTD. 2007. ‘Agricultural subsidies in the WTO ’Green Box: An

overview of the key issues from a sustainable development viewpoint’.

Available at: http://ictsd.org/downloads/2008/07/a1.pdf.

100

von Witzke, H. et al. 2010. ‘Decoupled Payments to EU Farmers,

Production and Trade: An Economic Analysis for Germany’. Humboldt

University Berlin Working Paper, Number 90/2010, p. 18.

101

International Centre for Trade and Sustainable Development (ICTSD).

2009. ‘Agricultural Subsidies in the WTO Green Box: Ensuring Coherence

with Sustainable Development Goals’, Information Note, No.16. Available

at: http://ictsd.net/downloads/2009/10/green-box-web-1.pdf.

102

See von Witzke, H. et al. 2010. ‘Decoupled Payments to EU Farmers,

Production and Trade: An Economic Analysis for Germany’. Humboldt

University Berlin Working Paper, Number 90/2010, p. 22.

103

IFCN. 2009. Dairy Policy Impacts on Bangladesh & EU 15 Dairy

Farmers’ Livelihoods, p.5.; Previous studies, undertaken when the level

of export subsidies was much higher than currently - for example by the

Australian government in 2001 - showed that a halving of EU and US sub-

sidised dairy exports would cause world prices to rise by between 17 and

35 per cent. Oxfam. 2002. ‘Milking the CAP: How Europe’s Dairy Regime

is Devastating Livelihoods in the Developing World’. Oxfam Briefing Paper,

34. Available at: http://www.oxfam.org.uk/resources/policy/trade/down-

loads/bp34_cap.pdf, p. 16.

104

IFCN. 2009. Dairy Policy Impacts on Bangladesh & EU 15 Dairy

Farmers’ Livelihoods, p.5.

105

Agritrade. 2010. ‘Farm-gate milk prices lag behind rising dairy com-

modity prices’, Agritrade News Update, May. Available at: http://agritrade.

cta.int/en/Commodities/Dairy-sector.

106

European Court of Auditors. 2009. ‘Have the Management Instru-

ments Applied to the Market in Milk and Milk products Achieved Their

Main Objectives?’. Special Report No.14, para 71.

107

von Witzke, H. et al. 2010. ‘Decoupled Payments to EU Farmers,

Production and Trade: An Economic Analysis for Germany’. Humboldt

University Berlin Working Paper, Number 90/2010, p. 18.

108

European Court of Auditors. 2009. ‘Have the management instru-

ments applied to the market in milk and milk products achieved their main

objectives?’. Special Report no. 14.

109

Matthews, A. ‘Developing country impacts of the next CAP reform’,

CAP Reform Blog, 5 February 201. Available at: http://capreform.eu/

developing-country-impacts-of-the-next-cap-reform.

110

EC Directorate-General for Agriculture and Rural Development. 2010.

‘EU Farm Economics Overview: Farm Accountancy Data Network 2007’.

Available at; http://ec.europa.eu/agriculture/rica/pdf/report_2007.pdf.

111

Office of the United Nations High Commissioner for Human Rights.

2011. The Common Agricultural Policy towards 2020: The Role of the

European Union in Supporting the Realization of the Right to Food,

Comments and Recommendations by the United Nations Special Rap-

porteur on the Right to Food, p. 3-4.

112

When nothing else is stated, British pounds are converted to Euro at

the rate of 1,18 GBP/€, calculated based on average of exchange rates

2010 according to OECD Financial Indicators (MEI): Exchange Rates

(http://stats.oecd.org/Index.aspx?DataSetCode=MEI_FIN).

113

Agritrade. 2011. ‘Farm-gate milk prices lag behind rising dairy com-

modity prices’, Agritrade News Update, May. Available at: http://agritrade.

cta.int/en/Commodities/Dairy-sector

114

Hemme, Torsten & Uddin Mohammad Mohi, 2009, ‘Dairy Policy

Impacts on Bangladesh & EU 15 dairy farmers livelihoods: Dairy Case

Study’, International Farm Comparison Network

115

Agritrade. 2011. ‘Farm-gate milk prices lag behind rising dairy com-

modity prices’, Agritrade News Update, May. Available at: http://agritrade.

cta.int/en/Commodities/Dairy-sector

116

Agritrade. 2011. ‘Farm-gate milk prices lag behind rising dairy com-

modity prices’, Agritrade News Update, May. Available at: http://agritrade.

cta.int/en/Commodities/Dairy-sector

117

EU delegation to Bangladesh. n.d. ‘Food security projects’. Available

at: http://www.eudelbangladesh.org/en/projects/foodsecurity_projects.

htm#6.

118

FAO. n.d. Bangladesh Country Profile. Available at: http://www.fao.

org/countries/55528/en/bgd/.; According to the National Food Policy,

increasing production in the livestock and fisheries sub-sectors is conside-

red as one of the important frontiers towards augmenting overall food pro-

duction in the country, ensuring food security as well as foreign exchange

earnings: Ministry of Food and Disaster Management. 2006. ‘National

Food Policy’. Available at: http://www.nfpcsp.org/agridrupal/sites/default/

files/National_Food_Policy_2006_English_Version.pdf.

119

DANIDA. 2011. ’DANIDA Årsberetning 2010’, p. 113. Available

at: http://www.netpublikationer.dk/um/11063/pdf/Danidas_aarsberet-

ning_2010.pdf.

120

Haque, S.A. 2007. Lessons Learned Study: Bangladesh – Smallhol-

der Milk Producers, Nutrition, Incomes, Jobs. Rome: FAO.

121

Ministry of Foreign Affairs of Denmark. 2005. ’BANGLADESH-DEN-

MARK PARTNERSHIP Strategy for development cooperation 2005-2009’.

Copenhagen: Government of Denmark, p.20f. Available at: http://www.

netpublikationer.dk/um/5751/pdf/87-7667-263-8.pdf.

122

Ministry of Foreign Affairs of Denmark. 2004. ’På bistandsområdet er

Danmark ikke en småstat’. Available at: http://www.afghanistan.um.dk/

NR/rdonlyres/AF83FFFB-93BF-422B-8A33-E728FF92FEC0/0/CarstenIn-

terviewdoc.PDF.

123

‘IFC Loan Helps PRAN Group Expand, Contributing to Food Security

in Bangladesh’, IFC Press Release, 22 June 2011. Available at: http://

www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocum

ent&UNID=E1CB9B548A0AB4FC852578B70052A0D9.

124

EC. 2010. ‘The Common Agricultural Policy alter 2013 – Public

debate: Executive Summary of Contributions’, p.4. Available at: http://

ec.europa.eu/agriculture/cap-post-2013/debate/report/executive-summa-

ry_en.pdf.

125

EC. 2010. ‘The CAP towards 2020: Meeting the food, natural resour-

ces and territorial challenges of the future’. Available at: http://ec.europa.

eu/agriculture/cap-post-2013/communication/com2010-672_en.pdf.

126

http://farmsubsidy.org, personal communication, 16 May 2011, Da-

nish dairy farmer Bøje Pedersen received € 588,616 in 2010.

127

Landbrugsrådgivning på Fyn, http://www.fsps.dk/artikler/driftsana-

lyse2003-2004/fire_typer.htm#eksempel. The example is based on 2006

forecasts, and sums are converted from DKK at the 2006 conversion rate

of DKK 5.94 DKK/$1

128

Ministry of Food, Agriculture and Fisheries, 2011. ’245,4 mio. kr. i

handyrpræmier’. Available at: http://ferv.fvm.dk/Default.aspx?ID=17142&

M=News&NewsID=8193.

129

Ministry of Food, Agriculture and Fisheries, personal correspondence,

4 April 2011.

130

These tables are based the model developed in von Witzke, H. et

al. 2010. ‘Decoupled Payments to EU Farmers, Production and Trade:

An Economic Analysis for Germany’, Humboldt University Berlin Working

Paper, Number 90/2010, using figures from Statistics Denmark.

131

EC Directorate-General for Agriculture and Rural Development.

‘Microeconomic Analysis Of EU Agricultural Holdings 2007’; Farm Ac-

countancy Network Database

132

As the European milk price is artificially high, distorted by market sup-

port mechanisms, it is necessary to compare milk production costs with

an estimated world market price. However, fresh milk is not exported in

itself but transformed into different products with varying contents of milk.

Therefore we use a price estimated by OECD – an OECD reference price.

The OECD reference price is a calculation of the ’real’ milk price based on

the value of the milk contents in various traded dairy products. In 2008 the

OECD-price per 100 kg was € 33.6 28.9 converted at 2008-rates to DKK

251; in 2009 € 28.9 converted at 2009-rates to DKK 216; http://www.

oecd.org/dataoecd/32/5/45560751.xls?contentId=45560752

133

Personal interviews, June 2011

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DK.2200 Copenhagen N

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