Milk Is Now Officially Cheaper than Water in Germany

Turns out, the whole isn't always greater than the sum of its parts. At least, that seems to be the case for Germany's increasingly disillusioned dairy farmers.

As unbelievable as it may sound, prices for milk in Germany have sunk so low that it's actually cheaper to buy milk there than water. This is a pretty bitter pill to swallow for farmers, especially when you consider that milk is primarily composed of water.

The problem started back in 2014 when Russia banned Western food imports in retaliation for the sanctions imposed over the Ukraine imbroglio. Then, in 2015, the European Union ended quotas on milk production. What's more, Chinese demand for Western milk is weakening. All this means a perfect storm is brewing in Europe, and dairy farmers are paying the price. Production of milk throughout Europe has surged, and prices have dropped so low that in Germany, milk is now cheaper than some brands of water. In fact, European dairy prices are so low, it's led to a massive cheese surplus stateside.

The German discount supermarket Aldi has lowered prices of milk to around 52 cents US per liter. Other chains are following suit, according to the Hamburger Morgenpost. This means farmers are earning as little as 20 cents US per liter, less than half of what they earned in 2013. To make ends meet, most German farmers have to make more like 45 cents per liter. The Association of Milk Farmers in Germany says many members of their organization are seeking bankruptcy protection. Of the 75,000 dairy farmers in that nation, thousands have gone bust in 2016, and more are expected to do so, according to Der Spiegel.

The farmers have asked for financial help and the European Union has pledged $561 million—but that goes to dairy farmers all across Europe. Farmers are none too pleased; they say more needs to be done. They've been protesting outside the office of Christian Schmidt, the conservative Federal Agriculture Minister, who previously said, "The milk crisis needs to be solved by the market."

Farmers are crying foul. "Schmidt is asking for calm, but how we stay calm when we are fighting for our existence and the government is doing far too little to help?" asked Romuald Schaber, head of the European Milk Board.

Deregulation of the milk market last year allowed farmers to produce as much milk as they wanted for the first time in 30 years. Europe's farmers want to see the reintroduction of production quotes to help stabilize the market. "Unless production is reduced, the market will carry on deteriorating at a pace," Schauber says.

In the meantime, Germany and the rest of Europe will be enjoying some abnormally cheap milk at the cost of their farmers' very livelihood.