Science - October 29, 2009

West European dairy plants support East European farmers

With western dairy companies offering a helping hand, dairy farmers in Central and East Europe have been able to improve and expand their businesses in the last ten years.

Companies such as Friesland Campina (NL), Meggle (D) and Danone (F) offer advice and cheap loans to improve the milk quality and livestock in Poland, Slovakia, Romania and Bulgaria. This 'vertical coordination' in the dairy sector enables the often small dairy farming neighbours to have access to lucrative markets such as supermarket chains. This is propounded by Liesbeth Dries of the Agricultural Economics and Rural Policy Group. Her article, co-authored with colleagues from the KU Leuven, will be published in the next issue of World Development.
Less than five cows
Dairy production in Slovakia, with relatively large agriculture firms, are now almost completely undertaken by international dairy companies. This happens too in Poland, Bulgaria and Romania where, despite having many small farmers still operating with less than five cows, local dairy factories have been taken over by West-European companies. Besides refurbishing these factories, these companies invest in their suppliers as well.
Wash hands
In the simplest way, Dries says, such investment can take the form of advice to a farmer to wash his hands before he goes a-milking to prevent bacteria from  getting into in the milk. Dairy factories also buy cows and cooling tanks for the somewhat bigger farmers. 'They are almost like a bank', says Dries. The dairy farmers can lease the cooling tanks or pay for these with milk deliveries. Furthermore, the dairy companies also send vets to the farmers to give advice on the use of medicines, advise on animal feed and supplementary feeding for the cows.
New marketing channels
This support is not a form of charity, says Dries. The companies want to make sure of having milk of a certain quality. In any case, the result is that farmers are able to develop their activities into somewhat bigger and more modern concerns. They conclude that the processing industry has played a major role in the structural change of the dairy sector in Central and East Europe. The dairy companies have also opened up new marketing channels for the farmers. Part of the produce goes to West European countries, according to Dries, but the new markets are mostly local. Western supermarket chains, treading the takeover path, have opened new shops for the wealthier part of the population. Via the dairy factory, the farmers now supply products with a higher added value to the supermarkets of Tesco, Carrefour and Ahold.