Government Regulatory Policies make Greek Milk the most Expensive Milk in the European Union

Posted by PITHOCRATES - November 24th, 2012

Week in Review

Greeks are furious over the high price of milk.  Some cannot even afford it anymore.  While others are calling for government to do something about the high price of milk.  Which is rather ironic as the government is responsible in large part for those high prices (see Price of milk makes Greeks’ blood boil by Karolina Tagaris and Alan Wheatley posted 11/22/2012 on Reuters).

Aravanis reserves his harshest criticism for government bureaucrats, who he says make it hard for farmers to obtain land permits to expand and reap economies of scale. “It’s not as if cows are going to be grazing in their living room,” he said.

George Kefalas, who produces milk on a family farm near the northern city of Thessaloniki, said it can take two or three years to get an operating license…

Attempting direct comparisons with prices elsewhere in Europe is treacherous because so many variables are in play, such as transport costs, rents and consumer preferences.

But Eurostat says the price in Greece of dairy produce -milk, cheese and eggs – was 31.5 percent above the EU average in 2011, the highest in Europe…

Skordas said milk was expensive because of farmers’ high production costs, expensive packaging and the cost of transporting milk to remote islands and villages.

Moreover, fresh milk is sold in Greece with a shelf life of just five days, which means more trips to collect it from farms.

Dairy farmers oppose a long-standing proposal to extend the shelf life of milk to 10 days, as is common elsewhere in Europe.

This could be done relatively simply in the pasteurisation process, but Skordas said cattle breeders feared – unnecessarily, in his opinion – that this would open the door to increased competition from imported milk.

Small farms.  Government restrictions.  High regulatory and compliance costs.  If the Greeks don’t want economies of scales (like they have in the US) and want only fresh milk (unpasteurized milk less than 6 days old) legally sold then milk is going to be expensive.  Especially when dairy farmers lobby government to keep their costly regulations in place to keep out less pricy imported milk.

Only government can keep out less pricy milk.  And only government can keep the cost of milk production high by mandating a short shelf life.  As the Greek milk market is a captive market Greeks have little recourse but to pay high milk prices.  Or demand that government stop raising the price of milk with their regulatory policies.

Milk is like oil in a way.  There is little difference between batches when it comes from the source.  But once it enters the regulated market governments start adding costs.  Making some milk (or oil products) more expensive than other milk (or oil products).  The reason why gasoline prices are different in the US than in Europe is that government taxes and regulations are different.  They’re more costly in the Europe so gasoline is more costly in Europe.  Just as milk is more costly in Greece than elsewhere in the EU.

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