Farmers hope for voluntary deal preventing cheap milk prices

Members of Estonian Young Farmers buy out entire stock of cheapest milk for sale at Sõbra Prisma in Tartu. (Mirjam Nutov/ERR)
9/6/2016 6:20 PM
Category: Business

According to the chairman of the Estonian Chamber of Agriculture and Commerce, the selling of milk below cost is one of the most telling examples of an unfair trade practice with which 80 percent of Estonian food industry companies have come into contact according to the Institute of Economic Research. In order to manage the situation that has arisen, the chamber has proposed that Estonia's ministries form a work group dedicated to the issue.

"Food producers are in a clearly weaker position compared to retail chains and in other countries we can see that legislators have taken steps to manage unfair trade practices," said Estonian Chamber of Agriculture and Commerce Chairman Roomet Sõrmus. "I believe that Estonia must actually go this route as well, as it can unfortunately be seen that, if we take these same 35- and 36-cent [per liter] milk prices, then this shows that such voluntary responsible behavior is a bit difficult to expect."

Minister of Rural Affairs Urmas Kruuse said that hopefully a voluntary agreement is indeed reached. "There are many examples of voluntary agreements in the world and I sincerely hope that this voluntary agreement will be produced as well," said the minister. "If Europe were to begin regulating this, then it would surely be better if this were regulated the same way in all states. This would guarantee that our output, which enters this or that market, can follow uniform rules. All of that which is regulated domestically may not always necessarily provide this outcome."

Estonian farmers buy out store's entire stock of cheapest milk in protest

Members of the NGO Estonian Young Farmers organized an action of protest at Prisma's Sõbra location in Tartu in order to draw attention to the unbearably cheap milk prices. The young farmers bought out the entire stock of the cheapest milk in the store in order to prevent it from giving consumers a false impression about the actual value of milk.

The milk bought in protest was thereafter donated to the Tartu Food Bank.

"For over a year now, Prisma has sold consumers the cheapest milk for 35-36 cents per liter, which clearly does not reflect the actual costs incurred in milk production," explained Estonian Young Farmers' board member Karin Sepp. "The price wars that have continued in commerce has given a serious blow to domestic milk production and aggravated problems prevailing in the dairy market, which affects young farmers' prospects for being involved in milk production."

Sepp, who has decided to quit raising dairy cows in her Võru County business, asked at what expense farmers should be expected to sell milk for 20 cents per liter if the actual costs involved in milk production are at least 30 cents per liter. "Such a situation has been going on for a long time and its inevitable consequence is milk cows being sent to the slaughterhouse," she continued. "Farmers are simply incapable of producing milk so cheaply."

She stressed the fact that milk production in Estonia had reached a very critical situation which could be alleviated by responsible behavior from merchants. "We expect a domestic food-valuing attitude from Estonian retail chains," Sepp added.

Milk as low as 35 cents per liter in stores

The cheapest milk, sold in plastic one-liter milk bags, has been sold in supermarkets for 35-36 cents per liter during the past year. Prisma was the first to do so, offering store-brand milk for 35 cents per liter. The cheapest milk currently offered by Prisma costs 36 cents per liter. Rimi and Säästumarket, owned by the same parent company, followed suit, offering milk for 36 cents per liter for some time.

As of Saturday, Sept. 3, milk was still available for as cheap as 35 cents per liter in supermarkets: the cheapest milk offered by Coop (Maksimarket, Konsum, A ja O) cost 35 cents per liter, while milk cost 35 cents at Selver, 36 cents at Maxima and 42 cents at Rimi (Rimi, Säästumarket).

Subtracting VAT that goes to the state from the 35-36 cent retail price, that leaves just 29-30 cents per liter to cover all costs related to milk production, including milk production costs at the farm, processing and packaging, transport and marketing, despite the fact that milk production alone costs an average of 30 cents per liter and milk producers have only been paid 20-23 cents per liter during the past nearly two years.

Editor: Aili Vahtla

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