The price of milk in Estonia has fallen to as low as €0.35 per liter, the result of a price war between two major supermarkets, as well as existing supermarkets gearing up for the arrival of German low-cost chain Lidl. This is in turn putting pressure on dairy producers and farmers to cut prices, something they say they have little or no scope to do.
Milk is currently at a four-year low thanks in part to a price war between Finnish-owned chain Prisma and Lithuanian-owned supermarket Maxima. The last time milk was this cheap was in 2016-2017, when prices of €29 per liter could be had, ERR's online news in Estonian reports.
At the same time, supermarkets are using milk as a loss-leader, ERR reports, with even some producers selling at a loss.
Maido Solovjov, head of dairy producers Valio, said that while they get their due, the company is feeling the pressure to cut prices to retailers even as raw milk prices have been rising in the last few months.
Valio selling milk at a loss
Valio and other producers pay farmers €0.36 per liter, Solovjov told ERR, inclusive of VAT, but supermarkets as noted have been selling one cent below that level. Solovjov added that he noticed supermarket food prices rising since summer, perhaps to make up for this shortfall.
Margus Amerikas, development director at Baltic Agro, told Vikerraadio's "Vikerhommik" Friday morning that farmers have no room to cut prices, with the €0.30 per liter price for raw milk (not including VAT) only sufficient for subsistence, but not investment.
Dairy farmers would need as much as €0.40 to have any surplus for investment, he said.
Supermarkets wary of Lidl's arrival
Allan Tohver, sales director at Farmi, another dairy firm, confirmed that supermarket chains are wary of the arrival of Lidl on the market. Lidl has been busy buying up plots of land and constructing stores in the past few years, though no operating outlets are open yet.
Tohver added that his company, along with Tere, part of the Maag Grupp, could not cut prices more.
"The question definitely gets asked, but since we are based on Estonian capital, Estonian farmers have difficulties arising from the pandemic, hence why we have no interest in going down this route," Tohver said.
"Thirty-one cents is the milk's own production price, we can't go along with that," Tohver added, noting that farmer protests involving manure loads have already been touted.
Editor: Andrew Whyte