Record milk prices in Estonia may have peaked

Cartons of milk on shelves at the Maxima grocery store in Räpina. July 27, 2022.
Cartons of milk on shelves at the Maxima grocery store in Räpina. July 27, 2022. Source: Aili Vahtla/ERR

Milk producers in Estonia are earning modest profits in the aftermath of a long trend for rising, now record, prices and demand exceeding supply, ERR reports.

However, high input costs have complicated matters, and milk and other dairy products reaching their price apex, which some producers and sellers think they may already have done in Estonia and across Europe, might actually make things simpler.

Consumers meanwhile are reining in purchases and searching for the best price offers they can find.

Whereas a year ago you a liter of milk cost a little under 40 cents, the price today is around the 75 cents-per-liter mark, while the price of raw milk from dairy farms has risen consecutively for the past 19 months.

Between September and October alone, milk prices in stores rose by 4.5 percent.

The demand is significantly greater than the supply, but the price cannot rise indefinitely.

At the same time, there is no danger, or danger to producers at least, that cheaper competition will come in from other countries, Lenno Link, board member at large Järva County dairy collective Väätsa Agro, says.

The milk market across the three Baltic States is comparatively uniform, he told ERR, while Estonian-produced raw milk is also sold to Latvia and Lithuania.

While large processing plants in neighboring countries are currently a little more cost-effective than those in Estonia, Link added, from next year a new, larger and more efficient dairy run by butter and cheese producer E-Piim will start piloting next summer, and will be at full capacity with a year.

Ülo Kivine, of dairy products firm Tere, meanwhile, told ERR that not only had the price of raw milk has risen for 19 months in a row, this had represented an increase of nearly 60 percent in one year.

More than 80 percent of this rise was the result of input costs, he said.

Kivine said "This inflation has been substantial, even at the level of a hundred percent in stores, but the price of milk of 39 cents, including taxes, a year ago was set artificially too low. Today's price is fairer in this context," he added.

Both Kivine and Link said the rise in prices had benefited producers and was starting to reach them, with Link saying that producers were receiving higher prices than ever before.

Link said: "At present, the price of milk is the highest that has ever been paid to producers in Estonia."

The soaring increase in costs means that profits remain modest, however.

"Currently, it can be said that the farmer is also making a little profit after difficult years," Link went on.

These input costs include fertilizer (up five-fold over the pst 18 months) and fuel, which has doubled in price, Link said, though it remains to be seen over the winter what effect electricity prices will have on farmers' costs, even as government support measures have been put in place.

The effects of the pandemic, green energy policies and the Ukraine war have all made their effects known also.

As for consumers, some supermarkets have been making discounts and campaign offers.

For instance, at Estonian-owned supermarket Selver, a little over 50 percent of dairy product sales in general are discounted, while the proportion for drinking milk and kefir is 40 percent; with cheese, as high as 60 percent.

Rivo Veski, Selver's communications manager, told ERR that consumption this year, at least since February, has been lower than in 2021 – with drinking milk and kefir there has been a 5 percent fall in uptake, though prices have risen by over 25 percent.

Meanwhile with other dairy products, prices have risen at Selver by 20 percent but demand has fallen by over 10 percent, Veski said.

With cheese, the figures are 5 percent (fall in sales) and 20 percent (inflation) he said.

Lenno Link said that milk prices on the raw producers' market should have topped out by now, at €500-e510 per tonne (compared with €330 per tonne a year ago), and, internationally, have started to fall – a drop which may even start to reach Estonia this month.

This level would permit a certain amount of investment, neglected in recent years, and help stem the fall in the number of heads of dairy cows which has been ongoing in Estonia, and across Europe, in recent years, Link said.

Ülo Kivine acrees that milk prices have reached their ceiling, adding that the year had been a hard one for producers. Actually managing price increases is a difficult job even as it brings some small increases to profits, Kivine added.


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Editor: Andrew Whyte

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