Trader: Dairy costs less already, food prices to continue drop in fall

Cheese. Source: Ken Mürk/ERR

Dairy prices have already come down in Estonia, with other food products set to follow in September and October, said Kaimo Niitaru, head of product selection for supermarket chain Prisma told ERR.

"We can only operate with the prices we're getting ourselves," Niitaru said, reacting to a blog post by Bank of Estonia economist Kaspar Oja where the latter points out that while producer prices are falling in agriculture and the food processing industry, those in supermarkets are staying put.

The Prisma representative admitted that the previous few years' food prices rally has been unprecedented.

"We have seen some signs of the price level coming down in Estonia this year, while most prices still went up over the first six months. I am slightly more optimistic for the second half-year. We are expecting a 20-percent price drop for dairy, and cereals, oils, fresh fish and other goods also set to become cheaper," Niitaru said.

He added that there is no reason to talk about record profits of supermarkets. "All retail chains have made their results public, and everyone's situation has deteriorated instead, with Prisma even making a loss overall last year."

Niitaru said that while dairy buying-in prices have started to come down, which has already been reflected in the end price, the world market price slide will take a while to reach Estonia. "Companies have long-term agreements. It may take until September or October for the new prices to land in supermarkets as they are tied down by long-term supply contracts."

Comparing prices in Estonia and Finland, which is where Prisma is from, Niitaru suggested that staple foods are still cheaper in Estonia than across the gulf. "But we need to consider the fact that the Estonian economy is tiny. It is more susceptible to world market changes. Estonia has also had record inflation and does not have a special VAT rate for food. Starting from January next year, Estonia will have one of the highest VAT rates on food in Europe. The difference with Finland alone will be eight points."

He added that if we keep in mind Poland has laid down an extraordinary 0-percent VAT rate on fresh food, it is hardly any wonder prices in Estonia are the same or even higher than in other parts of Europe.

The Prisma purchasing specialist said that sales volumes have not fallen and all product groups are doing well. Niitaru remarked that the slump in sales volume that started in the second part of 2022 is evening out now.

"Looking at fresh fruit and vegetables, dairy and meat – the slump in volumes has all but disappeared," Niitaru added.


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Editor: Marcus Turovski

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