Milk producers preparing for quotas to go
Milk quotas’ disappearance in 2015 opens Estonia a door to produce even more milk.

OÜ Estonia lehmad.

PHOTO: Mihkel Maripuu

Not long ago, Urmas Varblane, professor of international business in University of Tartu, expressed his hopes in an interview given to Postimees, that Estonia’s milk production might, after the quotas go, be restored to the Soviet time glory days’ level of 1.2 million tonnes a year.

In agricultural ministry’s document «Estonian dairying strategy 2012–2020» the aim is set to increase milk production, from current near 700,000 tonnes, by one third by 2020. Which would mean a million tonnes a year. European Union does away with milk quotas in April, 2015.

The milk producers themselves have either just made their largest investments or are planning to do so in near future. However, they dare not forecast rapid increase of local milk production in post-quota times – having up to now never filled up the current quotas. These past ten years, Estonia has been stable at producing 500,000 to 650,000 tonnes of milk a year; the quota has been filled up to 85-94 per cent.

«Right now, investments are indeed being made to increase production in the future, but in reality, it will not happen so soon,» reckons Margus Muld, chief of Trigon Dairy Farming, commenting on the disappearance of quotas.

As quotas go, milk producers are bracing for considerable drop of crude milk prices. Both Mr Muld and OÜ Estonia’s CEO Ain Aasa forecast that the price will fall from current € 0.32 to €0.25 a kg of crude milk.

OÜ Männiku Piim boss Avo Samarüütel, however, thinks that Estonian market and crude milk price will not be much impacted by discontinuance of quotas, as the number of cows has not grown here for a long time.

The OÜ Voore Farm head Indrek Klammer, appointed for top post in agricultural sector on Friday, said that he was not into foretelling. However, disappearance of quotas would, certainly, put pressure on producers.

«We’ll see who survives and who won’t. Maybe there will be fewer farms, like it was in pig farming,» he said.

While Mr Samarüütel and Mr Klammer said that, having made the major investments, they plan no more increases of dairy herds, Estonia’s top producers Estonia and Trigon do intend to significantly increase production in near future.

The Austrian owned Trigon Dairy Farming plans, according to its CEO Margus Muld, to build a cow house for 2,200 in Väätsa, Järva County, in this year already. Thereby increasing the number of cows there by 400. In Rapla County’s Kaiu LT, belonging to the same group, a 500 cow increase is planned. In Saaremaa, at Kärla agricultural cooperative, 200 dairy cows will be added.

The Estonia farm plans to add a new cow house and increase dairy cow amount from 2,200 to 3,000. The largest investment for them, of late, has been a biogas station working on cow manure, which in past month has produced 560 MWh of electricity – enough to cover farm’s two months’ need.

According Estonia’s chairman Jaanus Marrand, they currently aim mainly at getting the milk production cost as low as possible – to withstand the cost pressure created as the quotas go, and be profitable.

They strive for efficiency by trying to improve the cows’ productivity, use of state of the art technology and cutting labour force.

While, at collective farm times, 1,500 people worked at Estonia to obtain current production volumes, ten times fewer i.e. 150 people now do the job.

More milk may indeed be produced, but domestic milk consumption is currently only half of local production. Thus, more production must equal more export. As crude milk can only be exported to nearby countries, all those involved agree that they will have to concentrate on added value products like yoghurt and cheese.

Valio Eesti CEO  Maido Solovjov says that the industry already has capability to produce more. However, additional export markets will have to be found – and the search is on. The company currently exports its produce to countries like Russia, Latvia, Lithuania, Italy and USA.