Giant farms and couple-of-cow hobby farmers to survive price drop due to Russian food embargo.
Milk price plunges ten years back
2nd September 2014, 13:05
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The day before yesterday, Valio dairy industry paid close to 33 cents for a litre of milk. Since yesterday, the figure stands at 26. «I do hope this is the bottom and that, for the months ahead, the market will at least stabilise,» said Valio Eesti CEO Maido Solovjov. «As soon as market does the upward turn, we stand ready to rise the buying-in prices.»
Exceeding the direct impact of Russian restrictions, global overproduction has suddenly hit, excluding successful imports into China for instance. «Even if Russian market were still open for us, the prices would still be down right now,» noted Mr Solovjov.
A sudden fall of the base product price was also admitted by Estover which paid 32 cents for a kilogram of milk this summer, now down at 25 cents. «A large part of the milk which used to go to Russia is now processed into milk powder and butter,» said CEO of Estover, Hannes Prits.
«I may confirm that the crude milk price drop has already reached the Estonian consumer; the traditional half-kilogram cheese is considerably cheaper in the retail chains at the moment.»
Meanwhile, the large farms are scrambling to increase their production capacity, seeing the situation caused by the embargo as their chance to grab market share.
«In the Baltic milk market, the Russian embargo accelerated the processes which were underway anyway: due to efficiency, the modern large farms keep growing bigger, and the small farms drop out of the game,» said risk investor Joakim Helenius whose investment firm Trigon Agri is opening a 2,000 cow farm in Väätsa, at the end of September.
«As the big producers offer the processors better quality and more convenient logistics, dairying carries a different price logic: the larger the amount you sell, the better the price you’re paid.»
Therefore, price of milk is greatly fluctuating on the Estonian market right now and a small producer may get 19 cents a kilogram, while the big one gets 30 cents.
Swimming against the stream, Uno Kaur, keeping four cows at his Pratto farm in Võru County, intends to raise his milk price from current 50 cents to 60. «If, in Maxima, they sell milk at 60 cents, why should I give it away cheaper,» reasoned Mr Kaur. «The folks at the villages buy from me because, as opposed to the milk in the stores, mine ferments properly.»
Formerly a professional small cow farmer, Mr Kaur admits he is now a pensioner and keeps the cows to draw agricultural benefits. «While a couple of years ago they used to pay me 25–28 cents per kilo, that wasn’t much for anything – the buildings are falling apart,» added Mr Kaur.