Farmers link Estonia's bagged milk shortage to rising demand for raw milk
Agricultural industry representatives say disruptions in supplies of plastic-bag milk in Estonia stem from stronger competition for raw milk, not just a change in cattle feed. Cheap bagged milk has become less profitable for processors.
Supplies of milk sold in plastic bags have been disrupted in Estonian shops. Representatives of the agricultural sector stress that the cause is not only reduced output at individual companies: competition for raw milk has intensified, and producing cheap bagged milk is becoming less profitable for processors.
What happened
In early November, the retail chain Rimi ran short of bagged milk. Maido Soloviev, chairman of the board of dairy processor Valio, then attributed the situation to reduced production at its competitor Maag Food. The company itself linked this to lower purchases of raw milk from farmers after they switched to feed from the new harvest.
Rimi has now told the Estonian public broadcaster's programme "Aktuaalne kaamera" that the maker of milk sold under the Smart brand warned the chain about supply difficulties roughly two weeks ago. The temporary reason given was cows moving onto new feed. The supplier, Maag Foods, declined to comment.
The industry's explanation
Agricultural representatives consider the feed explanation incorrect. Lenno Link, head of Väätsa Agro, said raw milk production in Estonia is stable and not markedly seasonal. According to him, demand for milk is growing, and production volumes are rising with it. About half of Estonian dairy output is exported, including to Latvia and Lithuania. Processors are also increasingly using milk to make protein concentrates, whose prices in the summer were five to six times higher than three to four years ago.
Ants-Hannes Viira, head of a department at the Estonian Chamber of Agriculture and Commerce, likewise points to stiffer competition for raw milk. Companies are now signing contracts for next year: farmers are seeking better terms, while processors try to secure enough raw material. In Viira's assessment, producers may in this situation first cut output of the least profitable products. Bagged milk costs under one euro per litre, and retail chains often sell it below cost. The chamber considers such price promotions unfair to producers.
Outlook
Valio's Soloviev does not expect bagged milk to vanish from the market: about 100 tonnes of it are consumed in Estonia every day. Rimi expects to resume deliveries of Smart milk next week.
