March 17, 2011
Estonia's rising milk costs put pressure on dairy firms
Rising prices of raw milk and oil are placing pressure on dairy processors, according to managers of major Estonian dairy producers.
The price of raw milk which affects ex-factory prices the most has undergone another jump, said managing director of Valio Eesti Kari Finska. "Raw milk costs around 20% more at present than in August of the previous year when we last decided to change prices of our milk products. But our suppliers want to raise the price of raw milk further in April," he said.
Finska said tension is caused also by the high price of oil which in addition to logistics expenses has a direct impact on the cost of packaging. "The latter too is a considerable expenditure item in the dairy industry," he explained.
Ex-factory prices of dairy companies are established in bilateral talks between the companies and retailers, he said.
The chief executive of Maag Piimatoostus, Valdis Noppel, said that the price of raw milk for dairy producers rose significantly at the beginning of this month. He too observed that in the last few months other input prices such as packaging, fuel and sugar have risen as well.
Noppel likewise stated that ex-factory prices are established in cooperation with trade enterprises.
According to media reports at the beginning of this month, the retail chain Comarket suspended sale of the Tere dairy's plastic bag-packaged milk as the dairy was asking a considerably higher price from it.
Tere announced on Monday it stopped supplying all its products to Comarket stores at the weekend and terminated cooperation with the retailer because of Comarket's violation of contract terms and loss of trust. The dairy stated that the draft of the new contract it offered Comarket did not include changes in the price list.