Kirkilas demands bureaucrats get to bottom of capricious milk market

  • 2008-05-01
  • Staff and wire reports

For free: There is one way to get a good price for milk

VILNIUS - Prime Minister Gediminas Kirkilas has asked the Agriculture Ministry and the Competition Council to probe irregularities in the dairy market and to recommend measures to stabilize the topsy-turvy prices for milk.
The order came just days after Transport Minister Algirdas Butkevicius said he had asked competition authorities to look into suspicions that dairy companies had reached a cartel agreement to reduce milk purchase prices, which have fallen dramatically in recent weeks.

Butkevicius said that farmers in Vilkaviskis, in southern Lithuania, had told him about the sudden drop in prices in the purchase price for milk.

In fact, Bronius Markauskas, chairman of an agricultural association, said on April 23 that dairy farmers were so appalled by the situation that they were going to give milk away for free outside large shopping centers.
"We want society to know what's going on," said Markauskas, adding that farmers get 0.75 litas per liter of milk, and stores sell one liter for 3 litas. "We know this won't change anything, but we just want society to support us."

Milk purchase prices fell sharply in March and April, while retail dairy product prices remained stable or even increased, according to the farmers.

Dairy farmers who sell 10 and more tons of milk daily saw the milk purchase price drop to 0.80 litas (0.23 euro) per liter from 1.02 litas. For those who sell 1.0 's 1.5 tons of milk, the price dropped to 0.78 from 0.95 litas. Smaller farmers who are not members of cooperatives received only 0.60 litas, Butkevicius explained.
The news follows a series of penalties imposed by the competition council on several dairy companies for what were ruled to be illicit exchanges of information.

 Some 2.2 million litas in fines were handed out, and a shadow of doubt was cast over milk processing companies. Official data shows that milk prices are behaving oddly, even in a time of rising global food prices. In March, the purchase price of fresh milk 's the price at which dairies buy from farmers 's declined 9.4 percent versus February.

Compared with March 2007, however, the price was up a staggering 33 percent, the Agriculture Ministry reported. In the first quarter, the average price was 1,087.9 litas per ton, up 43.2 percent year-on-year.
The trend is being mirrored in Latvia, where prices started falling recently. Ieva Jaunzeme, chairman of Latvia's Competition Council, explained the decline was a result of global trends since half of the milk purchased in Latvia is for export 's particularly for Lithuania.

In March 2007 the purchasing price on milk was 0.16 lat (0.22 euro) per liter, while in March this year it was 0.21 lats per liter, or the same as in November 2007.

Over the first quarter the average price rose 63.38 lats, or 40 percent, to 232.6 lats per ton year-on-year.
Latvia's milk product prices, in fact, have reached West European level, the daily Latvijas Avize wrote in a recent report. The paper said that food prices in Latvia are higher than in other East European countries and that milk, cheese and butter are even more expensive than in old EU member states.

Region-wise, Lithuanians and Estonians pay slightly more than 0.50 lat (0.71 euro) per liter of milk, while Latvians pay 0.60 lat -- 20 percent more -- Latvijas Avize wrote. For butter and cheese the difference is even larger.

Critics have said that fluctuations of 0.03 's 0.04 lat reflect instability and that the situation needs to be rectified. Jaunzeme said that the industry is split, and milk producers should cooperate more since most farms have an average five cows.

Milk producers say they need a minimum of 0.24 lat per liter to cover costs and develop the business.
Meanwhile, Lithuanian dairies say they're bracing for financial losses this year.
"I am sure that not a single company was able to post a profit last quarter," Julius Kvaraciejus, chairman of Pieno Zvaigzdes, told the Verslo Zinios daily.

"There are no miracles in the economy 's we purchase raw milk at similar prices, we produce similar products using similar technologies, and we are selling them in the same area," he said.