Valio cutting producer prices of milk

Farmers’ union says average farm earnings set to decline EUR 20,000 this year

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The dairy cooperative Valio is cutting the producer price that it pays farmers for milk by 4.5 cents per litre from the beginning of July. The cut is the second one this year.
      The total decline this year will have been nine cents a litre. From the beginning of next month, producers will get an average of about 36 cents for a litre of milk delivered to Valio dairies.
      In addition to the producer price, dairy farmers are paid an extra bonus, the size of which is determined later, on the basis of Valio’s net result.
     
According to Eero Isomaa, chairman of the milk committee of the Central Union of Agricultural Producers and Forest Owners (MTK), the cuts mean losses of an average of EUR 20,000 for the average farm.
      The number of farms in Finland has declined with each successive year in Finland: in early June there were 11,600 farms producing milk, with an average of 25 milking cows each.
      Isomaa says that farmers are very concerned about their future. He notes that equipment needed in milk production ties down much capital, and it is not possible to change to other types of farming at short notice to follow market trends.
     
The reasons given by Valio for the cut in producer prices is the sharp growth in cheap imports, which pushes prices down in Finland as well. For instance, the share of imported cheese in Finland has grown to nearly 40 per cent.
      Under pressure from imports, Valio CEO Pekka Laaksonen notes that Finnish milk must increasingly be exported in the form of powdered milk and butter, which is not financially very rewarding.
     
Valio is a company that is owned by the dairy farmers themselves. Laaksonen notes that Valio still pays more for its milk than what farmers get in Sweden and in Central Europe, where producer prices have dropped so far that production is starting to decrease as unprofitable.
      The dairy company Ingman has been importing inexpensive Swedish milk in the form of fresh milk, and not refined into cheese, for instance.
      Milk is cheap in different parts of Europe because of overproduction.
     
Output was increased by the decision by the European Union to raise milk quotas and eventually to eliminate them in 2015. The quotas had previously limited milk production.
      When the decision was made, Isomaa says that the European milk market went out of control.
      Milk producers from around the EU held a demonstration in Luxembourg, where a meeting of EU ministers of agriculture was held. Isomaa says that there were thousands of dairy producers and tractors from all around Europe.
      Finnish producers say that peripheral areas suffer most from the elimination of quotas.
     
Valio is also cutting staff as a result of co-determination talks. A total of 35 employees are being cut from marketing, sales, and sales support. Output at the Tampere dairy will be reduced, and personnel will be cut by 41.


Previously in HS International Edition:
  Finland´s Ingman sells dairies to Swedish-Danish giant Arla (9.11.2006)
  10 million litres of raw milk imported from Sweden per year (19.3.2009)
  Finnish dairy industry threatened by cheap imports from new EU countries (16.3.2005)
  EU ends export subsidies on dairy products (20.6.2007)

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