Lithuania at the crossroads
Dairy products from different brands for sale at a Vilnius supermarket. Credit: Egidijus Balandis
The Lithuanian dairy industry has seen its share of highs and lows in recent years, culminating this year in a rash of dairy farmer protests, rising energy costs, inflation, farm closures, and rock bottom prices for raw milk. During the first half of 2022, export sales grew according to Lithuanian dairy producer organisation Pieno Centras (1), as dairy product prices rose and demand remained high, boosting production and Lithuanian farm milk sales. With the Russian invasion of Ukraine causing economic uncertainty in the region, exports fell sharply in the first half of 2022, with international dairy prices falling sharply, so that in the 11 months of January to November 2022, Lithuanian dairy exports actually dropped by 3.6% to 343,600 tonnes, compared to the same period in 2021 according to Pieno Centras.
Extra-EU exports fell faster than intra-EU export sales, with Lithuanian exports to China across the board dropping by 91% by the beginning of 2022 after the November 2021 decision to allow Taiwan to open a de facto embassy in Lithuania’s capital, Vilnius. This prompted China to ban Lithuanian dairy, beer, and beef exports in February. The decision was made based on phytosanitary arguments from China, but no justification was ever provided. The European Union has said these bans were not justified. However, given dairy products exported from Lithuania to China in 2021 were worth €4.2 million, according to UN international trade data and data service Trading Economics (2), compared to the total Lithuanian dairy export sale (as per figures from EU statistical service Eurostat) for 2022 of €1.02 billion, sellers generally found other markets – largely within the EU, which accounts for the vast majority of Lithuanian dairy exports.
The World Trade Organisation (WTO) has started disputes proceedings, prompted by the EU, to adjudicate over whether China’s action breaches global trade rules. But even if the WTO rules against China, any appeal may not be heard because the US is blocking appointments to the WTO disputes appellate body, which would enable it to operate. (3)
With milk prices falling to €0.25/litre, February 2023 saw weeks of protests from Lithuanian milk producers, calling for processors to pay more for raw milk, which farmers say is being produced at a loss. Indeed, some Lithuanian farmers gave away their milk, to anyone with a container, or spilled milk on the ground. (4)
“The beginning of this year was worrying because the milk crisis started. Farmers, who paid high prices for fertilisers last year and now are facing falling grain prices, are anxiously waiting for the autumn. We are also monitoring the situation. The milk crisis is, unfortunately, the result of decisions not taken earlier,” a Lithuanian agriculture ministry spokesperson told Dairy Industries International. The protests have sparked action by agriculture minister Kęstutis Navickas, whose resignation has been sought by demonstrators. As a result, the ministry has proposed amendments to the Lithuanian Milk Law (5). The changes include allowing raw milk sellers to form bargaining groups negotiating raw milk sales terms with buyers, (6) helping milk sellers hit by price declines.
The ministry also requested emergency support from the European Commission of €18.6 million per quarter until prices were stabilised, although the EU executive rejected this bid, saying it did not view the situation as a significant market imbalance, citing previous years’ growth in milk prices. However, farmers remain unhappy, saying the cost of processed dairy products have risen without being reflected in raw milk prices, leaving producers unable to afford rising energy costs.
“There is also the possibility for national state aid under the EU temporary crisis framework. Lithuanian schemes to support companies suffering from the consequences of Russia’s aggression have been approved under the framework,” European milk trading association Eucolait secretary general Jukka Likitalo told Dairy Industries International, but it is unclear how much is allocated specifically to the dairy sector.
Astrida Miceikienė, chancellor of the Agriculture Academy at Vytautas Magnus University, Kaunas, says national government support was on its way, with nine out of 10 Lithuanian milk producers able to receive a part of €8 million in new price supports, and 10,615 farms eligible. The payments will be made to farmers earning under €0.35/litre of milk.
Arūnas Uleckas, chairman of the Litamilk Group of dairy producers, told DII he was positive about the 2024 outlook, saying, “It should be noted that there are still a lot of small dairy farms and the collection of raw milk is increasing significantly.”
The current price of milk in Lithuanian grocery stores is about €1-1.50 per litre, while butter can range from €8-17/kg and Lithuania-made cheese from €8-20/kg. Even shop prices for finished milk have been rising. In February 2023, the Lithuanian Agricultural Data Centre reported that prices increased by 25% year-on-year (7). Of this revenue, processors took 14.7% and milk producers’ share decreased 10.2%, according to the Lithuanian Agricultural and Food Market Information System.
Growing exports
Looking at how Lithuania’s dairy export sector breaks down, Eurostat data for 2022 exports shows milk and cream amounted to 177,655 tonnes, while butter made up 3,674 tonnes, buttermilk/kefir/yogurt added up to 10,004 tonnes, and whey was 61,639 tonnes; plus, cheese and curd totalled 55,981 tonnes. According to the State Food and Veterinary Service, exports of Lithuanian dairy products outside the EU included 25,000 tonnes of Lithuanian cheese in 2022, such as Džiugas hard and grated cheese; Memel blue cheese, Goya, and Montecampo hard cheeses. Also, 2,000 tonnes of butter were exported outside the EU, and 12,000 tonnes of cheese products, with additives or emulsifiers/preservatives. (8)
Key non-EU export markets are currently Saudi Arabia, Vietnam, Israel, Malaysia and Morocco, according to the Lithuanian State Food and Veterinary Service (9).
Companies large and small
Rokiškio Suris is the largest Lithuanian dairy processor and the largest cheese producer in the Baltic states. It a key exporter, exporting about 70% of its fermented cheeses, whey products and skimmed milk powder. The company processes more than 500,000 tonnes of milk in three dairies in the towns of Rokiškis, Utena and Ukmergė, and the company produced 35,000 tonnes of cheese in 2022. Company earnings totalled €5.7 million in the first half of 2022, with consolidated group sales of €168.2 million.
Outside the EU, the company last year succeeded in the Middle East market, with butter sales to the region rising sharply in 2022, shifting from an earlier focus on cream exports, due to a lower price of cream per unit of milkfat.
Italy has been another lucrative market for Rokiškio Suris’ production, with a 98.1% increase in exports to Italy during the first half of 2022, year-on-year. This should make up for a 47% decrease in sales in the US in the first half of 2022, as the US was not willing to pay the same prices for cheese as EU buyers.
CEO Dalius Trumpa is looking for new markets, specifically in the Balkans and the Middle East. “The competition is freer there, and not as brutal as Germany or France,” Trumpa told the Baltic News Service newswire in February.
Another player is the Vilvi Group, made up of AB Vilkyškių pieninė, AB Modest, AB Kelmės Pienė, UAB Kelmės Pienas, AB Pieno Logistika and the SIA Baltic Dairy Board, selling yogurt, whey and cheese, and processing 800 tonnes of milk per day. In April 2023, the company’s chairman and general director Gintaras Bertašius, announced that the group had acquired the remaining 30% of outstanding shares of Latvia’s SIA Baltic Dairy Board, in which it had already enjoyed a 70% controlling share. The Latvian producer makes high added-value milk ingredient products, such as protein concentrate powder, and galacto-oligosaccharide (GOS) syrup/powder.
Vilvi’s economics and finance director Vilija Milaševičiutė, reported that the group’s consolidated sales revenue in 2022 were €234.1 million, up 50% on 2021, with net profits of €12.7 million. However, consolidated sales revenues for March 2023 were €16.8 million, or 5.4% lower than in March 2022. A 2022 Vilvi report said that a major problem in the Lithuanian production chain is the prevalence of small farms of five to six cows per farm. The report estimated that about 19.7% of the small farms would cease operations between 2022 and 2027.
The country needs this raw milk flow to feed a dairy industry that has been delivering sales on classic products, such as glazed curd snacks, and Kastinys, a mixture of sour cream and butter. It will also aid smaller companies that are making unique local lines. Sūrio Džiazas, from the Jurbarka region, is making a name with its line of aged, fermented cheeses. This includes additives such as maple wood ash, fenugreek and coriander. The company is also selling milk, buttermilk, yogurt, cottage cheese and butter.
A Lithuanian ice cream company, Dadu, meanwhile, has received an investment of €3.2 million from parent company Vikonda Group to increase its production capacity by 50%. The first stage is complete, with the second is due to be completed in 2024. Improvements include new technology that allows for including ingredients up to 25mm in diameter, such as whole nuts, cookie fragments and berries.
References
2. com/lithuania/exports/china/dairy-products-eggs-honey-edible-product
3. wto.org/english/news_e/news22_e/ds610rfc_31jan22_e.htm
4. lrt.lt/en/news-in-english/19/1915982/lithuanian-farmers-give-away-milk-in-protest-of-low-rates
5.lithuania.postsen.com/trends/89797/The-draft-law-on-milk-is-on-the-negotiation-table.htm
7. lt/2022-m-kovo-men-lietuvos-pieno-rinka
8. lt/naujienos/lithuanian-food-export-gains-back-its-previous-volumes?language=en differentiates between cheese and cheese products, which may have
9. lt/naujienos/lithuanian-food-export-gains-back-its-previous-volumes?language=en
