Agrowill Group: milk producers losing price war due to too small farms
Agrowill Group, the largest agricultural company, believes that the paradoxical market situation where Lithuania is leading the European Union in terms of the lowest milk purchase prices as well as nearly the highest milk product prices is determined by the size of Lithuanian dairy farms. “Dairy farms in our country are too small, farmers have not established cooperatives and therefore milk producers do not hold strong positions in negotiations with buyers on milk prices. Secondly, small dairy farms bear quite high farm maintenance costs. Therefore, it is necessary to either enlarge Lithuanian farms or establish cooperatives of milk producers. Otherwise, the price war will be lost and all farmers will still feel like dependants,” Mindaugas Juozaitis, General Manager of Agrowill Group, said.
In his words, quite intensive farm consolidation processes are taking place in European and US agricultural markets, as this is the only way for milk producers to considerably reduce their costs and increase their operational efficiency.
In terms of milk yields per dairy farm, Lithuania ranks third from the bottom among EU member states, just ahead of Romania and Bulgaria.
By consolidating farms and merging into larger cooperatives, foreign milk suppliers strengthen their positions in negotiations with milk processors. In Juozaitis’ opinion, this is why even in the neighbouring EU countries milk purchase prices are not as low as in Lithuania.
“Our legal base and the general state policy do not encourage farmers to unite. There are 55,000 dairy farms in Lithuania. One dairy farm has an average of 3.5 cows. Such a farm has no chance to survive. It can only be dependent on state and EU subsidies. This year, the state allocated another LTL 100 million for supporting dairy farms, but this will not change the situation. Instead of waiting for support from the state, farmers should take actions and take care of their survival themselves,” the head of Agrowill Group believes.
In his words, Agrowill Group that controls one of the largest cow farms is actively implementing a performance improvement programme this year. The results achieved in the first five months include lower farm maintenance costs, reduction of the number of operational staff required to carry out the same works, and a 15% increase in milk yields. This enabled the Group to increase its positive cash flows by some LTL 0.4 million per month.