Why do Interfood and A-ware see opportunities in Estonia?

Latvia, Lithuania and Estonia are seeing their dairy farms continue to scale up. Since the fall of the Soviet Union, which included the three countries along the Baltic Sea, many small family businesses have been set up. These have been able to develop further after the three Baltic states joined the European Union in 3. The hectare premium from the Common Agricultural Policy (CAP) was useful for the development of the companies. 

17 years later, these Baltic dairy farms have grown into dairy giants, many of which rival dairy farms in the United States in size. There are currently many farms with more than 1.000 dairy cows and this trend does not seem to be stopping. Cheap agricultural land, government support and foreign investors make it easier for companies to expand.

A quarter of the milk is exported
Milk production in the Baltic States together amounted to 2020 tons in 2.939.000. For comparison: the Netherlands produces that in just 3 months. Most milk production is in Lithuania. The 3 countries export approximately 25% of the milk produced. In 2015, the countries suffered a setback due to the Russian sanctions imposed. Estonia was particularly affected and saw a drop in exports of 17% compared to 2014.

The milk price in the Baltic States is one of the lowest in Europe. Lithuania has the lowest milk price here at €26,16 per 100 kg of milk based on 3,9% fat and 3,4% protein. Fortunately, the costs are also low for dairy farmers. This is mainly due to the cheap land prices. The low investment threshold and government support ensures that foreign investors see opportunities in the 3 countries.

A-ware sees an opportunity and invests
Royal A-ware and Interfood are working together with the Estonian SCE E-Piim to set up a modern dairy factory in Estonia. SCE E-Piim is one of the largest dairy cooperatives in Estonia and Latvia. This improves the capacity of the dairy industry and gives dairy farmers room to develop further. A-ware and Interfood have a 24,99% share in the Estonian SCE E-Piim through a joint venture called Meierei BV.

A spokesperson for A-ware says that the construction of the factory represents a long-term collaboration. A lot of cheddar cheese is produced in the United Kingdom and Brexit has created space on the European market. A-ware is responding to this by purchasing cheddar from the new dairy factory. This allows A-ware to improve its market position. A representative of Meierei indicated at the announcement that the new dairy factory gives the sector a development leap of 30 years. A specific goal of the new factory is to process the milk climate-neutrally and sustainably. 

Expectations
Dairy farming in the Baltic States appears to be continuing the trend of the past 20 years. The government has been supporting dairy farming for years to ensure continued growth for an efficient sector. Larger individual farms and more milk per cow. The countries want to produce milk efficiently and reduce costs.