Milk war brewing: Government at loggerheads with producers over Benna price hike

Government is at loggerheads with Malta Dairy Products after the company raised fresh milk prices by 15c, the second substantial increase this year, MaltaToday has learnt. 

The government, which holds a 30% minority stake in MDP, has made it clear with the Milk Producers’ Cooperative, a farmers’ collective that holds the rest of the company shares, it disagrees with the price hike, senior government sources told MaltaToday. 

The disagreement could lead to the government pulling out of MDP altogether, the sources suggested. 

“The government disagrees with the price increases, which the producers pushed through despite the hefty government subsidies on animal feed and electricity, which have kept costs down,” the sources said. 

On Thursday, MDP announced higher prices for its Benna milk products. A uniform 15c price hike was applied on its full fat milk (dark blue carton), the popular 2.5% fat light blue carton, skimmed milk and lactose free milk (orange carton). 

The popular 2.5% fat one-litre milk carton has seen its price increase by 22% since May

The price increase is the second this year for Benna fresh milk products. In May a similar hefty price hike came into force. 

Over the span of seven months, despite the subsidies on animal feed, electricity and fuel, the price of the light blue milk carton increased by 22%, while that of fresh skimmed milk shot up by 25%.

Unjustified price hike

“The price hike is not justified in light of the subsidies and government has told milk producers it is unfair for people to pay for their inefficiencies,” the sources said. 

The higher prices for fresh milk, a staple product, will contribute to the inflationary pressure households have been dealing with for the past two years although consumers have other imported long-life milk alternatives that can be substantially cheaper. 

When contacted, Malta Dairy Products stood by the latest decision to raise the price of fresh milk. 

A company spokesperson explained that production and operational costs have increased, despite heavy government subsidies on animal feeds and electricity. 

“Even with subsidies on certain inputs like specific animal feeds and electricity, the broader cost structure, including labour, transportation, and compliance-related expenses, has continued to rise. The previous pricing strategy, while reflecting our commitment to affordability, was not sustainable in the face of persistent and escalating challenges,” the spokesperson said.

Prices not reflecting dairy costs

MDP explained that previous price adjustments were insufficient to fully offset increasing dairy production costs. “In fact, the prices were not accurately reflecting the economic reality faced by our company,” the spokesperson said.  

“Despite facing higher input costs over time, the company chose to absorb a considerable portion of these costs with the hope that the situation would improve in the future. This approach was undertaken to minimize the immediate impact on consumers and maintain a level of stability in pricing.” 

“However, as the economic landscape evolved and the challenges persisted, it became evident that a more substantial adjustment was necessary to ensure the sustainability of our operations. The decision to increase prices is not taken lightly, and it is a response to the ongoing financial strain that the company has been shouldering.” 

MDP insisted that it is committed to the quality of its milk. “Achieving this standard requires the use of the best feeds and ingredients in our products.  Ensuring the well-being of our livestock, maintaining the highest nutritional standards, and adhering to rigorous quality control measures are non-negotiable aspects of our production process,” a spokesperson said.  

“We understand that quality is paramount to our consumers, and the recent price adjustment is essential to uphold our commitment to delivering top-notch dairy products. We appreciate the understanding of our consumers during these challenging times and assure them that, despite the price adjustment, we will continue to invest in maintaining the exceptional quality that they have come to expect from our brand.”