Surfing on the sea of milk

By July the production price of milk had dropped nearly 10 percent, but August brought a 2-percent increase. According to the Agricultural Economics Research Institute (AKI), milk’s export price was HUF 96.05/kg, 12 percent more than in June but 6 percent less than a year ago; this price was 6 percent higher than the production price. At the moment milk is bought from farmers for about HUF 95/kg in Hungary – this price hardly covers the production costs.

How will the milk market develop? The European Commission forecasts demand for milk will only grow by 0.5 percent in the Hungarian market. Another question is the effect of the VAT cut. The Central Bank of Hungary (MNB) calculates that at annual level HUF 22 billion will stay in the pockets of producers and consumers. Some say that in the case of milk the VAT cut will entail a lower import level and milk being purchased from farmers for about HUF 100/kg. However, dairy farmers say high-quality milk could be produced profitably in Hungary if it was purchased from them for HUF 110/kg.