‘Milk price ceiling will backfire on shoppers’

MANUFACTURERS and consumer advocacy groups were yesterday seething at the commerce minister’s decision to press forward with a price ceiling on milk, warning that the move would backfire on shoppers.
The cap – both on wholesale and retail prices – is likely to be announced today and if so would be published in the government gazette the following day and thus take immediate effect.
An announcement had been expected yesterday, but the decision was apparently deferred.
But industry sources told the Mail the caps would be €1.41 for retail and €1.32 for wholesale – significantly higher than what milk currently goes for at points of sale.
Speaking to newsmen, Commerce Minister Neoclis Sylikiotis said he would exercise his powers in ordering a price ceiling for 45 days in order to protect consumers.
“Our intervention is intended to keep prices at bay, protecting consumers first and foremost, and I think that over the next 45 days there is ample time for all concerned to have second thoughts,” Sylikiotis told newsmen.
This followed a move by the cattle farmers who raised raw milk prices by four cents a litre from January 1, announcing also an additional increase of 1.8 cents as of April 1 to cope with the rising costs of animal feed.
In turn, pasteurisers said they would need to crank up the price of wholesale milk by nine cents per litre.
The minister’s stance appeared to be slanted in favour of the producers. He said a nine cents hike on the part of the manufacturers would be “completely unjustified” in the event the farmers went ahead with their four cents increase.
But whereas he suggested that the pasteurisers should absorb most of the extra cost, he did not imply the same for the farmers.
“Who has the more clout? The farmers or the manufacturers? From my own experience with such negotiations, these decisions are more about politics and less about the technical details,” said one dairy products manufacturer who preferred not to be named.
The minister and the pasteurisers did not see eye to eye during a meeting held later in the day, with the businessmen insisting they could not absorb the extra cost and would have to pass it on.
“We disagree with the whole concept of a price ceiling,” head of the milk pasteurisers’ association Marios Kampanellas told the Mail.
Moreover the pasteurisers threatened that, should cattle farmers insist on the four cents hike and refuse to negotiate a new price, they might stop processing milk and halt operations until the matter clears up.
Even with a nine cents increase, Kampanellas said, their profit margin would be less than one cent per litre.
Milk prices in Cyprus are already among the highest in the EU.
The Pancyprian Cattle Farmers’ Organisation (POA) counters that in recent years they have maintained their sale prices fairly stable (around 48 cents per litre), but despite that milk on store shelves went from €1.28 in 2008 to €1.40 in 2011.
POA is a collective of the individual cattle farmers organised as a limited liability company. It represents about 90 per cent of milk production on the island.
Loukas Aristodemou, head of the Cyprus Consumers & Quality of Life Union, said he could not figure out the logic behind the price cap.
Currently a litre of semi-skimmed milk goes from €1.16 to €1.32 at supermarkets, although bakeries and kiosks are far more expensive, selling for as much as €1.40.
“So the minister’s ceiling is even higher than that,” Aristodemou said.
Over the past couple of days his group has been receiving several complaints from people across the country reporting soaring milk prices at stores.
“It’s going to boomerang on consumers, because with a price cap, retailers are thinking: ‘heck, why not sell at the maximum permissible price’?”
He also questioned whether the ministry had the resources to adequately enforce the price ceiling, citing the shortage of manpower.
One Nicosia kiosk was yesterday selling a litre of milk for €1.50. The owner said that, previously he had bought fresh milk from suppliers for €1.26 and was selling at €1.40. Now, to maintain his profit margin, he had to go up to €1.50.