IS THE PRICE of fresh milk too high in Cyprus? Newspapers and radio stations seem to think so and in the last few days they have been carrying reports about profiteering by dairy farmers, dairy companies and shops, as they complain that we pay the highest price in Europe for milk. Is this really an issue or has the problem been created by journalists during the slow season for news?
To be fair, it is not the first time complaints about the price of milk have made the news. This is an ongoing issue which had prompted Commerce Minister Antonis Paschalides to write to the European Commission requesting approval to set a plafond (maximum price) on the price of bread and milk. The Commission has not responded, but the ministry hopes it will secure approval once it forwards the findings of an investigation by the Commission for the Protection of Competition, which supposedly supports official claims that there was no competition.
There have been claims of price collusion between the two milk companies which reportedly sell a litre of milk at exactly the same price. There could also be collusion among the cow farmers who sell milk to the companies at the same, high price. But cow farmers, point out that the price they charge to companies for a litre of milk (between 51 and 54 cents) is high because, unlike most European countries, Cyprus has no grass pastures for cows to graze on and fodder has to be bought.
The main supplier of the grain bought by farmers is the state, which enjoys a monopoly. If there is no real competition in the fresh milk market, the state also has a share of responsibility as it dictates the price of grain. If there was competition in the supply of grain, perhaps fresh milk prices would come down, even though this is far from certain – for too many cow farmers have been accustomed to selling their milk at exactly the same price, via the monopolist, Milk Marketing Board.
Milk companies can claim they sell at exactly the same price because they buy the milk at a fixed price from the farmers. Ironically, the only competition is among retailers, with supermarkets selling a litre for €1 and bakeries and kiosks for as much as €1.30. Funnily enough, according to the commerce ministry, 70 per cent of milk is bought from bakeries, which charge a higher price per litre. This would suggest that consumers are not half as bothered as journalists and the commerce minister about paying a high price for a litre of fresh milk.
As for the lack of competition, it is inevitable after four decades of state-sponsored protectionism, collusion and price-fixing.
