EU bargaining reforms may strengthen Lithuanian dairy farmers but will not guarantee higher milk prices

Lithuania loses suppliers faster than milk volume

Lithuania’s dairy sector is consolidating as weak farm economics push producers out while larger holdings account for a growing share of supply. According to data from the Agricultural Data Centre cited by 15min.lt, 7,159 producers sold milk in August, down by 1,478, or 17.1%, from a year earlier. The volume purchased declined by only 2.4% over the same period, indicating that production is becoming increasingly concentrated among larger farms.

The average purchase price for natural raw milk was €360.85 per tonne excluding VAT in August. It rose 2% from the previous month but remained 26.4% below the year-earlier level. Farms selling at least 40 tonnes a month received an average of €402.90 per tonne, while their milk represented 67.42% of the national volume purchased. The €42.05-per-tonne gap illustrates the commercial advantage associated with scale.

EU rules strengthen contracts, not guaranteed prices

The EU Council adopted amendments to the Common Market Organisation regulation and related Common Agricultural Policy rules on June 29. The regulation entered into force on August 18, although the principal new requirements for written contracts in the dairy sector will apply from August 19, 2028. Written agreements between farmers and buyers are to become the general rule, with review mechanisms in long-term contracts reflecting changes in markets and production costs.

The measures also strengthen producer organisations and collective bargaining, while allowing prices to be linked more closely to objective indicators of market conditions and input costs. They do not, however, establish a minimum raw-milk price or require buyers to pay every farm at least its individual cost of production. Lithuanian Milk Producers Association president Jonas Vilionis argues that contracts alone cannot correct the imbalance because milk, unlike grain, cannot be stored while a farmer waits for a better offer.

The association said during an April protest that lower purchase prices, combined with higher costs for fuel, fertiliser, feed and energy, had left some farms operating at a loss. It requested €30 million in support, action on agricultural credit and changes to the regulation of relations between milk sellers and buyers. In May, it warned parliamentary groups that even some larger farms were leaving milk production.

Collective selling could narrow the power gap

Member of the European Parliament Paulius Saudargas said a single mandatory production cost would be difficult to set for all Lithuanian farms because costs vary with size, productivity, feed, borrowing and labour. He favours a public sector cost indicator that could be used when prices are established and reviewed. A strict ban on purchases below each farm’s costs could offer stronger protection, he said, but might also prompt processors to reduce volumes or seek milk elsewhere.

Scale-related price differences are unlikely to disappear. Vilionis said larger farms can earn premiums for volume, quality and cooling, while small suppliers may struggle to maintain consistent quality. Pieno centras director Egidijus Simonis said large, stable deliveries reduce collection, transport, testing and administrative costs per tonne and make processing easier to plan. Collective sales through cooperatives or producer organisations could give smaller farms more leverage and processors steadier raw-material flows, but prices would still vary by quality, volume, delivery method, contract and market conditions. Pieno centras estimates that raw milk represents about 70–75% of a finished dairy product’s price, depending on the product; processing, energy, labour, packaging, storage, transport, demand and competition account for the rest. The reforms may therefore improve bargaining discipline, but higher farmgate prices will depend on collective participation and market economics rather than regulation alone.