Dairy Price Hikes Spark Discussion on Industry Structure Skip to content
Photo: Golli.

Dairy Price Hikes Spark Discussion on Industry Structure

The price of dairy products has risen 16% over the past year, well above inflation rates. At the same time, Auðhumla, the parent company of MS Iceland Dairies, which buys almost 100% of all milk produced in Iceland, reported record profits last year and an increase of ISK 4 billion [$29 million, €26.5 million] in operational profits between years. The CEO of MS Iceland Dairies told RÚV production costs have also risen and there is little real profit in the industry.

In Focus: Iceland’s Dairy Industry

Dairy consumption in Iceland is 60% higher than the European average, according to figures from MS Iceland Dairies. With inflation and rising food prices across the board, the increase in the cost of dairy products is felt strongly by local consumers.

The CEO of MS Iceland Dairies, Pálmi Vilhjálmsson, says that the company’s operational surplus is less than 1% of the company’s gross income. He stated that profits were small in the industry and that equipment costs were high relative to the production of other food products, and that rising prices of grain, fertiliser, electricity, and oil affected dairy prices.

Rafn Bergsson of the Icelandic Farmers Association says cow farmers have absorbed many of these rising costs and that further price hikes would be needed to improve their income and working conditions. Dairy prices are set by a government committee, and Minister of Food, Agriculture, and Fisheries Svandís Svavarsdóttir says there is reason to review that system, which may be out of date. “If neither consumers nor farmers benefit from the arrangement, where does the profit lie?” Svandís stated. She called on intermediaries to take responsibility for the situation instead of taking advantage of monopolies to raise prices for consumers.

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