ERR reported (link in Estonian) Wednesday that butter prices in Latvia have dropped sharply, with Latvian Radio saying a pack of butter can now be bought for as little as 99 cents in some stores. So far, this change hasn't been reflected on store shelves in Estonia.

Kertu Kärk, head of communications at Prisma Peremarket, told ERR that the supermarket chain has only lowered the price of Lithuanian butter, which has proven to be very popular among customers.

"Over the past month, this product has accounted for as much as 37 percent of all individual butter sales," Kärk noted.

Valio Estonia CEO Maido Solovjov acknowledged that Lithuanian producers were quicker to lower prices than Estonian dairies, but said local price cuts are also on the way.

"The price of butter on the global market has fallen and that drop is gradually reaching stores," he confirmed.

Solovjov added that the current €12–14 per kilogram price tag for butter will soon be a thing of the past. Valio expects its price to fall to between €7 and €8 per kilogram starting in February. Cheese prices have also dropped rapidly on the global market and according to the Valio Estonia chief, Estonian consumers can expect to see very favorable prices soon.

Prisma's communications manager noted that customers remain highly price-sensitive and closely watch per-kilogram prices and special offers in the butter category.

"At the same time, there is also a certain segment of customers who insist on buying only Estonian-made products. Overall, butter sales have seen a slight decline lately," Kärk said.

According to Solovjov, the upcoming price drop doesn't necessarily mean butter sales will start to rise. He explained that when people feel there's no shortage, they buy only what they can consume. But if there's a sense of scarcity, consumers tend to clear out shelves to stock up their refrigerators.

Solovjov said it's difficult to predict how long the lower butter and cheese prices will last, as they depend on global market trends. However, he added that no price inflation is expected in the dairy category this year; rather, a slight deflation is likely over the course of 2026.

Sharp price drop worries producers

Ants Hannes Viira, head of agricultural policy at the Estonian Chamber of Agriculture and Commerce, said on the "Uudis+" radio program that butter prices on the international market began falling sharply last August. Compared to the same time last year, butter on the German exchange now costs 42 percent less. Gouda cheese is down 31 percent and skim milk powder has dropped by 18 percent.

"This price decline has indeed been quite steep in recent months," Viira confirmed.

Compared with the previous decade, dairy product prices in recent years have remained at very favorable levels. At the same time, dairy production has increased in major producing regions such as New Zealand, the United States and the European Union, which has in turn driven up global supply.

"Since demand at these price levels hasn't kept pace with the increase in supply, we're now in a situation where, figuratively speaking, warehouses are full and prices are falling. The drop is expected to slightly boost consumption, reduce production somewhat and help bring the market back into balance," Viira explained.

Asked why butter produced in Latvia, Lithuania or Poland often costs less in stores than local Estonian butter — even when the imported butter may be made from milk sourced in Estonia — Viira said that when stocks are full and lowering prices at home would trigger widespread price declines, dairies in neighboring countries may find it more strategic to sell their surpluses cheaply abroad.

"This doesn't affect prices in their own domestic markets but creates competitive pressure in neighboring countries, which on one hand helps them gain market share and, on the other, puts pressure on competitors elsewhere," Viira said, offering one possible explanation.

According to Viira, the sharp price drop is a source of concern for dairy producers. He noted that while the price of milk held steady at €500 per ton throughout last year, it has now fallen by 20–30 percent or more — an enormous drop that for many brings the price below the cost of production.

Still, Viira stressed the importance of understanding that the market will eventually stabilize and that Estonia must work to maintain its dairy herd through this downturn, rather than assume the current situation signals a permanent collapse of the dairy sector.

"That's why it's crucial right now to offer dairy producers support measures that can help them weather this market crisis. In the longer term, Estonia has very strong potential to increase dairy production, develop the sector and move toward producing higher-value dairy products," Viira said.

--

Follow ERR News on Facebook and X and never miss an update!