Farmers and government agree on new milk pricing model in Norway

As part of the agricultural agreement this spring, farmers and the government reached an agreement on a new pricing model for milk. According to Beate Berrefjord, head of the food, trade, and health department at the Norwegian Competition Authority, this model could significantly impact dairy product prices in the long run.

Previously, farmers and the government had agreed on a target price for milk, which effectively operated as a maximum price, shielding consumers from sharp price increases. However, the government is now shifting to a volume pricing model where Tine, the dominant dairy supplier with a 93% market share, will set milk prices twice a year. Tine’s pricing will affect not only its own milk but also that of other dairies for producing products like yogurt, cheese, and sour cream.

The Competition Authority raised concerns that this change might allow Tine to increase prices based on its market interests, potentially disadvantaging its competitors. In Norway, agricultural raw material prices are set differently compared to other countries, where they are often linked to international commodity exchanges.

The Ministry of Agriculture insists that Tine’s pricing will not alter costs for farmers, industries, or consumers. Despite these assurances, uncertainty prevails regarding the support the government can provide to agriculture while adhering to World Trade Organization (WTO) commitments. Consequently, the government has asked Tine to assume responsibility for milk pricing changes.

Gunnar Dalen, Tine’s director for business policy, acknowledged that they are approaching the new model with an open mind and are seeking input from various stakeholders before it is implemented in April next year. The model aims to benefit farmers, the industry, and consumers while remaining competition-neutral. Tine will consider multiple factors, including farmers’ costs and international milk prices, in determining future prices.