In recent months a very dangerous trend has been observed with Latvia’s dairy industry. Since September 2021 there has been a clear difference between the highest and lowest milk procurement price for dairy farmers and milk producers, as reported by chairman of the board of Association of Agricultural Statutory Societies Kaspars Melnis.
With reference to the data reported by the Agricultural Data Centre (LDC), Melnis said the milk procurement prices show enormous gaps. For example, in December the gap ranged from 0.2709 to 0.47 cents per 1 litre of milk. In January 2022 this gap continued to increase.
According to Melnis, this snows the income from selling milk may differ by up to 43% between different dairy farms for the same amount of milk sold.
«Of course, the milk procurement price depends on multiple factors, such as quality of milk and volume. This means there will always be a difference between procurement prices. But it has never been this big,» stresses Melnis, adding that in August the milk procurement price amplitude was between 0.2382 to 0.36 cents per 1 litre, creating a difference of 34%.
He outlines also the rapid electricity price increase and the fact that electricity costs may drop thanks to the compensation provided by the state.
Melnis adds that animal feed costs have already increased by approximately 40%. The costs of micro-elements have increased even more. Compared to spring 2021, the price of grains has increased by 50%, which means the cost of self-produced animal feed has increased as well. Fuel prices also have a clear impact.
«This whole situation and rapid price surges in sectors related to agriculture suggest returning to the discussion about reducing VAT for fresh food products like bread, meat, milk and eggs, like it is in multiple other EU member states,» mentions Melnis, adding that in Ireland and Malta, for example, VAT for food is 0 %, and in Germany it is 7%.
«Of course, such a step will not provide any direct support to entrepreneurs, but it will be a major help to our residents. With the rise of services and prices, there is increasing pressure on entrepreneurs to increase wages. It makes sense, seeing as how residents are no longer able to procure the same amount of food products for the wages they were paid two months ago,» says Melnis.
The agricultural sector is also concerned about the prediction that states food prices will continue going up. «This is why government needs to make decisions on long-term mechanisms to support residents and entrepreneurs, because short-term benefits will not be enough to sustain this system for a long time,» stresses Melnis.
Association of Agricultural Statutory Societies coordinates operations of its members in an effort to protect shared interests, promote output of the agricultural sector and competitiveness, as well ass represent the association’s interests in state institutions and cooperate with other organisations whose operations affect the interests of its members. The association unites 46 active members, who provide more than 2 010 together.
Association: Latvian dairy industry is in a difficult state due to procurement prices
