Latvian government suggested to decide on long-term contracts in dairy sector

The government [in Latvia] should decide on long-term contracts in the dairy sector in order to avoid crises in the future caused by price drops, said Minister of Agriculture Didzis Šmits in an interview to Latvijas Radio.
«The government will need to act on its own,» said Šmits, adding that since the year 2013 the European Commission has given member states the rights to set on a national level mandatory requirements for long-term contracts, including requirements for terms and requirements that govern formation of prices.
At the same time, Šmits mentioned both milk processing businesses and milk producers have categorically opposed this solution. Instead they picked variable prices to earn more when prices are high.

«If we drop long-term contracts, it is wrong to come ask for additional funding time and time again [when prices go up],» stressed the minister.

The minister also said he has no intention of requesting any emergency funding from the state budget, because nearly all sectors are in the ‘price mountains’ at the moment, including the forestry and construction sectors.
«The war in Ukraine has created instability. This caused prices to reach their peaks at one point, but now these prices are going down. Many have produced products at very high prices, but now they can’t sell them. There is overproduction. Fortunately, this situation will balance itself out,» said Šmits.
At the same time, he said it is not possible to say if the price drop in the dairy sector is a one, two or three-month issue.
«If it’s a one or two-month issue, we can deal with it. Such situations appear in agriculture once every five years. If this crisis lasts for a long time, we will have to work to make sure we have enough dairy resources for milk processing and export. Then we will see emergency decisions,» said the minister, adding that the price drop lasts two weeks and two days. Last year the milk price in Latvia had reached its all-time peak.
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