The Latvian dairy sector is facing a severe crisis due to low milk prices, high production costs, and shortage of feed, according to industry representatives and farmers. Some companies are considering closing down entirely, while others are asking for urgent state support to survive.
The average procurement price of fresh milk in Latvia has dropped from 0.307 EUR/l in March to 0.252 EUR/l in May, showing a decline of 18%. However, the production costs have increased to 0.40 EUR/l, mainly due to the rising prices of gas, electricity, and mixed fodder. The drought that hit the country in July has also worsened the situation, as it has reduced the availability and quality of grass and hay for the livestock.
As a result, many dairy farms are operating at a loss and are unable to cover their expenses. Some of them have resorted to selling their property, cutting down nearby trees, or reducing their herd size to generate income and feed their animals. Others have decided to shut down their business and sell their cows to Poland, which has been actively buying off dairy cattle from Latvia.
There are around 50 companies in Latvia registered to process milk, but more than half of them are either inactive or manufacture dairy products in tiny quantities. The country’s dairy industry is mainly presented by 20 companies, which are struggling to compete with cheaper imports from other EU countries and Russia. Some of them have already announced their intention to close down or relocate their production facilities abroad.
The Dairy Industry Working Group of the Agricultural Organizations Council (LOSP) has declared a state of emergency in the dairy sector and has appealed to the government for immediate intervention in the market. The LOSP has proposed several measures to help the industry, such as abolishing the real estate tax for dairy farms in 2023, setting up a food regulator to ensure fair competition and pricing, and requiring traders to separate and label Latvian products on their shelves.
The Ministry of Agriculture has said that it is still collecting data on the extent of the damage caused by the drought and the hailstorm that hit some regions in August, and that it is too early to discuss the possible support and its amount. However, it has acknowledged that the situation in the dairy sector is critical and that it is working on finding solutions with other ministries and stakeholders.
The dairy sector is one of the most important branches of agriculture in Latvia, providing jobs in the regions, tax contributions to the state budget, and local products for the consumers. However, it is also one of the most vulnerable sectors to external shocks and market fluctuations. The current crisis threatens not only the economic viability of the industry, but also its social and environmental role.
