There could be a price increase on dairy products, coffee, oils and oranges next year. This can be explained with trends on world markets. On Latvia’s local markets, however, there could be a price increase for bread, head of Agricultural Resources and Economics Institute’s department Inguna Gulbe said.
At the same time, she said prices were expected to remain stable or even decline for some product categories – eggs, fish, grains and meat.
“Procurement prices continue their climb on the dairy market. Because of that, processing industry has to increase the prices of its end products to be able to pay suppliers. At the moment farmers are paid around EUR 0.30 per 1 kg of milk. The price is growing, however. This is because multiple processing plants have opened up in Lithuania and Poland. I doubt it will reach EUR 0.40. There should be a border to prevent that. It is possible that a number of smaller processing companies that focus on niche products may shut down next year because of the inability to pay suppliers”, said Gulbe. “Coffee prices grow somewhat because there is a problem with Robusta bean harvest – a deficit is forming. There could also be an increase for oils and butter, because processing has declined somewhat in recent years. Consumption is currently on a rise. Poor harvest could mean a significant price increase for oranges. This means a price increase for orange juice”.
She also noted that price decline would remain on the world’s grain market, where good harvests resulted in surplus forming.
“But that won’t be a reason for bread price decline, because the correlation between flour and bread prices tends to decrease every year”, she said.
Gulbe stated that grains only formed a mere 10% of the cost in the bread-baking business. All other costs consist of energy resources, labor fees, taxes and logistics. On top of that, Latvia’s market has its own specifics.
“Latvia’s specific characteristic is very small prices – average price is EUR 2.50 per 1 kg. There is no room to drop further. This characteristic is dictated by lower purchasing power and enormous competition. Because bread is unnaturally cheap, the price will undoubtedly rise”, Gulbe noted.
She also admitted that prices for eggs, fish and meat would be stable on the local market.
“We have a strong Baltic market player in the form of Balticovo. Fish prices, especially on salmon, have grown by several euros in the past months. No future increase is expected. Norway had a problem with salmon disease for a short while. Scotland managed to fill this niche fairly quickly. Latvia also has a well-developed infrastructure for breeding fish similar to salmon. Prices on the meat market will be either stable or lower”, the expert said.
At the same time, Gulbe predicts next year will be a nervous one for agriculture and food industry.
“Vegetable producers will be influenced by Poland’s enormous market, which, in spite of weather, is able to provide sufficient products. Pork producers in Spain and other countries will be able to produce a large volume of pork. Logistics of those products will be affected by low fuel prices. African swine fever and trade restrictions associated with it will remain a problem for pork producers. 2017 is expected to be rather nervous for this industry”, the expert concluded. (LETA/Business World Magazine)
