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 the 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 showed enormous gaps. For example, in December 2021 the gap ranged from 0.2709 to 0.47 cents per 1 liter of milk. In January, this gap continued to increase.
According to Melnis, this snows the income from selling milk may differ by up to 43% between 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,” stressed Melnis, adding that in August 2021 the milk procurement price amplitude was between 0.2382 to 0.36 cents per 1 liter, 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 an 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. (BNN/Business World Magazine)
