Latvian dairy farmers face lowest raw milk prices

In January 2024, Latvia’s average wholesale raw milk price was the lowest in Europe, a local news outlet, Leta, reported. Latvian farmers sold milk for €38.47 per 100 kg, nearly 20% lower than the European average farmgate prices estimated at €45.94, the publication said.

Even in the neighbouring Baltic countries, the picture is brighter. A spokesperson for the Latvian Livestock Industry Association (LSA) reported that farmers got €43 for 100 kg of raw milk in Lithuania and Estonia. The difference is even more drastic in Poland, where the average farmgate prices stood at €47.43 in January.

In absolute terms, milk farmers in Latvia earned €66 million less from selling milk to dairy processors than those in Estonia and €87 million less than in Poland, Janis Miezitis, LSA chairman, commented.

Looming bankruptcies

Market players warn that it can still be worse. Most Latvian dairy processors work at a loss or close to the breakeven point, which concerns both large and small enterprises. It is unlikely they will get an opportunity to revise tariffs upward in the foreseeable future, the publication said.

Moreover, the looming bankruptcies in the sector seemed quite probable, and they could put further pressure on the supply chain.

The industry has been hit with a mix of factors, including soaring energy gas, electricity and fuel prices, as well as expensive logistic services and packaging, Leta said. Moreover, the Latvian retailers seek the cheapest products, which leads to a rise in imports from other European countries and lowers the demand for products of Latvian origin.

The last straw

For Latvian milk farmers there be may hope if there is state aid. LSA, for instance, has recently called the authorities to revise the subsidy for milk farms from the existing €25,000 per farm to €125,000.

In addition, farmers insist that the authorities must raise limits on the duty-free imports of diesel fuel, emphasising that milk farmers need fuel year-round.

A complex of environmental, political, and economic reasons has plunged Latvian agriculture into one of the worst crises in its history, a recent report by the Latvian Ministry of Rural Affairs indicated. Last year, Latvian farmers suffered losses equal to €412 million, with farmers keeping cattle amounting to €129 million.