Announcements from market participants and members of organizations regarding the supposed food price rise should be viewed as a signal for the entire market to act cooperatively and avoid making the price rise process a reason for investigations of any possible competition breaches, explains Competition Council chairman Skaidrite Abrama.
«Although it is usual for the end of the year to be full of talks and predictions for future trends in the country, it would be unwise to ignore the bubble of irresponsibility regarding price rise in one or the other industry. Almost hoping to outdo each other, representatives of certain food industries and even the Agricultural and Economic Institute claimed (and will likely continue doing so) that 2017 will bring unavoidable price rise in certain food products. This will only continue price rise expectations in the public space, which could result in an unwanted avalanche effect,» – Abrama said.
She said like the New Year’s fireworks, Latvia’s largest dairy product processing company Food Union announced its strategy and business development. Food Union’s Vice-President Normunds Stanevics commented on the plan: «While in 2016 Latvia’s consumers were enjoying very cheap dairy products, next year consumers should expect price rise.»
«It is good that some farmers have found better markets to explore, securing better pay for their goods. But does this mean Latvian buyers will be forced to pay more? My answer is no. And I can justify it with studies performed by the Competition Council in relation to price changes – from procurement of raw materials to the store shelf,» – explains Abrama.
Last year, CC performed a study on price changes. It revealed that price rise on fresh milk does not always result in rise of production costs. In the event of a major fresh milk price rise, processing costs are impacted four times less. In addition, price reaction in the retail stage is less than one percentage point of the initial milk price.
Another study carried out in 2016 showed that milk product export structure is dominated by less processed dairy products. With that, fresh milk procurement prices in Latvia are negatively affected by the inability of processing companies to realize their products, resulting in bigger fees for farmers.
«This is the problem, you see. Considering all that, it is also worth keeping in mind the price rise of Scandinavian dairy products and the fact that Latvia does not have a closed market. Even now Latvia has imports of equal dairy products, which may successfully replace local products in the event of major price rise,» – said the chairman.
She emphasized that sees no reasons for over-dramatizing the situation in Latvia and the supposedly unavoidable price rise for food products in retail trade. The previously mentioned expectations about price correlations and presence of replacement products poses no reasons for concern reported by the media earlier in December in regards to risks for bread, oil, oranges, coffee and other products. There is no economic reason to believe problems with coffee beans could create deficit on the entire market, Abrama said.