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Monday 21.05.2018 | Name days: Ingmārs, Ernestīne, Akvelīna
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Lithuanian dairy producers seek Government help amid Russian embargo

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Linas Jegelevičius for the BNN

If you happened to be at a dairy products section in a Lithuanian supermarket, vivid, colorful and Russian language-emblazoned labels of yogurts, cheese, cottage cheese or sour cream will likely catch your eyes, even if you speak neither Russian, nor Lithuanian.

Dairy producers among most hit

With the Russian anti-EU sanctions put in place as retaliation to the EU and US economic sanctions in the wake of a possibly Russia-involving Malaysian jetliner downing kicking in, Lithuanian dairy producers were among the first ones to deal with the immediate outcome of the embargo.

«Indeed, we’ve been stocking our store shelves with dairy products that would usually go for export to Russia. «Pieno žvaigždžių» (a dairy producer) cottage cheese was the first Russian export-designated product to be stocked on Maxima stores’ shelves,» said Milda Januškevičienė, а Communications manager of Maxima, a giant grocery retailer.

Within days, the other «Pieno žvaigždžių»production made for Russia is expected to fill Maxima shelves, she said.

«First of all, it will be dairy goods with a sensitive expiration date: yogurt, yogurt drinks, cottage cheese and sour cream,» the retailer representative noted.

By the end of the week, other Lithuanian dairy producers’ Russia-catered dairy products also should be drawing attention with the vivid labels in most grocery stores.

«The Russian-labeled provision is 20-25 percent discounted, and the labels are easily discernible among other products. As we’ve sold dairy products meant for Russian market in the past, we’re pretty sure they won’t stay on the shelves too long: the customers are eagerly buying the yogurts, cheese, cottage cheese and sour cream. A couple years ago, there were similar circumstances,» the manager remembered.

Possible layoffs and salary cuts

Other major Lithuanian food retailers Norfa, Rimi and Iki, last Wednesday, were also looking forward to hauling the dairy exporters’ dairy tidbits to their supermarkets.

«Some of them will still bear Russian labels, and some will be relabeled. All of them will be heavily discounted, some- up to 30 percent,» insisted Darius Ryliškis, Norfa spokesman.

Meanwhile, Lithuanian dairy processors have already started ringing alarm bells, warning that Russian embargo in its magnitude will trigger an avalanche of layoffs and salary cuts.

«Their scope will depend on the EU and Lithuania decisions on support to the sector. If we will have to deduct from the production the part of Russian export, then, definitely, certain layoffs and a general decrease in the workers’ wages will be inevitable.

As if the patient who has just had infarct, we are doing whatever we can get short-term support, which would be tantamount to an injection for the patient to have the heart pumping again and recover in the course,» Dalius Trumpa, a board member of «Rokiškio sūris», a major dairy foods manufacturer, spoke illustratively of the plight.

According to Trumpa, much more important than receiving a hefty compensation for the imminent losses is guaranteeing that the dairy products surplus is bought up.

«It is a question of death and life that the daily milk surplus at around 1 400 tons now is bought up. This is how much milk we needed daily to produce dairy goods for Russian export. Unfortunately, our company itself cannot assume the risk of handling the surplus on its own.

We cannot be certain whether we will be able to sell it, and for how much and et cetera. We simply don’t have enough currents assets to do those kinds of things. Taking the risks could threaten putting us in a situation where bankruptcy or company’s closure may loom,» the businessman told Lithuanian media.

Lithuanian PM: bank loan may serve as lifeline

Having met with Lithuanian businessmen, most of whom where representative of agricultural and dairy enterprises, Lithuanian Prime Minister Algirdas Butkevičius hinted that the Government mulls suggesting Russian embargo-ill affected business bodies ask for bank loans as a lifeline in refilling their shallower coffers. If that were the case, the state would obligate to compensate the interest rates up to 95 percent.

«Banks, obviously, need some assurances and details as far as the production and sales market are concerned, but I reckon that with the state guarantees-assured, they might be willing to grant such loans,» the Government head said.

But the Rokiškio sūris stakeholder insisted that interventional surplus milk purchases would be in the best interests of the dairy producer.

«The milk production, like cheese, skim milk powder and butter, with the time-insensitive expiration date, could be stored and sold when a better time comes,» Trumpa argued.

Reportedly, the Government is not willing to come at rescue of the embattled producers that way.

Ministries scramble to find countermeasures

Meanwhile, AB «Pieno žvaigždės», another Lithuanian dairy producer, says that it is not likely to need a lifeline to withstand Russian embargo, but cozies up with an idea of shrunken profits.

«AB Pieno žvaigždės sales to the Russian Federation comprised 30-35 percent of all sales. Part of them will be redirected to other, less profitable markets, but it will be impossible to offset the relocation of sales until the end of the year.

Venture expects to post around 800 million litas (around 230 million EUR) in sales in 2014. Loss of Russian market does not pose threat to the continuity of our entrepreneurial activity, but it will have a negative impact on its profitability,»«Pieno žvaigždės» statement read.

Reacting to the Russian sanctions, the Lithuanian Ministry of Agriculture (LMA) announced it will address EU institutions, asking them for immediate dairy and meat market regulation measures.

To buffer the embargo ill-effects, the ministry has proposed the Finance Ministry to look over the current taxation and come up with some tax exemptions.

Giving the green light to the so-called ritual slaughtering would open for Lithuanian breeders Israeli and Arab countries’ markets, the LMA suggested.

Some new meat and dairy markets, some of them as far as China and South Africa, also are being weighed as a countermeasure to Russian embargo.

Ref: 020/111.111.111.1410


Leave a reply

  1. mike walsh says:

    So, loss of profit and a glut of surplus heavily discounted produce. Ouch. Just what others have been predicting.

    “It’s a double détente system. Russia will halt imports, but the products that aren’t exported will land back on European markets and create a crisis situation,” Xavier Beulin, the president of FNSEA, said in a TV interview on iTele on Thursday.

    For the Baltic States this market will not return. Snubbed Russia will never trust EU producers again. Would you?

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  2. John says:

    Stop complaining, Lithuanians. Investing into Russia always poses big risks, as well as profits under lucky circumstances. So state shouldn’t come at rescue when things go bad one day.

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    • Foreigner says:

      Well, quite difficult to predict what governments will do….

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      • mike walsh says:

        Beg!

        Austria is warning of catastrophic falling prices, and the Netherlands is saying losses could be triple initial estimates. A third of Lithuanian milk producers say they are facing problems.

        The wholesale price of a kilogram of fruit or vegetables could halve due to excess supply, the Austrian newspaper Salzburger Nachrichten cites Rupert Gsols, a federal coordinator of the Austrian Union of Market Gardeners.

        There is a bumper crop of European apples in 2014; around 12 million tons against the normal 10-11 million tons. About 370,000 tons are harvested in Poland.

        The economic damage to the Netherlands from the Russian boycott could be triple the original estimate and reach €1.5 billion, Dutch News cites Hans de Boer, the chief of VNO-NCW Dutch employers’ organization.

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