bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Sunday 24.06.2018 | Name days: Jānis

Lithuanians damage Latvian milk processing industry to overtake it later

FaceBook
Twitter
Draugiem
print
(+2 rating, 2 votes)

Latvian Dairy Producers’ Central Union’s (LDPCU) Board Chairman Jānis Solks tells the business news portal BNN about the fuss around the state guarantee granted exactly to the company Latvijas piens and Lithuanians damaging the Latvian milk processing companies to gradually overtake them.

Why did dairy products prices surge in late 2010?

Baltic news, News from Latvia, BNN-NEWS.COM, Jānis Solks

Latvian Dairy Producers' Central Union's Board Chairman Jānis Solks

Unfortunately, it is logical and inevitable we will have to pay more for dairy products. The price of milk purchased by processing companies spiked already in September 2009, from 11.5 santim/kg up to almost 20 santim/kg. The price climb for milk as a raw material amounts to 60%, while for the production – three times less. Milk processors have been subsidising the low milk prices in the stores for nine, ten months already, in order facilitate the lives of people in Latvia; that way spending all the reserves accumulated during the past few years. Dairy combines managements turned out to be tougher than the notorious Latvian malevolence. It was only in December 2010, when the processors decided to raise dairy products prices by 10% on average. Why didn’t we raise the prices already before? Because five months ago Lithuanian dairy products were declared of insufficient quality and the Russian market was shut for them, hence Latvian stores abounded in Lithuanian products for dumping prices. The next price climb is expected in January – February by 5-15%.

Can farmers make profit with 20 santims/kg?

Sure they can. We can see this judging from their welfare (clothes, properties, cars) and the expensive agricultural technique. Those perceiving agriculture as a business are the ones who make profit. If a farmer is complaining about his actual costs of milk production surpassing the procurement prices, obviously something is wrong with his business plan. All dairy farmers forecasts should be based on calculations with the procurement price up to 18 santim/kg, as recommended by the Ministry of Agriculture specialists in 2007 already. Only then farmers’ activities will be sustainable. The type of the business – be it a limited liability company or a farm is not that important.

Why does LDPCU permit exporting 300 tons of milk a day?

It’s even more – about 450 tons a day. Lithuania is interested in paying a higher price for milk purchased from Latvia and partly also from Estonia (about 200 tons a day). They have three large companies in a cartel agreement and they process 75% of all the Lithuanian milk. Therefore the Monopoly Supervisory Council imposed them a fine at the extent of 0.5 million lats. Lithuanians are thrice as powerful as we are, so their long-term plan is to weaken our milk processing companies, in order to overtake them. They will achieve it with an artificial milk price rise, which is good news for thousands of milk producers. The rest of milk producers are tense, because Lithuanians offer more per each liter. They are nor even hiding the intentions to get our market and processing industry. A normal market situation would be if Lithuanians offered the lowest milk procurement price for their local producers, with a slightly higher one for Latvians, however our dairy combines are keeping the highest price. Three leading dairy companies Rīgas piena kombināts, Valmieras piens and Preiļu siers could take these 450 tons, as they have enough capacity, yet farmers have already concluded agreements with Lithuanians for at least six months ahead. It is simply that we are too small players in the global dairy market. From the perspective of processing, we cannot develop export to external markets with favourable prices, because we are aware that we do not have milk enough. We do not get EU subsidies for exporting to third countries and Russia since November 2009. Dairy products form 20% of total Latvian products export. It is a considerable amount.

Why did you call irresponsible Latvijas Piens project of building a dairy in Jelgava with the state guarantee at the extent of 8.7 million lats?

Unfortunately, there is no dialogue between dairies and the LDPCU. The issue became so political the Agriculture Minister Jānis Dūklavs was even threatened shortly before the Saeima elections. What would have happened if the government had forbidden to build the dairy in Jelgava? The government’s decision to grant state guarantee to this project is not fair to the whole industry in general and it damages the domestic market as well. I will never take back my words that this move is irresponsible and hasty. We are called LDPCU, because it is our duty to promote the Latvian industrial prospects by implementing innovative projects, while this means supporting a company that is going to produce for Lithuanian dairy combines.

We sharply object to the government hasty decision to include five million guarantees in the budget to support a questionable project that has not even been subject to neutral experts assessment. But we were not righteous to express our opinion to the government. Obviously, there is no wiser man that the Prime Minister Valdis Dombrovskis’ advisor on agricultural matters Uldis Krievārs. Moreover, already for the third year in a row they cannot manage to find half a million lats co-financing for the school programme providing each pupil gets a glass of milk every day. Money for that comes from EU funds. We expect the government’s equal attitude towards all food industry representatives this year.

But wasn’t it rational to modernize one of the existing dairy combines by extending the range of shareholders?

Exactly. We proposed carrying this out in Rīgas piena kombināts or elsewhere. Latvijas Piens representatives met with the managements of the leading dairy combines, but the meetings turned out to be simply formal and lacking interest from their part. Their argument was they had a different legal form of business, thus no collaboration is possible. They announced publicly that none of the dairies was ready to yield. I am not righteous to indulge into details. But I wonder why no decision, profitable from the perspective of business, was taken. Mister Petrevics (dairy Dzēse) told me personally he thought they are going to deceive us any way. However, I must say all parties interests can be protected and respected. Any way, up to 30% of shares are owned by farmers who are not members of a cooperative. Therefore the cooperatives created fuss around farmers interests protection is, to put it mildly, nonsense.

Why can’t Latvians switch to the profitable dairy industry after loosing the sugar one?

Because the EU regulations have set quotas for the total output of milk till 2015. After 2015 wealthy dairy giants will be able to develop production here and dominate the local market. We have to get ready for that.

Did we overdo by introducing too high hygiene requirements for farmers?

Yes, officials did overdo. Quite many legal acts and the Cabinet of Ministers regulations exceed the required by the EU. We do not understand why. Did Latvians want to look better and stricter? Other states orientate only on minimal compliance with the EU regulations. We have proposed to develop the Cabinet of Ministers regulation nr.521, softening some norms on labelling. Since the Agriculture Ministry announced they were going to focus more upon the arrangement of the food industry, no one is listening to us any more. Although we do get the latest data on the situation in the industry, as we comprise dairy combines, processing more than 90% of all the milk in Latvia. We collaborate also with the Estonian Dairy Farmers Union and the neighbouring states Agriculture Ministries to get the latest data.

Do milk processors still owe farmers?

They don’t, we do not allow any exceptions, because the law stipulates obligatory settlement for the purchased milk in a month’s time. However, we are not always capable of turning assets in 30 days time, because semi-hard cheese (Russian, Dutch) maturation period amounts up to 90 days, while for the hard ones (Cheddar, Monterigo) – from 12 up to 18 months. They have to be sold as well, so investment returns only much later. Certain stores require including cash on delivery within 60 to 90 days in the contracts. Considering all that, milk processing can survive only with the help of loans.

Are there any prospects for businesses bypassing supermarkets by creating dairy selling points where they pour milk in the bottles of customers?

Well, it is some kind of a niche. It is a small but not at all an easy business for those who do that. In the summer of 2009 many farmers were exceedingly delighted at the possibility to sell milk themselves, but they got disappointed very soon and stopped doing that. This has been a short-term market phenomenon also in Italy, the Netherlands and Finland. Do not risk drinking milk of unknown origin!


Leave a reply

  1. Pop says:

    What kind of a brother (Lithuania) would do that???

  2. Leave says:

    Lithuania alone!!!

  3. wio pio says:

    There’s no use complaining. The Latvian agriculture policy has always been against its local producers, no matter how hard you try, take loans. The main thing is you pay taxes to them. Such a hypocracy!

BNN summary of the week: CPCB visit to Saeima; ministers survive no-confidence votes; DTV case ends with mild penalties

BNN offers a summary of this week’s topical news in a variety of categories: Ruling; Future; Trust; Measures; Calendar.

SRS uncovers numerous violations more than half of inspected companies

State Revenue Service’s Tax Control Office performed a total of 305 thematic inspections of employers in Latvia in Q1 2018. Authorities recorded violations in 171 inspections, according to information from SRS.

Third level pension plan deposit volumes reach new record value

Residents’ interest for pension savings remains high. The volume of deposits made to private pension funds in the first three months of 2018 has reached a new historic peak: a total of EUR 16.5 million has been paid to 3rd level pension accounts, which is 11.6% more when compared to the same period of 2017, as reported by Finance and Capital Market Commission.

Petrol station network in Latvia caught performing fraudulent activities with diesel fuel

State Revenue Service’s Tax and Customs Police have uncovered and put an end to a fraudulent scheme with diesel fuel performed by some network of petrol stations in Latvia, as confirmed by the service.

Kaimiņš: I believe CPCB is performing a political order

In the evening of Thursday, 21 June, Corruption Prevention and Combating Bureau released three people previously detained as part of a criminal process regarding possible illegal funding of KPV LV party – Saeima deputy Artuss Kaimiņš, his colleague Atis Zakatistovs, and businessman Viesturs Tamužs.

Latvia’s parliament conceptually supports new sanction regulations

On Thursday, 21 June, Saeima supported in the final reading amendments to the Law on International Sanctions and National Sanctions of the Republic of Latvia that are meant to improve sanction regime regulations to ensure efficient application of national and international sanctions, as reported by Saeima press-service.

Storm in Tallinn floods streets, cuts Croatia-Argentina match short on TV

A rain storm has hit northern Estonia on Thursday, flooding some streets in the capital Tallinn, damaged buildings and badly affected the broadcast of an interesting World Cup game.

American banks tested for financial stress show positive results

The U.S. has performed banking stress tests and found that the 35 largest banks operating in the country have enough funds on hand to sail safely through a severe financial crisis.

Saeima fires judge for coming to work in a drunken state

On Thursday, 21 June, Latvia’s parliament supported the proposal to dismiss Rezekne Court judge Arvis Garais from his post. 71 deputies voted in favour, no one abstained and no one voted against.

UK to have three requirements to EU citizens willing to remain in UK

For citizens of the European Union willing to continue living in the UK after the country leaves the bloc, they will have to submit applications and answer three key questions over the internet, according to the country's interior minister.

Weather in Latvia to be rainy and cool during Ligo; next week’s weather to be dry and hot

Weather at the end of the week in Latvia will be dictated by a cyclone. Because of that, there will be instances of rain on Ligo. Weather is expected to improve next week, however, according to Latvia’s State Environment, Geology and Meteorology Centre.

Lithuania’s blood plasma corruption scandal extends to Latvia

The former head of Lithuania‘s National Blood Centre, suspected of corruption and involvement in unlicenced activity, received more bad news this week from Latvia, where investigators of the Lithuanian Special Investigation Service had questioned the Latvian Health minister, Anda Čakša.

Administrative burden to be reduced for foreign students and researchers

The administrative burden will be reduced for foreign students and researchers, as well as all education and research institutions hosting them. This is provided by the amendments to the Immigration Law approved by the Saeima in the third reading on Thursday, 21 June.

Latvian Economy Minister endures no-confidence vote

Saeima declined opposition deputies’ request for dismissal of Economy Minister Arvils Ašeradens.

Swedbank economist becomes new member of Bank of Latvia Council

On Thursday, 21 June, Latvia’s Saeima approved Mārtiņš Kazāks in his new post as member of Bank of Latvia Council, as confirmed by Saeima’s press-service.

Pope Francis’ visit to Latvia will be a national holiday

Latvia’s parliament has approved in the final reading a law that makes 24 September – the day Pope Francis plans to visit Latvia – a national holiday.

ICT specialist numbers in Latvia are below Europe’s average level

In Latvia, information and communication technology specialists form only 2.2% of all employed people in the country, which is considerably below the average level in the European Union – 3.7%. Romania and Greece are the only two EU member states in which the number of ICT specialists is below Latvia’s, according to European Commission’s DESI index.

Hungary adopts prison sentence for helping migrants

Hungarian National Assembly has passed a set of laws criminalising with prison terms some help provided to illegal immigrants by non-governmental organisations.

Harmony plans turning to Constitutional Court to prevent transition to Latvian language in schools

«Why should this reform stay unrealized? It is because schools are not prepared for cardinal changes coming from dozens of other reforms that have already shocked the country’s entire general education system,» says chairman of National Minority School Parents Forum and member of Harmony’s work group in Konstantīns Čekušins.

Deputies detained in KPV LV criminal case not declared suspects yet

Saeima deputy Artuss Kaimiņš and businessman Viesturs Tamužs detained in the criminal process regarding possibly illegal funding of KPV LV party have not yet been declared suspects. Both are currently in police custody. It is likely Kaimiņš will be released later today, 21 June.

Production of mines and grenades planned in Estonia

As the Estonian parliament has adopted new rules on military arms and ammunition production in the country, local defence firm Eesti Arsenal has voiced its plan to build a factory in Estonia to make military explosives.

Total tax debts in Latvia reached EUR 1.224 billion in June

At the beginning of June, total tax debts in Latvia, including topical, halted debts and extended repayment terms were equal to EUR 1.233 billion, which is 0.6% less compared to May, as reported by State Revenue Service.

Switch off internet nationwide during exams – Algerian approach

In an attempt to prevent cheating during secondary school exams, the north African nation Algeria, has turned off internet in its whole territory.

Control Service proposes kicking out shell companies as intensely as offshore companies

Shell companies in Latvia should be combated with the same intensity once shown to offshore companies, says chief of Anti-Money Laundering Service Ilze Znotiņa.

EU imposes tariffs on blue jeans, motorcycles and other U.S. export goods

The European Union will introduce retaliatory tariffs against U.S. exports on Friday, EU Trade Commissioner has stated a top official has stated in the bloc's reaction to Washington imposing steep duties on steel and aluminium earlier in June.

Most read

Most commented

Newest comments