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Sunday 28.05.2017 | Name days: Vilhelms, Vilis
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Vegetable producers: the industry has a future, but it is burdened by taxes

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUCompared with Europe’s southern territories, vegetable and fruit production in Latvia has a future, says manager of Mūsmāju dārzeņi association Edite Strazdina.

She notes that the industry’s development rate and competitiveness of local producers on the Latvian and international market is burdened by unreasonably high taxes on labour force, high VAT rate on fruits and vegetables, as well as high electricity price. The planned excise tax increase for fuel will have a negative impact on local vegetable producers and cause price increases.

The fruits and vegetables industry has experienced serious changes in the past several years – after the coming into force of the Russian embargo, most producers have had to refocus their efforts from the east to the west.

Using European support programmes and cooperating with leading supermarket networks, many fruit and vegetable producers have managed to enhance their positions on the local market and even enter foreign markets, Strazdina says.

«The exporting power of fruit and vegetable producers depends on the size of their country of origin. The larger the country’s and the company’s ability to enhance positions on the local market, the better the opportunity it is for them to become a strong member of the international market. Even the largest Latvian producers cannot compete with producers in Poland and Germany production volume-wise. This is why it has been possible to expand by uniting many local producers under a single banner,» she adds.

As noted by the manager of the cooperative association that unites eleven farmers unions, it is becoming harder and harder for local producers to maintain development. Regardless of the market, traders are always interested in cooperation with producers that can supply goods at low prices – it is both financially advantageous and convenient.

«Although Latvian producers have learned to deal with the volume side of things, it is not as simple with prices. Competition is distorted by grey economy and low area payments, which are much higher in other European member states,» Strazdina comments.

In addition, because Latvia is a northern country and warm summer season is very short, greenhouses have to consume more electricity to grow more products. «Electricity in Latvia is 30% more expensive than it is in Sweden and 50% more expensive than electricity in Germany. Products are also made more expensive by the unreasonable tax burden – VAT rates on fruits and vegetables are reduced in most EU member states. Labour and other taxes are also lower. This helps improve farmers’ competitiveness,» Strazdina explains.

«In addition, the future is not looking promising – increased excise tax for fuel would impact prices of locally grown fruits and vegetables,» the expert explains the situation.

Although Strazdina is critical of the government’s efforts to assist local producers, she does welcome Agriculture Ministry’s and Latvian Investments and Development Agency’s organized activities to assist local producers. Even the largest retailer networks that are represented not only in Latvia but other countries as well help local fruit and vegetable producers deliver goods to consumers.

As for the future and the industry’s longevity, Strazdina is optimistic and enthusiastic in spite of complications on the market caused by state and international players. She is confident that fruit and vegetable production in Latvia will only start growing.

«Latvia is a green country – fruits and vegetables grown here are highly valued for their nutritional value and natural contents. Thanks to fertile soil in several of Latvia’s regions, we have no reason to use a lot of artificial fertilizers. Nevertheless, the harsh climate does have an impact on decease rates, which requires the use of chemical additives to combat,» Strazdina says.

Continuing, she adds: «Growing demand for clean and natural products will make fruits and vegetables grown in Latvia more popular on the local and foreign markets,» she predicts.

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