Latvian dairy producer declares insolvency; others struggle to survive

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The dairy producer "Elpa" has declared insolvency. High milk procurement prices and increased energy resources also cause problems for other companies, according to the union of dairy farmers, Latvian Radio reported on September 6.

"Elpa" already said in May that it is stopping production for an indefinite period of time. The Kurzeme District Court has now declared it insolvent. The production plant is in the medium-sized business category and a large part of the processed milk was involved in the free School Milk program in the Kurzeme region.

Gundars Sisenis, the head of the company, said that production was stopped due to a variety of difficulties, including the rapid rise in raw material prices and costly energy resources.

Although Elpa is not a member of the Central Union of Dairy Farmers, the head of the organization Jānis Šolks said that the difficulties are felt by several companies: “The fact that one of the companies failed in this situation is not a surprise. For the time being, we are talking about one company called Elpa, which has been officially declared bankrupt. [Cheese producer] Limbažu siers is also currently a company that has suspended its activities for a period of time. And it's hard to say what their distant fate will be. However, due to the fact that we have not received any form of aid [..] the fact that only one company is in an insolvency situation shows the sector's survival capacity. But the question is how long because nothing is over yet.”

The purchase price for raw milk is currently around 50 cents per liter. The price has climbed by 50% during the year.

"By putting this together with the increase in energy prices, plus we also had Ukraine as a significant market for dairy products, and there are difficulties of delivering products to Israel, Azerbaijan, which were also our good outlets. Everything is more expensive again – transport and logistics costs. As a result, the other side is no longer prepared to purchase their products to that extent,” Šolks said.

Rolands Feldmanis, consultant of the Latvian Association of Agricultural Cooperatives, estimated that the exit of the dairy processing company “Elpa” from the market, in general, did not significantly narrow the possibilities for selling raw milk. At the same time, the organization hopes that other farmers will not suffer from insolvency proceedings.

“The negative side is seen historically. Once several processors have ceased to exist, they owe money to farmers and the State. [..] If it is a separate farmer who has given the milk to a processor who no longer pays for a monthly turnover, the farmer himself is on the brink of bankruptcy. However, cooperatives are easier because they usually work with several processors, and the co-op can then settle with this member at the expense of their reserves,” Feldmanis said.


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