In the winter, on Mārtiņš Gierkens' farm, the price of milk forced him to reduce the number of livestock. The herd has been reduced by almost half, to 500 cows instead of 900. Part sold, part sent to the abattoir. There was no other way to do it.
Gierkens said: “Still companies liquidated and still farms are sold. In my case, the older farm, which was not so modern, let us say, with older technologies, had much lower profitability, and the cost of that milk was much higher, so that decision was made."
In February, the purchase price of raw milk per kilogram was critically low — about 28 to 30 cents, a slight increase to 35 cents in April. As interest rates rise, feed and labor-force costs rise, the drop in prices is critical, especially for small farms.
A dairy farmer from the municipality of Zemgale, Jānis Jansons, is also worried about rising prices to the final consumer: “Either the government engages with its instruments and delegates an interest rate [..]. If the shop price falls, our price also falls, if it rises, our price rises. [..] Otherwise, we as producers will not produce and store shelves will be empty.”
Others involved in the dairy chain also consider that the balance between the interests of the farmer, the dairy processor, and the trader should be respected.
Jānis Bertulsons, a member of the board of the Jaunpils Dairy, noted: “If we look at any annual processing report, [..] the profitability is very small, but then look at the profitability of the trader.”
The Ministry of Agriculture sent a letter at the end of last year and began discussions to overcome the milk crisis with experts from the European Commission, but there is no answer yet.
Dace Freimane, head of the Department of Market Organization of the Ministry of Agriculture, said: “The stabilizing of prices will depend on whether demand will remain at a sufficient level and whether production will grow at a reasonable pace.”
While answers are expected from the European Commission, the Ministry of Agriculture is also developing legislation to conclude long-term contracts with farmers.
Freimane said: “We have studied the experience of other Member States on how long-term contract relationships can affect the development of milk prices, and yes, we have had a first discussion with industry.”
Meanwhile, dairy processors and purchasers are skeptical of long-term contracts, considering that the principle of fairness of all parties should be respected.
The Ministry of Agriculture promises to develop new regulations on long-term contracts in the coming months, while those involved in the sector are fighting for survival.