The state will grant support to registered milk producers that have delivered milk from October 1, 2015 to April 30, 2016 if the producer owns registered milk cows or heifers older than a year and a half.
Latvia's Rural Assistance Service will pay out the compensations until June 30.
The Agriculture Ministry said that the purchase price for fresh milk has shrunk 33% in April 2016 in comparison to July 2014.
It's expected prices will continue to shrink, so dairy farmers need extra support from state funds, the ministry said.
Previously the ministry thought the EU would grant assistance to Latvia's dairy farmers but the scenario has become unlikely as other member states haven't used up the previously granted funding.