Latvijas piens: dairy industry is a mirror of our nation’s weakness

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Latvia has the most fractured dairy industry in Europe, which only serves to weaken its competitiveness. Companies are already allocating whatever resources they have to conquer export markets, said Latvijas piens Chairperson Anita Skudra in an interview to BNN.

What are some of the most notable recent events in your sector?

The moment that changed the situation in the dairy industry came when Russian announced its embargo on imports of European dairy products. This decision is the core of the crisis situation. Its result can be described with over-production of dairy products on global markets. The cancellation of milk quotas that followed in Europe from 1 April and onward only increased tension, causing a significant drop in prices around Europe and the world. Dairy industry’s experts say this situation is unprecedented – prices have gone to an all-time low in the past ten years. In this difficult time the primary question to ask is this – do we, dairy companies in Latvia, have a strong foothold in Baltic States, Europe and elsewhere in the world? The answer, unfortunately, is not optimistic at all: we have the most fractured dairy industry in Europe, which significantly weakens our competitiveness. It is impossible to consolidate resources to achieve a common goal, like exploring a new export market. Currently all companies are spending whatever resources they have to conquer export markets.

Can you say economic conditions are improving and there is a lot of potential for economic growth in the market?

No, the situation in the industry remains critical.

How would you describe the government’s economy policy aimed at improving the economic situation in the country?

We cannot deny the efforts the government puts into improving the situation in the industry. However, we have to admit that this ‘fire-fighting method’ will only ensure the overall survival of the industry. Yes, support has been provided to farmers. We have also seen measures aimed to help with exports – participation in international exhibitions. Experts say the situation is incredibly complicated. It is not something that can be resolved in a short period of time. It is closely tied to developments in Europe’s dairy industry. Latvia’s situation is made worse with one thing – there has not been any kind of future development strategy aimed at exploring international markets as of yet.

How is the industry affected by Latvia’s policy? What changes to legislation would you like to see? What helps? What makes things more complicated?

Politics influence businesses. This can be explained with the geopolitical situation in neighbouring countries, legislation and tax policies employed in Latvia and Europe. Unfortunately, we have short-term planning methods when it comes to matters like those – it is important for us to complete specific budget goals, not think about the future. The state changes its tax policy views every year. This makes it difficult for companies to plan their development and investments.

How would you describe the industry’s position in the Baltics? What about competition with Estonia and Lithuania?

As I’ve already mentioned, Latvia has the most fractured dairy industry. We are considerably behind Estonia and Lithuania. I would even say the dairy industry is a mirror of our nation’s weakness – we can clearly observe that every person wants to rule their own garden; we cannot cooperate with one another, talk to one another and plan ahead.

I would also like to emphasize that the Baltic market is considered as a whole – Lithuania has powerful milk processing companies that have been cooperating with Latvia for a long time. Development strategy employed by Lithuania’s dairy industry has yielded results because Lithuania has always wanted to be the leader in this industry in Baltic States. Around 50% of milk produced in Latvia is exported to Lithuania every day. With that, competition on the market is impressive.

Estonia is several steps ahead of us, I believe. Being close to Finland, where there are many powerful cooperatives and Valio (one of the most powerful milk processing company in the world), which is owned by dairy cooperatives, has definitely benefited Estonia. So it seems strategic thinking and practical work can give results for Latvia’s dairy industry as well.

What can you can your ‘trump card’? What is your ‘Achilles’ heel’?

Our industry’s trump card is definitely high quality milk provided by local milk producers. Our Achilles’ heel is the fractured state of milk producers. There are 39 milk processing companies in the country. They are small and relatively weak when it comes to competition on global markets.

Can you say there is a lack of skilled workers in Latvia?

Considering our country’s location – Jelgava – we don’t feel any lack of qualified workers. We have established great cooperation with Latvian Agriculture University. We’ve had 14 students from the university undergo training at our company this year. We would be happy if we could establish the same kind of cooperation in the field of engineering. It should be noted, however, that we have young and competitive specialists who graduated from Riga Technical University as well. We are interested in teaching young specialists all the details of production in order to achieve better results in cheese production and put Latvijas Piens on the global map of cheese producers.

What do you predict for the next five years? Will the situation in the industry improve, worsen or remain the same?

It has become clear that without enormous dedication and hope, it would be impossible to survive in this industry. With that, I’m certain that five years from now our industry will be in a much better situation. Everyone understands that we need to change in order to be certain about the future and secure better competitiveness. Dairy producers have to cooperate more than do now. We need to cooperate with one another based on common plans for the future.

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