The European Commission has been called on to provide exceptional financial support to dairy farmers in Latvia and Lithuania, following a sharp fall in milk prices combined with high production costs.

While input costs have soared, the “purchase price of raw milk in Latvia and Lithuania is on a steady declining trend with no signs of recovery”, the two countries, supported by Bulgaria, said in a submission to the Commission.

The three countries have called upon the Commission to use measures envisaged under the Common Market Organisation to alleviate the situation. In particular, they want exceptional financial supports for dairy farmers, funded from the crisis agricultural reserve.

They have also submitted a proposal to review and increase the prices for the buying-in of skimmed milk powder and butter into public intervention.

Latvia

In Latvia, the raw milk price has been decreasing for six months in a row, and currently it is already the lowest among all member states. Milk price dropped by 11.2% in January 2023, reaching €42.9/100kg (41.65c/l). In February a further sharp decrease of 21% was observed, with the price falling to €34/100kg (33c/l).

Overall, milk price in Latvia has dropped by 30% in the last two months.

Lithuania

In Lithuania, in the four months from November to February, the milk price dropped by 33% – from €55.3/100kg (53c/l) in October 2022 to €36.8/100kg (35.7c/l) in February 2023.

The price for February decreased by 17% compared to January, while costs of inputs remain considerably high.

“It is necessary to emphasise that prices received by small/family farms, which constitute the majority of dairy farms (in Lithuania over 70%), are considerably lower than the ones reflected in statistical averages.

“Immediate support is indispensable to ensure survival of those dairy farms and for them to benefit from long-term measures for sustainable transformation of the dairy sector,” they said in their submission.

Reduced demand

Furthermore, they say that dairy processors are struggling with reduced market demand for dairy products due to inflation and reduced purchasing power, which is also a global trend.

“With production costs remaining extremely high, such a rapid and significant reduction in the purchase price of raw milk has led to a situation where production costs of milk producers cannot be covered with market revenues,” they warned.

They stated that the viability of dairy farms is dramatically undermined, and that many farmers in Latvia and Lithuania are facing the risk of bankruptcy.

In February 2023, more than 10% of Lithuanian dairy farms withdrew from milk production and the quantity of raw milk decreased by 4%, compared to the same period in 2022.

EU funding

While possible instruments at the national level are being considered and certain measures have already been taken, Latvia and Lithuania have said that this will not be sufficient in the current conditions.

“Possibilities of using the national budget are strictly limited due to a whole range of complex challenges. Therefore, EU level measures are indispensable.”