Latvian dairies set to lose eastern market

  • 2007-07-18
  • From wire reports

SUBSIDIZED: The EC's decision to cut subsidies for dairy exports to non-EU members will drastically affect Latvia's exports to Russia.

RIGA - Latvian dairy companies said they expect their exports to non-EU countries to decline sharply in the future now that the European Commission has decided to cease subsidizing exports to third countries.
Henrijs Fogels, board chairman of Limbazu Piens dairy, told the Baltic News Service that it was still premature to speak about the impact of the commission's decision since the company is still supplying products at previous prices.

However, Fogels did not rule out that exports to Russia might decrease in the future if the company is forced to raise prices. The Russian market "is very sensitive to prices," he said.
Rankas Piens dairy said it was not planning to suspend exports to third countries for the time being, although it had considered doing so purely out of economics. "Russia and Belarus are offering us very bad prices," company chief Laila Dute-Spalvina said.
The European Commission recently decided to stop paying export subsidies for dairy products to boost the competitiveness of EU dairy products in the global market. The commission said the subsidies would be suspended as a result of the EU's common agriculture policy and the fact that dairy prices have climbed in the world.

According to the data of the Latvian Central Association of Dairy Companies, cheese was Latvia's largest dairy export to Russia in 2006, with 13,100 tons shipped to the eastern neighbor.
Gita Murniece, executive director of Smiltenes Piens dairy, told the Baltic News Service that all Latvian dairies are facing a reduction in exports to Russia. 

She admitted that Smiltenes Piens had not been seeing any profit from its sales to Russia prior to the commission's decision, so that now exporting dairy products there would be unprofitable.
To adjust to the new situation, Murniece said Smiltenes Piens was planning to focus more on the EU market.
She said Latvian producers had to be prepared to work in a subsidy-free environment. "Although it is not advantageous for us, it is fair to other countries," the company representative admitted.
Valmieras Piens said it was not going to start exporting its products to Russia even though it is licensed to sell products there, spokeswoman Zane Pelnika said. She added the EC decision would not affect the company's operations, as it is exporting its products to North African and Middle East countries through a German company.