State bails out pork industry

The government of Latvia distributed 2.37 million lats (3.79 million euros) from its agricultural subsidy fund in order to stabilize the pig breeding industry, while Latvia's Domestic Market Protec-tion Office recently assessed the growing swine and pork imports to Latvia and concluded that significant damage to local producers is being caused.

The DMPO will propose that the government implement additional import duties of 203 lats per ton of live pig imports, while pork meat and pork product imports will be levied by the same figure according to the respective slaughter weight.

The DMPO said it would immediately file its suggestion with the Cabinet of Ministers, which will make the final decision on the matter.

The new tax would have to be coordinated also with the World Trade Organization and before being introduced, Latvia will have to allow for exporters to consult on the implementation of the duty.

Most of the pork imports in Latvia come from Estonia, Lithuania, Poland, Germany, Denmark, Belgium and Spain.

The DMPO stated in its conclusion that losses posted by local producers were mainly due to a sharp decline in pork sales prices, which coincided with a sharp decline on world markets.

It also said that the sharp rise in pork imports had been caused by the 1996 Baltic State Free Trade Agreement for agricultural produce, which provides for customs-free pig and pork imports from Estonia and Lithuania.

Lithuania and Estonia have both set lower import duties for a number of large pork exporting countries, thus lowering pork prices and making it cheaper for Latvian companies to buy pork in Estonia or Lithuania.

This, said the DMPO, has forced Latvian producers to cut prices.

Pork imports in Latvia in 2000 were 4,700 tons, with the figure growing to 7,900 tons in 2001. Pork imports during the first 10 months of 2002 were up 162 percent compared withthe same period of the previous year.

Data from Latvia's pig breeder association show the falling pork price in February - June 2002 has caused losses of some 2.9 million lats to the industry.

Pork purchase price in Latvia in September 2002 was 0.74 lats per kilo, sliding to 0.52 lats per kilo in December, while the average pork production cost is 0.62 lats per kilo.

Despite sharp objections by Finance Minister Valdis Dombrov-skis, the government allocated funds to the pig breeding industry, as the pork purchase price had been below production costs for a prolonged period of time.

The allocated resources will have to be compensated from the national budget.

In light of the government's decision, pig breeders announced they will not take part in any protest actions that had been planned for late February.