Latvian farmers expect Agrone deal to lift milk prices

Latvian dairy producers hope Agrone’s planned purchase of the Riga and Valmiera dairy plants will increase demand for raw milk and lead to higher prices, ERR reported. The deal still requires approval from the competition authorities of Estonia and Latvia.

The two Latvian plants have a combined processing capacity of about 1,000 tonnes of milk per day, comparable to the new production complex in Paide. Some of that capacity is currently unused.

While the Paide complex is planned to produce large quantities of bulk products, the Latvian companies focus on consumer dairy goods. Karums, which is also well known in Estonia, is one of their popular brands.

“We specialise in producing high-value-added products. That is what gives us strength and what we like,” said Arturs Cirjevksis, chairman of the board of the Riga dairy plant. He said the company was actively working in export markets, increasing sales by 2 percent a year and selling its products in 30 foreign countries.

Agrone milks 190 tonnes of raw milk a day at its three farms. The company has 5,000 dairy cows and 4,000 young cattle, including high-yielding Holstein cows.

The average herd size differs across the Baltic states, at 200 animals in Estonia, 15 in Latvia and five in Lithuania. This means neighbouring countries have more processing capacity, according to the report.

“All companies in the sector, their success and prospects depend on investment. You can invest when you have security of supply,” said Raul Jeets, Agrone’s owner and chief executive. He said the company had spent more than 10 years seeking a way to process its milk under a long-term cooperation agreement.

Latvian farmers see potential new owners as investors because the plants need investment. They believe this could benefit both farmers and cooperatives.

“If everything goes ahead with the Paide deal and the Riga dairy plant begins operating at full capacity, processing volumes will grow and so will demand for raw milk,” said Valters Zelcs, an expert at the Latvian producers’ organisation Farmers’ Parliament. “The greater the demand and competition, the better the price that can be paid.”

Approval of the deal by the Estonian and Latvian competition authorities could create new development opportunities for producers and processors.