Lithuanian dairy industry in financial crisis

Vilenis emphasized the turbulent state of dairy farming, characterizing it as a profound crisis. Heightening concerns, he expressed significant apprehension about potential further deterioration in the coming months. A noteworthy factor contributing to these anxieties is the inadequate stocking of sufficient feed by a considerable number of farmers, attributed to the drought conditions prevailing in the country.

While Lithuania anticipates a modest 3% decline in milk production this year, concerns loom over the dairy processing sector due to the imminent opening of a substantial dairy plant in neighboring Estonia. Jonas Vilenis emphasized that this development could potentially lead to a severe supply shortage for dairy processing plants within Lithuania. The entry of this sizable dairy facility in Estonia poses a notable challenge to the equilibrium of the regional dairy industry.

Criticism has arisen within the dairy sector regarding the European Union's state aid program. Lithuania's agricultural minister, Kestutis Navickas, disclosed in late August that the €10.66 million EU state aid would exclusively benefit farmers who sold their milk for less than €0.40 per litre during April-June 2023.

This initiative faced disapproval from the Lithuanian Competition Council, citing concerns over the exclusion of numerous farmers from eligibility. Critics argue that the scheme disproportionately favors smaller operations, potentially neglecting larger players that command slightly higher prices for their products.

The Association of Lithuanian Milk Producers conveyed the appeals of milk processors in Lithuania, urging the government to augment support for all dairy farms. They contend that for the sustainability of the dairy industry, governmental assistance should encompass not only small farms but also medium and large-scale operations with the capacity to enhance milk production.

Lithuania, a significant exporter of dairy products, is witnessing a growing reliance on imported raw milk. In 2023, approximately 30% of the milk used by Lithuanian dairy plants is expected to be sourced from abroad, highlighting a notable shift in the country's production dynamics. Notably, Lithuania boasts around 11,600 registered milk farmers maintaining a total of approximately 202,800 cows.

The dairy sector in Lithuania has been marked by protests throughout the year, with farmers expressing discontent over the government's perceived lack of response to the industry's crisis. A key demand from dairy businesses involves seeking subsidies amounting to €40 million to offset the anticipated losses in 2023. This underscores the pressing need for governmental intervention and support to address the challenges faced by the dairy industry in the country.