In the assessment of the association Zemnieku saeima, the memorandum on reducing food prices, which was signed this spring by the Ministry of Economics (EM), retailers, and food producers, has so far not delivered the promised results. Board member of the association Zemnieku saeima, Mārtiņš Trons: “Politicians stirred the air, but so far there are no results or visible benefits. On the contrary – cooperation between farmers and retailers has become even more challenging.”
By signing the memorandum on reducing food prices, politicians, retailers, and producers committed to promoting the availability of basic food products for the residents of Latvia, increasing the range and sales volume of locally produced food, as well as improving cooperation between retailers and producers. According to EM data as of 1 June this year, which reflect the turnover of products produced in Latvia in nine retail chains, an increase in turnover compared to the summer of 2024 can be seen in only a few food product categories (certain vegetables and types of meat). For the most part, the turnover of local products has remained at the existing level or even decreased.
The situation is dramatic – purchase prices have fallen by up to 50%
Zemnieku saeima believes that although the intention expressed in the memorandum is worth supporting, in reality the cooperation of Latvian farmers with retail chains has not improved. Board member of the association, Mārtiņš Trons, stresses that finding common ground with retail chains and reaching a compromise is even more challenging than ever before.
“If politicians wanted ‘to do what’s best’, the result is worse. The memorandum does not define how results are measured, there are no sanctions for unfair behaviour and no obligation to ensure mutually beneficial contracts. As a result, retail chains continue to dictate their own terms, do not sign long‑term contracts, and constantly try to lower food purchase prices. Local farmers still have no guarantee that the products they grow or produce will be bought. Orders are unpredictable, making it impossible to build sustainable and mutually beneficial cooperation. The trust and partnership we hoped to achieve with the memorandum has not materialised in reality,” says M. Trons.
The situation is dramatic. This autumn supermarkets have reduced purchase prices paid to farmers by between 10 % and 50 % depending on the product, while shelf prices in stores have remained at last year’s level or even increased. For example, the purchase price of potatoes has fallen by about 50 %, carrots – by 15 % to 20 %, onions – by 30 %. At the same time, store markups still range from 60 % to 120 %, and in some cases even up to 200 %.
“This means that the price difference between the price at which the farmer sells the production and the price at which the store purchases it is growing. At the same time, the product price on the store shelf does not change. Supermarkets are making a profit, while the farmer is left only with the ‘joy of work’,” notes M. Trons.
Latvian farmers are experiencing the third challenging year in a row and, instead of supporting their own, obstacles are still being created to promoting the sale of products produced by local farmers. At the same time, imported products with lower prices continue to dominate supermarket shelves.
Words must be turned into action
“If we want, in the words of Minister of Economics Viktors Valainis, the Latvian farmer to be the backbone of the state, we must move from beautiful but empty political PR to real action. Latvian farmers still receive the lowest direct payments among all European Union countries, electricity costs in the country are high, which significantly increases the production cost of food, and producers still face insufficient labour availability and a heavy tax burden. At the same time, in terms of volume, it is practically impossible for Latvian farmers to compete with the large agrarian countries located in the southern part of Europe. In Latvia, the vegetation period is shorter, which means lower yields. At the same time, the financial investment is higher. All this creates conditions in which it is difficult for Latvian farmers to withstand price competition with imported food products in retail chains. In other European countries, protectionism towards local producers is incomparably stronger. We also hope for active involvement by the new head of the Competition Council,” emphasises M. Trons.
For the memorandum on reducing food prices to become a real instrument rather than a formal agreement, it needs clear rules and responsibilities. A transparency mechanism must be introduced that would make it possible to see how the food price in the store is divided between the producer and the retailer, as well as fair payment terms must be set, for example, 20 days. It is also important to introduce a system for controlling unfair trading practices that prevents “driving prices down” and the use of market power against local producers.
The association “Zemnieku saeima” continues to call on the government to review VAT policy on food, especially for fruits, berries, and vegetables typical of Latvia, in order to reduce the tax burden and make Latvian products more competitive. For the memorandum to deliver meaningful results, the state must engage with concrete instruments of action, through supervision, support, and the political will to defend the local producer.
Originally published at https://inc-baltics.com/zemnieku-saeima-valaina-memoranda-rezultats-ir-izaicinosaka-sadarbiba-ar-lielveikaliem/
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