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The hopeless herdsmen. What can save the sector? Problems and solutions...

2024-02-10 10:51:44Biznes SHKRUAR NGA REDAKSIA VOX

The hopeless herdsmen. What can save the sector? Problems and solutions...

Livestock farmers , this beginning of the year, are forced to sell milk 33% cheaper, since there is a low demand in markets and factories are full of stocks. Although retail dairy prices in our country are the highest in Europe, they are not enough to ensure the sustainability of the entire dairy market chain from production to market. The lack of subsidies and the high fiscal burden throughout the livestock production chain has made the price of farm milk 40-50% higher than imported raw milk. Small farms go bankrupt if they sell below the level of 160 ALL, while those of cows, below the level of 930 ALL per liter. The subsidy increase and VAT reduction are considered as quick solutions.

 

Dafina, after working for several years in Greece in the livestock sector, returned to Albania with her husband and three children to build her farm with purebred sheep near the family, with many years of experience in breeding cattle for milk.

Today she is disillusioned, with debts and loans, without a market for her products and ready to leave again. At the beginning of the year, the dairies are not giving her more than 100 Lek per liter of milk, while she says that below 150 Lek is a loss.

"I bought 200 sheep of the French breed abroad. I know the profession, having worked in Greece. I rented land and am using an old stable.

The lands last year were flooded and I could not plant them, so I paid rent without any benefit. On the other hand, the wolf harmed my sheep, as I was forced to use mountain pastures.

Now I got a loan to buy corn to feed the herd, I can't afford the price reduction", said Dafina, who works in the Balldren area of ​​Lezhë. Like Dafina, most of the Albanian livestock farmers are exposed to the change in prices from day to day, at a time when the costs keep increasing.

How the crisis is intensifying

Albanian livestock is at a point that, if it is not subsidized and exempted from taxes, it will go towards extinction. The 25% increase in the price last year has made milk and its by-products untouchable on the market shelves in these days of January, when tourists are also absent.

Factories claim that the drop in demand in minority markets has created stocks, a phenomenon that is increasing the pressure on livestock farmers to reduce the price of milk.

Small breeders, who were sold at a high price last year (180 ALL for a liter of goat and sheep's milk), have thrown themselves into protests these days, as they claim that lowering the price below 160 ALL per liter leads to bankruptcy. In the European Union, a kilogram of goat's milk cost about 105 euros per 100 kilograms (or 1.05 euros per kilogram) in January 2023.

A kilogram of cow's milk from the farm on the Albanian market is currently sold for 50-90 lek per kilogram depending on the region and type of farm, while in the EU, the average price of a kilogram of milk on the farm is 35-45 cents.

Producers and livestock keepers claim that costs in the livestock chain are high, as the state does not subsidize the sector. With the removal of the VAT exemption, once again returning to the 20% level, the situation worsened further. The price of milk on the farm is currently 40% to 80% higher than in the EU and the region.

In Albania, last year, livestock farmers who had more than 10 cows received 98 euros per head in two installments.

While in Serbia after the livestock farmers' strike, last year, the subsidy for a dairy cow is 365 euros and for each liter, the livestock farmer gets back 0.16 cents.

This difference in prices is driving Albanian factories to import milk from abroad, which means that it is a multiple pressure for livestock farmers who are already suffering from high raw material costs, labor shortages and rural abandonment.

Last year there were difficulties for supplies from abroad, as the Region was also suffering the consequences of last year, but now the situation has normalized.

"These prices were also reflected in the market, making it impossible for consumers to buy them, leading to a significant reduction in consumption and all production is stock in processors' warehouses. Although processors have reduced prices below cost, demand for these products is still very low.

In this situation, we are forced to reflect the reduction in prices for farmers, but also in the wholesale sale of cheese, in order to increase consumption", said Mr. Begeja. Small breeders have claimed that sales below 160 ALL per kilogram make breeding impossible.

Taulant Pupa, the administrator of the "Vita 2001" milk processing factory, says that in the Korca area, the price of buying milk has fallen due to the lack of sales. According to him, the prices of cow's milk have fallen from 70 ALL to 65 ALL per liter without VAT.

Even some factories, according to him, are buying milk from the farmer for 50 Lek per liter without VAT. Mr. Pupa said that the price drop does not favor the farmers, who at this moment are in doubt whether to stay in Albania or leave for emigration. This is expected to affect the decrease in milk production, since the low price does not encourage the farmer to keep cattle.

Ervin Resuli, who has a medium level farm in the area of ​​Fier, said that prices below 93 lek per liter with VAT bankrupt cow farms.

Fluctuations in prices harm livestock

Albania does not have a steadily distributed consumption throughout the months of the year. Last year there was an unusual demand in the three months of summer, due to the high flow of tourists.

In this period, the price has fallen, since there is only the resident population in the country, which is decreasing, compared to 10 years ago due to high immigration. According to INSTAT, from 2011-2022, more than 500,000 people emigrated.

Dough processors and sugar importers have given the alarm that consumption in the country has fallen as a result of high levels of emigration of young people, who are also big consumers of these products.

The Association of Milk Processors argues that the raw material in the milk processing sector, i.e. fresh milk bought from farmers, must have an equal price, or very close, to the price of milk produced by farmers of the region or of the European Union.

Only in this way, according to the Association, can the perspective and growth of the milk processing sector in our country.

If in Albania, processing companies will continue to operate at very high costs, then it will be impossible to cope with the constant pressure of imported products. The costs of the sector are very high and for some operators, even unaffordable.

Distortions in the market and excessive consumption harm farmers. Albanian livestock farmers do not have storage capacities, they do not have the opportunity to bear the costs of transport, they are not represented by unions and they are "victims" of price changes, according to the needs of the market.

In other European countries, these fluctuations are eliminated by subsidies. In all neighboring countries, subsidies to livestock farmers increased further after the costs created by the war in Ukraine, further increasing competition with our country.

Dairy imports double from 2015, danger to herds

Last year, dairy imports were 31 thousand tons, with an 11% increase in quantity compared to 2022 and over 100% compared to 2015. According to official customs data, 1 liter of raw milk with 3.5% fat, it is imported at reference prices of a maximum of 55 cents, while 1 liter of cow's milk in the country costs 50-90 lek according to farms and regions.

In any case, milk from Albanian farms is being competed by dairy imports from abroad, which come at cheaper prices. In 2022, the milk produced in the country was 15% lower than in 2105, as the number of cattle in the same period fell by 40% and of mine, by 26%.

Last year, the number of heads in all categories of dairy cattle decreased. The number of cattle decreased by almost 12% compared to 2021, sheep by 2.7% and goats by 6%.

The strongest decline of animals in stables last year is in Fier, with a 34% contraction. The county with the largest number of cattle, with about 12% of the total, also suffered the strongest contraction.

INSTAT reported that in Fier there were about 39,000 head last year, from over 58,000 in 2021. In 2022, there were 20,000 less. The second district with the largest decrease in the number of heads was Tirana, with an annual decrease of 27% in 2022.

Livestock is facing competition within the agricultural sector. In lowland areas, livestock farmers are outcompeted by greenhouses. For 1 hectare of greenhouse, the income reaches an average of 40 thousand euros per year, while one hectare is needed for a cow and 1000 euros are earned per year, analyzes the livestock farmer Resuli.

He said that farmers have realized that the greenhouse gives 2-3 plantings a year, that even if it loses in one cultivar, it wins in another. In recent years, in areas where greenhouses are widespread, the number of cattle has dropped drastically.

INSTAT data show that, during the year 2022, the biggest annual decline in cattle that are also the main producers of milk and dairy was highest in Belsh with 56%, Mallakastër 55%, in Vorë 52%, Lushnjë with 46%, Shijak 45%.

In the North, ranchers are selling cows and buying hives. For example, in the Tropoja area, the number of cattle has decreased by 35% in the last five years, but the number of beehives is increasing rapidly.

Last year, 19,569 beehives were counted in the Municipality of Tropoja with an increase of 22% from 2021 and 166% from 2018. Emigration is a fact that has also negatively affected the sector, which is expected to be further reduced.

Dairy is the main product of the basket of goods, consumed by all ages and necessary for good health, it is now turning into a luxury good.

More difficult, processors increase income

In 2022, the revenues of the three operators in the milk processing sector that occupy over 70% of the market, reached 3.8 billion with an annual growth of 24%. Profits also increased to the same extent.

Luis Ndreka, from "Lufra", said that in 2023 the financial performance is in a slight decline, due to the pressure of increased costs, starting from energy, employee salaries, oil, packaging materials and above all, fresh milk from farms, which accounts for the largest share of our costs.

According to him, a slightly better performance in sales is expected, both in volume and value, mainly due to internal reorganizations, the increase in tourism during the summer, the economic growth of Albania as a whole and above all, from the reflection from the end of last year, a slight drop in shelf prices.

The Association of Milk Processors analyzes that it has become quite difficult to predict the progress of the activity "Informality continues to increase every year, the number of heads (animals bred for milk) has decreased, accompanied by smaller amounts of milk produced by Albanian farmers, while the price of milk bought by farmers has gone to the highest values.

In fact, the price of milk purchased from farmers in Albania is much higher than milk from farmers in the region and in Europe. (40-50% higher).

According to him, the imported products in the sector of milk and its by-products have become more present and dominant in the Albanian market, influenced especially by the high subsidies in the countries of origin, by the low costs of the processing industries in the region and Europe, but the drop in the exchange rate has also had an impact.

According to INSAT, the accumulated amount of cow's milk reaches 140 thousand tons, or 14.7% of production, causing the processing factories to face a high level of informality.

The solution is seen in subsidies and the reduction of VAT

Both livestock farmers and milk processors unanimously affirmed that the livestock sector can only be saved by subsidies and the reduction of the fiscal burden. The compensation per head of milk should be increased and the production per liter should be subsidized, said the farmer Resuli. Also, the livestock farmer Dafina from Balldreni says that she is being forced to sell her cattle due to the lack of support.

Something else that would improve the situation even more is the reduction of the VAT level for these products from 20% to 6%. This would immediately affect the prices of dairy products on the shelf, which would encourage consumption and formalization of the market even more.

The Association of Milk Processors also requested a reduced sales VAT rate for the milk processing sector to 6%, as countries in the region also have, and an assessment of the medium-term effects of the VAT rate reduction for the dairy industry.

Concrete fiscal measures against informality in the milk processing sector, including street milk, unlabelled products and unlicensed/informal processing units.

The association says that support subsidy schemes for livestock similar to those of the region and clearly oriented towards production and safeguards for locally produced products in the dairy sector are needed, in accordance with CEFTA and MSA regulations. Abridged from Monitor


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