Analysis of the Milk Production and Milk Price in Latvia

Dairy farming (milk production) is one of the important sectors in agriculture economic in Latvia. After joining the EU the dairy sector in Latvia has changed, small dairy farms could not complete the new technological requirements of milk production and it was the time when in the country the amount of dairy cows was reduced by 9.3% during the two years from 2003 to 2004. During the last ten years farms involved in commercial milk production often had substantial modernization, the farmers are motivated to improve cows keeping and feeding. The smaller number of dairy cows is partly offset by the regular growth of their milk yield. Thereby average milk yield per cow during the ten years has increased by 42% and has reached 6993 kg in 2014. Milk price is depending on the economic and political situation in the world, it is also influenced by the geographic location, seasonality, and raw materials (feed, electricity, fuel) prices. During the last 10 years the average milk price in Latvia has increased by 60% with variation during the seasons therefore the purpose of this paper is to analysis the milk supply and demand to its price, using the forecasting models.