Integration effect on Baltic States' dairy sector export performance
2011
Ozolins, J., Latvia Univ. of Agriculture, Jelgava (Latvia)
Baltic States’ dairy sectors are important to their economies. All Baltic States have had substantial current account deficits that exceeded acceptable thresholds until the year 2009. The States are dairy product exporters. Export capability largely depends on international competitive position of dairy processing companies. Several factors, inter alia, company size determine the position. Largest companies have been formed by horizontal integration. At Baltic scale dairy processing is still fragmented. The aim of this paper is to evaluate economic effect aspects of integration related to exports in the Baltic States’ dairy sector secondary level. As the subject has not been explored earlier at company level, the author researched data of 188 annual reports of 53 Baltic dairy processing companies over the period 2003 to 2009. Descriptive statistics, time series analysis and regression analysis methods were primarily used. The author establishes that among dairy companies which generate significant exports turnover two-thirds are horizontally integrated and include all largest dairy processing firms in the Baltic States. A few smaller firms have succeeded in exporting due to suitable channel management. Among a large group of companies that generate less than 1% turnover from exports, 77% are non-integrated and all are small. Using regression analysis the author estimates that 1% increase in net turnover in the exporting dairy company group is expected to create 0.93 – 0.94% increase in net turnover from exports. Policies promoting mergers of some companies may thus lead to increased dairy exports, higher milk production and fuller realisation of economic potential of the sector.
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