Grāmatas

Agricultural Situation and Prospects in the Central and Eastern European Countries: Latvia

1995. gadā Eiropas komisijas Lauksaimniecības ģenerāldirekcija DG VI publicēja pētījumu un publikāciju sēriju par desmit valstīm - par lauksaimniecības situāciju un perspektīvām asociētajās valstīs (CEEC valstis). Pārskati sniedza pārejas lauksaimniecības analīzi un lauksaimniecības un pārtikas nozare šajās valstīs attīstījās deviņdesmito gadu pirmajā pusē un galveno lauksaimniecības preču tirgu perspektīvu novērtējumu līdz 2000. gadam. Šis ir atjaunināts 1995. gada ziņojums, kurā jau vērtēta perspektīvas līdz 2003. gadam. Pamatā likta esošā darba hipotēze, ka pirmās CEEC valstis pievienosies Eiropas savienībai, ar integrēšanu vienotajā tirgū un Kopējā lauksaimniecības politikā 2003.gadā. Pilns pētījuma teksts lasāmā formātā pievienots pielikumā kā PDF fails

Executive Summary 
General economic situation 
Latvia, with a population of around 2,46 million, 
had in 1997 a gross domestic product (GDP) of 
ECU 4 743 million (expressed in current prices), 
equivalent to 14 119 million ECU at purchasing 
power parity. The first years of independence and of 
economic transition were marked by a dramatic 
output decline. Economic growth resumed in 1996 
at a rate of 3,3 % and accelerated sharply in 1997 
to 6,5 %. 
The exchange rate of the Lat has been relatively stable against the ECU. Inflation is down to 6 % in 
1998, from a peak of three digits in 1992. Prudent 
fiscal policy, and the withdrawal of the government 
as a major borrower from the domestic market has 
allowed a decline in commercial credit rates, and an 
increase in the volume of lending to the private sector by commercial banks. Commercial lending rates 
for short-term credits fell nominally to around 13% 
by the end of 1997. 
Non-working persons, registered with the State 
Employment System in January 1998, numbered 89 
558. This represents a rather moderate official 
unemployment rate of 6, 7 %. Considerable regional 
disparities exist. In areas around Riga, unemployment is around 4 %, whereas in other parts, unemployment exceeds 26 %. In addition, there is a significant level of hidden joblessness. 
Compared to the first 11 months of 1996, Latvia's 
total exports grew in 1997 by 21,6 %, while its 
imports grew by 25,5 %. The gap between the gross 
value of exports and imports has continued to grow. 
Latvia's major exports were wood pulp and wood 
pulp products (29 ,9 % ), textiles and textile products 
(15,6 %), food products (up to 14,5 %), and 
machines, mechanical devices, electrical equipment 
(9 % ). The EU has been growing in importance as an 
export market with a share of around 50 % in 1997. 
Agriculture in the national economy 
In 1996, agriculture and agro-processing accounted 
together for around 15% ofGDP. The importance of 
primary agricultural production in terms of GDP is 
declining. In 1996, the percentage of primary agricultural production amounted to 7,6 % of total 
added value and it fell to 6,9 % in 1997. 
In 1997, around 17 % of the working population 
were employed in agriculture, whereas 3 % were 
employed in the food processing industries. 
Increasing prices for agricultural commodities and 
the steady decline in real income since 1990 led to 
changes in the patterns of food consumption. Consumers substituted cheaper products for more 
expensive ones. As a result, consumption of dairy 
products, meat, fish, eggs and sugar declined, while 
consumption of potatoes, vegetables and edible oils 
increased. 
The proportion of household spending on food 
increased to 52,2 % in 1996 from 44 % in 1995 
because of large retail price increases. In 1997 the 
turning point may have been reached when household expenditures fell to 49 %. 
Land use and farm structures 
Total agricultural area in Latvia is 2,52 million ha 
(39% of its total land area), of which 1,7 million ha 
are classified as arable land (67 %). 44% of Latvia 
is covered by forests (2,9 million ha) and timber production is rising steadily. The most fertile soils can 
be found in the plains to the south of Riga, where 
most of the sugar beet production and also fruit and 
vegetable production is concentrated. The central 
and eastern mountainous areas are less favourable 
for crop production and are therefore dominated by 
cattle breeding. 
CEC Reports - Latvia > 7 
I 
In 1997, the sown area accounted for 1 million ha, 
which represents only 40 % of the agricultural land. 
Meadows and pastures cover about thirty percent of 
the agricultural land. The land use for the remaining 
30% is not clear; a reasonable assumption appears 
to be that this proportion is idle. 
A significant feature of the changes in the arable 
sector was the sharp decline of the production of 
fodder crops which, in 1997, accounted only for half 
of the area used for these crops in 1990. While sugar 
beet, oils seed and vegetables represented a low percentage of the total sown area, with the absolute 
number of hectares decreasing over time, the 
increase of the total sown area from 1996 onwards 
resulted from an increase in the cereals. Potatoes 
remained broadly stable with some fluctuations 
reflecting short-term responses to the market situation. 
With the land privatisation process winding up, land 
division has resulted in 95 000 family farms with an 
average farm size of 23,6 ha; this includes on average 13,7 ha of agricultural land and 7,7 ha of forest. 
Additionally, there are 173 000 household plots with 
an average size of 7,9 ha, including 4,9 ha of agriculturalland and 2,1 ha of forests. There are 474 
agricultural enterprises and statutory companies and 
81 specialised State farms, which together own 
around 5 % of the total agricultural land. 
Delays in land titling and registration have seriously 
constrained land transactions. As a consequence, a 
functioning land market has not really evolved yet. 
Agricultural production 
Following the major drop in farm output in the transition period, the level of production started to stabilise in 1997. Gross agricultural output even experienced a minor increase in 1997 when it reached 
LVL 9,100 million. The tendency towards stabilisation was totally due to a rise in crop output as livestock production continued to decline. 
8 < CEC Reports - Latvia 
Cereals have been the most important arable crops 
grown over the last decade on roughly half of the 
cultivated area. An upward trend in the total sown 
area could be observed since 1996, which kept 
momentum in 1997 reaching 482,7 thsd. ha. The 
area sown with cereals is, however, still 30 % below 
its 1990 value. Yield reached on the average of all 
types of cereals 2, 14 t/ha in 1997. Total grain production recovered from a low level of 687.000 tin 
1995 to 1.037.000 t/ha in 1997. 
Both the potato area and harvest remained stable in 
the first third of the decade with some fluctuations 
due to weather conditions. In 1997, the potato area 
reached its low at 69 thsd. ha. With yields remaining 
stable, the level of total production followed the 
decline in area and reached 843 thsd. tin 1997. 
The area planted with sugar beet has been relatively 
constant reaching 11 thsd. ha in 1997. Sugar yields 
and sugar content were relatively low, especially in 
the first years of the reform period, while recovering 
to the pre-reform levels in 1997. A recovery of sugar 
production could be observed during the last three 
years up to a level of 3 87 thsd. tonnes in 1997. 
The main fruit grown in Latvia are apples and other 
tree fruits, which account for roughly 90 % of total 
fruit production. Other fruits grown are strawberries, raspberries and black- and red currents. The 
area under fruit trees has declined in recent years, 
whereas the area planted to berries has increased, 
mainly in small household plots. 
The cultivation of vegetables increased, mainly on 
household plots, whereas professional production on 
large-scale farms has dropped significantly in recent 
years. As a net effect, total production dropped to little more than two thirds of its pre-independence 
level and reached 146,5 thsd. tonnes in 1997. 
In 1997, dairy production accounted for roughly one 
fourth of total agricultural output and half of the 
livestock part in GAO. Between 1990 and 1997, 
total milk production has been reduced to half of its 
pre-reform level. The decline in cow numbers, 
which continued up to 1997, was outweighed in 
recent years by increasing yields per cow, resulting 
mainly from the selection of more productive cows 
in the de-stocking phase. As a net-effect, production 
shows a certain recovery in 1997 with a level of 986 
thsd. tonnes. 
Beef meat has turned to hardly more than a by-product of milk-production, with a contribution to the 
livestock GAO of not more than 10 % in 1997. 
The cattle inventory showed a decline from about 
1,47 million animals in 1990 to almost a third, i.e. 
509 thsd. animals, in 1997. At the same time, the 
proportion of dairy cows in the herd increased from 
37% in 1990 to 54% in 1997. Total production of 
beef and veal was at a level of 125 thsd. tonnes in 
1992. Until 1997, total production experienced a 
dramatic contraction, falling to only 27,6 thsd. 
tonnes. 
Developments in pig production, which was before 
independence was the most important part in meat 
production, witnessed a sharp decline. The steady 
decline came to an end in 1997 at a production level 
of 44,5 thsd. tonnes which represents only a third of 
the pre-independence output. The main problem of 
the transition process was the deterioration of production capacities in units of a competitive size. 
Individual farms and household plots increased their 
share in stocks from 13 % in 1990 to 60 % in 1997. 
In 1997, production of poultry meat reached with 
7,6 thsd. tonnes, only a fifth of pre-independence 
level. Its share in livestock GAO accounted only for 
4,5 %. Production of poultry meat used to be concentrated in a few very large-scale state enterprises 
which accounted, in 1990, for 90% of the stock, and 
- after their transformation into private statutory 
companies - still hold a share of 70 %. 
Egg production has a higher share than poultry meat 
within GAO. In 1997, its proportion was 12 %. Total 
production was 464,7 million eggs in 1997 - half of 
its pre-independence level. Egg production has 
experienced, however, a positive development over 
the last four years. In 1997, production was 30 % 
higher than in 1994, when production hit its lowest 
level. 
The forest sector has a high potential that could be 
mobilised relatively easily. In the last few years, the 
timber harvest has markedly increased. In 1997, 
9million m2 (about 3,1 m2
/ha) were cut as compared 
to only 4,4 million m2 (about 1,6 m2
/ha) in 1991. The 
1997 figure may be considered having reached the 
limit of increment. For the future economic development of Latvia, the forestry sector and its related 
industries have a significant potential. 
Agricultural trade 
Following liberalisation, trade patterns changed dramatically. Over the last 5 years, Latvia changed from 
a net-exporter of agricultural commodities to netimporter, while the share of agricultural trade in 
total trade is still significant. 
Agricultural exports were at LVL 141,1 million in 
1997, which is an increase of 5 % as compared to 
1996. Agricultural exports accounted in that year for 
14,5 % of total exports. Agricultural imports 
increased from 1996 to 1997 by 28 % reaching LVL 
219,5 million. This represents a proportion of 15 % 
of total imports. The trade deficit in agricultural 
commodities 78 million LVL in 1997. 
The rise in imports of food products gathered 
momentum in 1995, notably for products such as 
fruit, sugar, tropical beverages and cocoa. By the 
end 1997, it was estimated that grain imports, which 
had in the past accounted for one quarter of total 
agro-food imports, had fallen to around 3, 7 % of the 
total value. The main imports were alcoholic beverages, juices and mineral water, fish, sugar, and fruit 
and vegetables. Traditional export commodities like 
meat and live animals reached a remarkable share of 
5%. 
CEC Reports - Latvia > 9 
The main destination of Latvian agricultural exports 
has been the NIS. The Russian and especially the St. 
Petersburg regions remain an important market, 
since both the difficulties in attaining EU production standards and the longer distances to large 
Western markets make a significant shift of trade 
flows towards the EU difficult. 
As far as imports of agricultural and food products 
are concerned, the Member States of the European 
Union have become the largest partners. In 1997, the 
EU share in Latvian agricultural imports accounted 
for 53 %. The CEECs have become the second ranking source of agricultural imports. Showing high 
First signs of a positive development reveal a certain 
improvement in competitiveness. Growing Western 
imports put pressure on the Latvian food industry to 
reorient towards meeting consumer requirements by 
increasing the quality and variety of food products, 
as well as improving the packaging. Nevertheless, 
serious problems remain to be solved. The quality of 
Latvian food industry output; although improved, 
still varies greatly, reducing the export possibilities 
for such products, especially to the West. The outdated machinery and the lack of access to capital 
also hamper the competitiveness of this sector. 
fluctuations in recent years, their share more than Environmental aspects 
doubled between 1990 and 1997. 
Up- and downstream sectors 
Within the agricultural industry, privatisation in the 
processing industry and the food sector started in 
1992-1993 and is now virtually complete. 
During the last three years, food processing accounted for 8 to 9 per cent of total GDP and for about 40 
per cent of GDP in manufacturing. Roughly 400 different food-processing plants exist in the country. 
These employ about 30 000 people or 3 % of the 
total number of employed persons, with an average 
output per employee of about LVL 17 000 per year. 
There are a relatively large number of meat, dairy 
and mill processing firms (140, 73 and 17 respectively), 65% of these firms are estimated to employ 
less than 100 people - only 5 % have more than 500 
employees. 
The Soviet regime left Latvia with a set of environmental problems concerning eroded land, polluted 
sites, and hazardous livestock units. 
The main environmental problems related to agriculture include the eutrophication and pollution 
caused by nitrogen, phosphorus and other biogenic 
materials, pesticides and heavy metals. A major 
problem is the pollution of the Baltic Sea. In 1993, 
wastewater resulting from agricultural activities, 
food processing and fishery production represented 
21 ,3 % of total wastewater discharges in Latvia. 
The use of pesticides and synthetic fertilisers fell 
sharply over the last few years. While this poses 
problems for agricultural productivity, the implication for the environment is clearly that the risk of 
pollution from farm inputs has, at least on the average, diminished. 
Both the dairy industry and the milling industry, Agricultural policies 
where the four largest milling enterprises have a 
market share of 60 %, reveal growing concentration. 
At the same time enterprises have started to specialise, targeting a definite segment of the consumer 
market with their production activities. The milkprocessing sector has specialised in either whole 
milk or products such as cheese or ice cream. 
10 c CEC Reports - Latvia 
After independence Latvia adopted a liberal profile 
in agricultural policy. Support has been provided 
mainly by border protection measures. The current 
political discussion within the farm sectors points, 
however, towards a higher engagement by the state 
in the development of the agricultural sector. The 
agricultural budget reaches LVL 39,64 million in 
1998, which is a spectacular increase of 40 % as 
compared to the budget of 1997. 
The limited use of price support over the past years 
led for most commodities to prices, which are significantly lower than the comparative EU prices. 
The price gap between Latvian producer prices and 
EU prices is less significant only for those commodities where EU price support has been moderate, for example pig meat and rape seed, or for 
which a high world market price could be observed 
as for cereals over the last few years. For poultry, 
Latvian prices are even higher, since tariff rates are 
higher than in the EU. 
Agricultural commodities, which are domestically 
produced are protected with tariff rates ranging from 
25% for wheat to 60% for refined sugar. The Government announced in 1996 its intention to reduce 
tariffs from the current levels of 30-50 %to 30 %. In 
the year 2000, the differences in tariff rates for different commodities are bound to be reduced, which 
will result in lower rates for butter, cheese and pig 
meat. 
Certain tax reliefs exist to stimulate agricultural production in Latvia. Until recently, private individual 
farmers, householders and private auxiliary farmers 
were not liable to pay income tax on income earned 
in agriculture. Property tax is not levied on property 
used exclusively for agricultural operations. Since 
1995, some reimbursement of excise tax on diesel 
fuel used in agriculture is granted for agricultural 
producers. 
The agricultural and rural support package for 1998 
focuses on addressing structural problems and the 
development of rural areas, including an improvement of the rural environment. Provision of support 
is geared towards preparing for integration into the 
European Union Common Market and compliance 
with EU production requirements. It will also provide an element of co-financing in the context of EU 
pre-accession policies. 
The 1998 budget foreseen for structural policy and 
rural development support reaches in total LVL 
17126,7, which represents 43 % of the agricultural 
budget. The funds allocated to different programme 
areas include support of modernisation and 
improvement of productivity, the development of 
marketing channels, diversification of income 
sources of farm households, agri-environmental 
activities and credit guarantees. 
Latvia signed the Agreement on Free Trade and 
Trade-related Matters with the EU on 18 July 1994. 
Under this agreement, which entered into force on 
1 January 1995, the EU eliminated restrictions on 
imports of industrial products from Latvia in January 1995. For agricultural and food products, the 
agreement provides for reciprocal trade concessions. 
These concessions represent a significant potential 
for Latvia to export to the EU its meat and dairy 
products. Unfortunately, a lot of current access is 
not taken up due to Latvia's inability to comply with 
EU import requirements. Some progress has been 
achieved to date, which is illustrated by .the fact that 
since January 1998 six dairy processing establishments have been licensed to export to the EU. However, as of July 1998, no Latvian slaughterhouse has 
received the authorisation for exports to the EU. 
Serious efforts are being made to adopt the "acquis" 
in the field of agriculture. This includes the introduction of measures to modernise agriculture as 
mentioned above. Measures to bring Latvian agriculture into line with EU environmental requirements and rural development measures are due to 
start in 1998 and are envisaged to be strengthened in 
subsequent years. A good deal of legislation on veterinary, phyto-sanitary, and quality- and healthrelated standards is in preparation or has already 
been established and, at least in parts, implemented. 
CEC Reports - Latvia > 11 
General Oudook for Latvian 
Agriculture 
The stabilisation and recovery of Latvian agriculture 
is highly dependent on general economic growth 
and growth in consumers' real income. Recent figures show signs of a recovery in the macro-economic situation. GDP increased in 1996 for the first time 
in the Nineties and reached in 1997 a strong growth 
rate of 6,5 %. These growth rates are likely to be 
maintained for the near future. 
With the strong growth of GDP, the real income per 
household increased. The population of only 2,6 million inhabitants has, however, only limited purchasing power and the market for processed, high value 
added products is small. Positive developments in 
per capita consumption of some products like white 
meats, potatoes and vegetables may be offset to 
some extent by a further decline of the Latvian population, which is assumed to continue, although at a 
lower rate (0,6 %). 
In line with the overall economic development, agricultural production recovered somewhat in 1997, 
but at a slow pace. This recovery was due to an 
increase of crop production, whereas the decline in 
livestock production continues, although at lower 
rates. With a view to the future trend it appears reasonable to assume that crop production will continue to recover much quicker than the livestock sector, 
which is particularly in need of investment. 
Total agricultural land is assumed to remain at the 
1997level of2,53 million hectares. The share of idle 
land will most probably continue to decrease again, 
since parts will be allocated to other use, and parts 
will be brought back into cultivation to meet the 
increased need for cereals and fodder area. The economically favourable long term prospects for 
forestry implies an increase in the forest area. 
Agricultural production costs are still marked by 
low costs for labour and machinery. Labour productivity is, however, also low, compared to Western 
12 < CEC Reports -Latvia 
standards. Production costs per output unit are 
affected by low yields in the crop sector due to climatic conditions and the low fertility of the soil. 
Feed conversion rates in the livestock sector are considerably lower than in the EU. 
Progress in the completion of land registration and 
more concentration on structural and rural policies 
are likely to give momentum to the structural development of agriculture, and improved productivity. 
Together with funding from international institutions and the EU pre-accession programmes, SlCh 
policies should become an important driving force 
in the process of structural adjustment and recovery 
of Latvian agriculture. 
With the completion of privatisation, an essential 
precondition for a recovery of the food processing 
industry is met. Although the first positive signs of 
an improvement are visible, a significant take-off in 
the food processing industry is still awaited. Low 
capacity utilisation rates, obsolete equipment, and 
the slow pace of renovation caused by the lack of 
investment remain serious problems. 
Agricultural trade will remain important, but the 
trade balance is likely to stay negative after the tum 
of the century. Only for cereals and dairy products 
will domestic production continue to exceed consumption. The NIS and especially . Russia will 
remain the principal markets for Latvian products in 
the coming years although some cutbacks may result 
from the actual economic crisis in Russia. There 
would be a chance to reverse the trend of a widening 
trade balance for agricultural commodities, if Latvia 
manages to take advantage of trade opportunities 
established by the free trade agreement with the EU. 
Prospects for Crop Production 
The recovery in arable production involves a certain 
specialisation, which contributes to the relatively 
high share of cereals. The cereals area is assumed to 
increase to 548 thsd. hectares by 2003, following a 
trend which has already started in 1996. As a result 
of the development of area and yield, production 
should increase to 1246 thsd. tonnes by 2003, from 
1038 thsd. tonnes in 1997. By 2003, utilisation will 
total 982,8 thsd. tonnes. Self-sufficiency is expected 
to be at 127 % by the year 2003, which is significantly higher than the level of 1997 (112 %). 
Potatoes are relatively important for the domestic 
market and rank second among the marketable crops 
produced in Latvia. The cultivated area will stabilise 
at the 1995level of roughly 75 thsd. hectares which, 
subject to yields, enables Latvia to reach self-sufficiency in potato production. Production should 
increase to 949 thsd. tonnes by 2003, from 843 thsd. 
tonnes in 1997. Human consumption will decline 
further, as a result of increasing income. By 2003, 
utilisation will total952 thsd. tonnes with self-sufficiency at a level of 99,7 %. 
Sugar production played only a limited, albeit stable 
role in Latvian agriculture with a share in the sown 
area of around 1 %. The cultivated area is expected 
to cover 12,3 thsd. hectares in 2003 which is a little 
bit higher than the 1997 level and still lower than 
that of 1990. As a result of the development of area 
and yield, the production should reach 39 thsd. 
tonnes of raw sugar by 2003. Human consumption 
of sugar, including processed sugar is expected to 
increase again to 33 kg per capita in 2003. By 2003, 
utilisation will total 79,9 thsd. tonnes. Self-sufficiency is expected to be at 48,8 % in 2003. 
Prospects for Livestock Production 
Milk production has traditionally been a key element 
in livestock production. Since the pre-independence 
yield level has been reached again, only a moderate 
increase in yield is expected for the coming years. As 
a result of the expected developments in cow 
numbers and yields, the production should increase 
to 1034 thsd. tonnes by 2003 from 986 thsd. tonnes 
in 1997. Total human consumption is expected to 
reach 759,4 thsd. tonnes in 2003 which would result 
in a rate of self-sufficiency of 104,7 % by the year 
2003. 
A recovery of the dairy herd will also improve the 
basis for beef production. The average carcass 
weight may increase from its currently low level of 
140 kg to roughly 180 kg by 2003, which would still 
be only 80 % of the 1990 level. As a result of 
increased carcass weight and an increasing herd 
size, production is expected to reach 32,4 thsd. 
tonnes by the year 2003. Beef consumption will 
increase only moderately to 41 ,8 thsd. tonnes by the 
year 2003, with self-sufficiency reaching 77,3 %. 
Pig production used to be the most important branch 
in Latvian livestock production. The number of animals is expected to recover from the year 2000 
onwards. This implies a forecast pig population of 
493 thsd. animals by 2003. The carcass weight is 
expected to remain at 84 kg, the average figure for 
the last five years. As a result, pork production will 
recover by 2003 to a level of 50 thsd. tonnes, an 
increase of 10 % over the 1996 level. A moderate 
increase in total consumption to a level of 70,7 thsd. 
tonnes in 2003 is projected. Self-sufficiency in pork 
will be at 70,3% by the year 2003. 
Poultry has kept a small, albeit, stable share (4-5 %) 
in the gross output of the livestock sector. Following 
the strong decline in animal numbers up to 1997, 
livestock numbers will start to recover in 2000 by 
5% and increase in 2002-2003 by 4 %. Production 
could increase from 7,6 thousand tonnes in 1997 to 
10,4 thousand tonnes in 2003. With consumption 
per capita reaching 9 kg by 2003, total consumption 
would amount to 21,6 thsd. tonnes in 2003, which is 
an increase by 15,1 % as, compared to the 1997 
level. Self-sufficiency is expected to increase from 
1999 onwards up to 48,1 % in 2003, which is 
extremely low, bearing in mind that Latvia used to 
be a net-exporter of poultry meat.