Agriculture sector looks to restore profitability

  • 2004-04-29
  • By Aleksei Gunter
TALLINN - Andres Annuk, 41, assistant professor at Estonian Agricultural University, gave up his sheep breeding and grain cultivation business several years ago. Now his farm in the Parsti parish of Viljandi county has only a potato field and a garden with some 60 apple trees.

"One should have at least 100 hectares for grain cultivation so the harvester would have the proper workload," says Annuk, who was forced to give up his 30-hectare field of rye at his farm in southern Estonia.
In his opinion, the life of small agricultural companies and individual farmers has always been difficult, and it's about to get more so in the EU, despite support from various programs aimed at developing rural areas.
"In Estonia, it is nearly impossible to start a small new agricultural company based on local capital. Today the strongest agricultural producers are those that developed from the remains of the big old Soviet enterprises," says Annuk.
The main factor that will hamper EU development of Estonia's small agricultural producers will be the complexity of regulations and norms, he explains.
"Sometimes it seems that the EU has gone too far with those regulations," he said.
Annuk names production quotas, production regulations and the open market as the three main postaccession changes facing the agricultural sector.
Production regulations – the rules for all kinds of plant cultivation and storage and cattle breeding – will have differing effects on various branches of agricultural production.
"For example, chicken farms will face spending increases as it will be prohibited to keep as many hens in one cage as now," says Annuk. "At the same time cattle breeding may become cheaper, as it will be possible to keep cows in unheated barns in winter."

Generally, Estonian farmers should benefit from getting into the vast EU market. Membership will remove subsidies on many foreign goods, such as Polish pork and butter.
However, the opportunity of using only Estonian raw materials – which local consumers appreciate – may be curtailed in a rapidly globalizing market.
"Already today Estonian producers of white bread exaggerate when they say their production is made of wheat flour milled from Estonian grain, according to the information I have," says Annuk, explaining that it is impossible to produce extra-white bread from Estonian grain since the climate here is too humid and local bread producers lack modern processing technology.
Ants Laansalu, adviser with the Ministry of Agriculture, says that the stability of the agricultural product market will increase thanks to EU regulations.
This is seen as a major step toward the improvement of agricultural sector profitability. As a result of the 1998-1999 economic crisis, income in the agricultural sector has decreased by one-third. Due to the world recession in 2002, Estonian farmers' turnover dropped by 10.5 percent, while just 4 percent for EU farmers.
"The agricultural products market used to be profitable for trade not manufacturing, and this is what is about to change," says Laansalu. "EU market regulations will also provide the balance in the food production chain between agriculture, food processing and trade sectors, and Estonian farmers, for example, will be able to receive a bigger part of the product's retail price."
The ministry expert considers EU accession a positive change for small producers since smaller farms with annual sales from 2,000 euro to 18,000 euro can apply for special "living farms" and a number of other allowances not linked with production volume.
On April 22, the government approved the Estonian Rural Life Development Plan for 2004 to 2006, according to which the country will apply for 150 million euros in financial aid from the EU. Officials say the goal of the development plan is to support subsistence by means of the EU's Common Agricultural Policy and to ensure equal regional development.
Laansalu emphasizes that allowances should not be seen as social security benefits. "Every allowance is connected to certain requirements and obligations that proceed from the agricultural principle of keeping the land and nature in perfect order," he says.
Speaking about the future of GM food cultivation, Annuk says that it's not likely to appear earlier than five to 10 years from now. "Cultivation of GM plants will not likely be pushed by the EU, but it could be pushed by the market if growing regular plants will become too uneconomical," he says.