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Seminar “ Future of Agriculture: views of the EU member states and Australia”

Seminar “ Future of Agriculture: views of the EU member states and Australia”. Estonian experience and visions (1992 – 2014). Rando Värnik Institute of Economics and Social Sciences Estonian University of Life Sciences. Outline of presentation.

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Seminar “ Future of Agriculture: views of the EU member states and Australia”

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  1. Seminar “Future of Agriculture: views of the EU member states and Australia” Estonian experience and visions (1992 – 2014) Rando Värnik Institute of Economics and Social Sciences Estonian University of Life Sciences

  2. Outline of presentation • What have been the main experiences since 1992? • What are the major challenges in Estonian agriculture and food industry in the future? • What are the key questions in the future ?

  3. The beginning of activities Some results from farm survey carried out in 2007/2008 Most of the agricultural producers started their activities after agricultural reform in 1992

  4. Economic environment in 1991-2000 • After regaining independece for Estonian enterprices the access to the world market characterised by oversupply, high tariffs and price distortions was opened. • Collapse of Eastern markets. In the beginning of nineties the production of foodstuffs almost twice exceeded the amount what was needed to supply Estonian own market. • Western markets remained unreachable for most of the Estonina goods due to high tariff barriers and food safety requirements. • Caused by abundant supply to domestic market the prices for agri-food products falled below the world market level.

  5. Some figures from the past The number of farms in 1993 • Total 8 412 Size classes: - Up to 10 ha 1699 • 10,1-50 ha 5884 • 50,1-100 ha 784 • over 100 ha 45 The average size of a farm 25,4 ha

  6. Structural changes in Estonian agricultural sector Engaged in agriculture, persons 1992 1996 2000 2006 114 500 52 100 31 500 23 200 • 1991 year 16,8% / 54% • 2006 year 3,5% / 13% • Agriculture was a main employer in countryside before agricultural reforms • In 1991-2003 the number of agricultural producers has decreased 5 times. The total agricultural production has fallen 2 times

  7. What are the key elements for agricultural producer in Estonia in the future? • Prices of the agricultural goods • Prices of the inputs (trend to increase) • Changes in the demand of the food (trend to increase) • Increase of efficiency

  8. The dynamics of cereals’ prices in the EU (EUR/t), 1991 - 2014

  9. Changes in milk production, % Before accession to EU After accession to EU Generally there is an increasing demand for milk products

  10. Changes in the numbers of livestock in Estonia, 1992 - 2006 Average milk yield per cow in 2007, 6363 kg Milk qoata 659295 t

  11. Changes in production of cereals in 1996-2006,%

  12. Changes in the average yields of cereals in Estonia, 1992-2006

  13. Cereals resources and use in Estonia, 2000- 2007

  14. The structure of agricultural holdingsTotal numbers: 2001 - 54 728 2005 -27 688In Estonia 6724 agricultural holdings exceeded the threshold of the economic size of 2 ESU

  15. Distribution of agricultural holdings by economic size in 2005 Appox. 4% from the ag. holdings gives 2/3 from standard gross margin 1 ESU = 1200 EUR

  16. Comparison of Estonian and Finnish agricultural holdings by the economic size

  17. Major challenges in Estonian agri-food industry • Competitiveness • Health and food safety • Trade • Energy supply • Rural development

  18. More globalised competition Differentiated products Vertical integrated supply chains Pressure to increase productivity The economics of innovation Willingness-to-pay Competitiveness

  19. From farm survey:Age groups of agricultural producers Average age 56 years Over 50 years old – 73% of small scale enterpreneuers, 71% of middle size ja 42% of big producers

  20. Current trend: Global oil use will double by 2030 Bioenergy as part of a new energy portfolio Potential benefits: Reduced GHG Land improvements Increased energy security Enhanced rural activity Potential disadvantages: higher food prices Increasing technology gaps Energysupply

  21. Concluding remarks • Rethinking the economic role of Estonianagriculture • What we have do know about the future?

  22. Rethinking the economic role of Estonianagriculture There is a need to • Redefine the role of agriculture in a knowledge-based economy • Adopt holistic approach in thinking and acting about the 4 Fs (Food, Feed, Fuel and Fibre) • Identify the opportunities and threats of Estonian agriculture in an increasingly competitive world • Deal with high uncertainties

  23. What we have do know about future? • General changes in the economy will efect agriculture • On the opinion of analysts the price level of agricultural production can change. Should price level on agri-food markets decrease the according measures for increasing competitiveness have to be implemented • Support and different payments should be considered as temporary means

  24. Thank for your attention! Rando Värnik, PhD, Assoc. Professor Director of the institute Economics and Social Science

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