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

This seminar will explore the main experiences and challenges faced by Estonian agriculture and food industry since 1992, and discuss the key questions for the future. It will also highlight the structural changes in the agricultural sector and the key elements for agricultural producers in Estonia.

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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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