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

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

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

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. 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. 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. 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. 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 The number of farms in 1993 Total 8 412 Total 8 412 Size classes: - Up to 10 ha1699 - 10,1-50 ha5884 - 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 50023 200 114 500 52 100 31 50023 200 1991 year 16,8% / 54% 1991 year 16,8% / 54% 2006 year 3,5% / 13% 2006 year 3,5% / 13% Agriculture was a main employer in countryside before agricultural reforms 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 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 agricultural goods Prices of the inputs (trend to increase) Prices of the inputs (trend to increase) Changes in the demand of the food (trend to increase) Changes in the demand of the food (trend to increase) Increase of efficiency Increase of efficiency

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

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

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 holdings Total numbers: 2001 - 54 728 2005 - 27 688 In Estonia 6724 agricultural holdings exceeded the threshold of the economic size of 2 ESU 1 ESU = 1200 EUR <2 ESU 2-<16 ESU, >16 ESU 2001 46 591 7328809 2005 21 022 5 616 1 108

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 Competitiveness Health and food safety Health and food safety Trade Trade Energy supply Energy supply Rural development Rural development

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

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

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

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

22. Rethinking the economic role of Estonian agriculture There is a need to Redefine the role of agriculture in a knowledge- based economy 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) 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 Identify the opportunities and threats of Estonian agriculture in an increasingly competitive world Deal with high uncertainties Deal with high uncertainties

23. What we have do know about future? General changes in the economy will efect agriculture 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 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 Support and different payments should be considered as temporary means

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