Agricultural transformation in Estonia - Situation and outlook in Spring 1998

The transformation of agriculture in Estonia since 1992/93 has shown that i nspire of a liberal economic policy and considerable economic success short ages persist within the area of agricultural primary production: capitalisa tion, privatisation of land, sector services and manufacturing industry The privatisation of state-owned land (ca. 75 % of the AA) is yet to be effect ed. Agricultural production continues to decline with the exception of the dairy sector. In 1997, 54 % of the dairy products were exported without sub sidies. Already today Estonian raw milk production is to a large extent competitive due to low wages and the low cost of investment and land utilisation. Alth ough in the decade ahead, labour and investment cost advantages are expecte d to dwindle, considerable production reserves may be realised for cost red uction. The cost of land utilisation will remain low since the cultivation of cereals holds little competitive advantage. Moreover, the dairy sector b ears considerable streamlining potential and reserves of added value. During the next ten years price trends will favour labour extensification a nd a growing capital intensity. The projected locational conditions point t owards a growing importance of the dairy Industry both in relative and in a bsolute terms regarding factor utilisation and value added. In this area, E stonia should affirm its position as a competitive export nation through a marked effort in agro-structural policy and by investing in the modernisati on of the dairy sector. The necessity for degression of milk production cos ts denotes the need for an increase in the national raw milk production and further concentration and specialisation in the processing sector Regardin g the cultivation of grain and the production based on tradable inputs (egg s, chicken, pork) the status as a basically importing country will be reinf orced.