Pork production in the Baltic states have not known a stable development since the fall of the Soviet Union. Estonia, Latvia and Lithuania all have their own history in pork production, but they share a common tragedy. It's hard to build up a buoyant industry in times of high feed prices, strong cheap imports – and Classical Swine Fever, as in the case of Lithuania.
Pork production in Latvia, Estonia and Lithuania – together known as the Baltic states – faced a rapid decline in the years after their independence from the Soviet Union, in the early 1990s. This situation, mainly due to radical changes in the economic system, lasted until about 1995. During this period, many of the countries’ largest pig farms went bankrupt. As a result, the volume of pork production in Lithuania and Latvia decreased by half.
Estonia in that same period, sustained relatively smaller losses. As shown in Figure 1, the decline in the rate of pork production was only about 15% in 1995, when compared to the level of 1992. This is commonly presented as a result of the fact that the structure of the pork industry in Estonia at that time was dominated by relatively small farms.
In the years after 1995 the rates of production in all Baltic states developed cyclically. Especially in Lithuania, where by the end of 2005 the pork industry’s turnover equalled more than 75% of losses of the previous period. Later, however, as a result of the global financial crisis, rates began to decline again and this is still felt in some areas.
In recent years, the pork producing industries in all three countries have fought pretty similar battles. One of the major problems for all of them is related to their latitude. Cold, long winters require high energy costs for the production process, compared to costs paid in other EU countries. The pork industries in all three countries have been facing a continuous rise of primary production costs. Prices for carcasses, however, only recently started to grow. Back in 2007, the average price paid for carcasses in the Baltic states was around the mark of €1.40/kg – only in 2012 it is projected that this price may increase. This in turn will result in an overall price increase in supermarkets, ranging from 10% to 30% compared to the current level.
Serious difficulties are being expected in Lithuania as a result of several outbreaks of Classical Swine Fever (CSF). The country’s veterinary services recently decided to cull more than 10,000 pigs in an attempt to control the virus – the losses however, were substantial.
After the reported outbreaks, several countries introduced a temporary ban on pork supplies from Lithuania. As a result, local Lithuanian pig producers were forced to suspend their exports of pork to Russia, Ukraine, Belarus and other Baltic countries which together accounted for a share of about 80% of the total exports. In 2010, Lithuania had exported 442,600 head of live pigs – of which more than half was shipped to Russia. It is worth noting that in the past year, compared to the 2009 level, exports of live pigs in Russia decreased sharply to 282,000 head.
This resulted in a significant decline of total live pigs exported in this time frame.In 2011, from June to August, pigs could not be shipped from Lithuania to both the European Union and Russia. According to official data, national breeders have lost about 4-5 million litas (€1.2-1.5 million) as a result of the export ban to Russia alone. Last but not least – the Lithuanian pork industry has been suffering from cheap imports from neighbouring countries as well, just like the other Baltic states do. Primarily from Russia come relatively cheap products, which can easily compete with the local produce.
According to official statistics, this year’s rate of pork production will drop to a record low for the last 20 years – and the same goes for total pig numbers. The country’s Ministry of Agriculture reports that in the first nine months of 2011, many production facilities went bankrupt or, alternatively, moved to alternative types of livestock. Since the beginning of this year, pork production in Latvia has actually become unprofitable, due to a substantial difference between purchasing and selling prices.
Dzintars Wade, director of the Latvian association of pig breeders states, “Nowadays our main problem is prices. In recent years, costs of production have risen dramatically. In these years feed prices doubled, while prices for pork remained the same.” Local manufacturers already in dire straits cannot compete with foreign products, dumped on the Latvian markets. Representatives of the Latvian association of pig breeders said that the country’s industry can only be saved by radical measures. This would include a complete ban on imports, as well as substantial subsidies for the development of pig farming. In addition, it would mean that the possibility of preferential farming would have to be created for enterprises – in particular to purchase animal feed products against low prices.Wade continues, “Meanwhile, there is a large overproduction of pork in the Western European market, especially in Germany. This affects all countries, including Latvia. And the subsidies received by German farmers from their government are much higher compared to those received in Latvia.”
Varis Simanis, head of the Latvian association of pig breeders, even said that it is time to eliminate the country’s pork production industry, and breeders should demand appropriate compensation from the EU.
“The situation is catastrophic,” says Simanis. “Out of the 270 large farms that were operating just a couple of years ago, with a total stock of more than 300,000 pigs, nowadays only 86 farms remain, having 200 pigs each. Nowadays, a tonne of corn costs 160-165 lats (€226-233), so the farmers can not buy it. However, the losses for each pig equals to 22 lats (€31). We propose that the government eliminate the industry and require an appropriate compensation of the European Union,” adds Simanis.
Estonia is one of the few countries that is completely self-sufficient – its production meets the domestic demand for pork. Last year, Estonia produced nearly 46 tonnes of pork. The pork industry developed dynamically over the past few years. Today, however, it faces a very difficult situation as a result of the increase in grain prices.
Sharp feed price increases of on average 150% were seen from September 2010 until the spring of 2011. As a result, farmers simply do not have enough working capital to buy expensive animal feed.
Meanwhile, purchase prices for pork, despite the appreciation of feed, have remained relatively stable. Roomet Syrmus, head of the Estonian Chamber of Agricultural Commerce recently admitted that the sharp rise in feed prices put Estonian pork producers in a difficult position. Since many do not have land to produce their own feed, it may become even more difficult for many enterprises.
Syrmus said that at current prices, the production of each pig brings about a loss of €10-15/ month. In these conditions, total losses for the pig breeding sector amount to at least €500,000 per month. Syrmus said that the emergency situation calls into question the sustainable development of pork production in Estonia.