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Economic Analysis and Development Prospects of the Crop Farming Sector in Latvia

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Economic Analysis and Development Prospects of the Crop Farming Sector in Latvia I. Vitola, S. Avota Economic Analysis and Development Prospects of The Crop Farming Sector in Latvia ECONOMIC ANALYSIS AND DEVELOPMENT PROSPECTS OF THE CROP FARMING SECTOR IN LATVIA Irija Vitola 1, Dr.oec.; Sanita Avota , Ms.oec. Faculty of Economics, Latvia University of Agriculture Abstract. $JULFXOWXUDO FRPSDQLHV DUH LPSRUWDQW IRU FUHDWLQJ D VWDEOH DJULFXOWXUDO LQGXVWULDO FRPSOH[ &RPSDQLHV are dependent on grain purchase prices and dictate their rules; they should provide a production storage system to reduce these factors maximally. Businesses should also follow very conservative borrowing policies resulting in effective protection against a variety of external factors such as price changes, weather conditions, and national HFRQRPLF SROLF\ 7KH DLP RI WKH UHVHDUFK LV WR SHUIRUP DQ HFRQRPLF DQG ¿QDQFLDO DQDO\VLV DQG WR DVVHVV FURS industries as well as to explore their development perspectives. It is possible to increase the area sown with JUDLQ LQ /DWYLD PDLQO\ LQ OHVV LQWHQVLYHO\ H[SORLWHG DUHDV OLNH 3LHULJD .XU]HPH SDUW RI 9LG]HPH DQG /DWJDOH %HVLGHV WKHUH LV D VLJQL¿FDQW SRWHQWLDO IRU LQFUHDVLQJ FURS \LHOGV LQ /DWYLD FRPSDUHG ZLWK WKH RWKHU (8 0HPEHU States. It is also necessary as far as possible to seek for lower costs to reach the highest possible outcome. The company major risk factors include adverse climatic conditions, unprotected domestic market, unpredictable current asset prices and price increase as well as grain purchase prices – a factor unknown at the time of sowing. Key words: FURSIDUPLQJVHFWRU¿QDQFLDODQDO\VLVJUDLQUDSHVHHG JEL code: Q11, G3 Introduction Research results and discussion Agricultural industry is closely related with other 1. Characteristics of the crop farming sector industries, and it depends on prices of inputs needed for of Latvia and the supply of crop farming production: fertilisers, pesticides, fuel and machinery, products to the domestic market and prices of services. It is also affected by the Unlike other industries of the national economy, crop world demand for agricultural products; while farming has several peculiarities, thus, it is one of the supply, in its turn, to a great extent depends on most complicated industries of the national economy the weather conditions in various regions of the requiring extensive knowledge on the growth and world which unfortunately is a factor not to be GHYHORSPHQW RI SODQWV WKH VSHFL¿FV RI DQ\ LQGLYLGXDO LQÀXHQFHG crop, plant nutrition, and the environment where the Agricultural enterprises have to produce their process of crop yield formation takes place, i.e. soil products under tough competition, and market studies (Latvian Ministry of Agriculture, 2006). are one of the most important procedures before As of 1 January 2011, the agricultural area was PDNLQJDQ\¿QDQFLDORUHFRQRPLFGHFLVLRQ7KHFRPSDQ\ 2423231.1 ha or 37.6% of the total area of the country PDQDJHUV KDYH WR SRVVHVV UHOLDEOH VXI¿FLHQW DQG (State Land Service, 2012). In 2010, the Rural Support timely information to reduce the company’s risk. It is Service visually surveyed units of agricultural land and very dangerous for the company existence and further LGHQWL¿HGWKHDJULFXOWXUDODUHDWKDWZDVQRWPDLQWDLQHGLQ sustainable operation to rely, on market conditions, only good agricultural and environmental condition in Latvia. on the intuition and previous experience of managers According to the survey the unfarmed area equalled to and specialists. 368900 ha in 2010 or 16.0% of the total surveyed area in The research aim is to perform an economic and Latvia. There were surveyed 2352159 ha of agricultural ¿QDQFLDODQDO\VLVDQGWRDVVHVVFURSLQGXVWULHVDVZHOODV land (Latvian Ministry of Agriculture, 2011). to explore their development perspectives. Agricultural land occupies 77% of the territory of Research tasks: Zemgale region which is 26.1% of the agricultural —to investigate and characterise the crop farming area of Latvia. Soils in Bauska county are ones of the sector and the supply of crop farming products to most fertile soils in Latvia; in some places, qualitative the domestic market in Latvia; estimates of agricultural land exceed 60 points. Besides, —to identify development perspectives for the the relief and climatic conditions are favourable for industries of grain and rapeseed. intensive use of agricultural land there (Bauskas The following research methods were employed QRYDGD GRPH 7KH &DELQHW 5HJXODWLRQV 1R in the present paper: the monographic method, the ³5HJXODWLRQV RQ $JULFXOWXUDO 7HUULWRULHV RI 1DWLRQDO graphic method, calculation and constructive methods, ,PSRUWDQFH´ RI -DQXDU\ VSHFLI\ WKH DJULFXOWXUDO the abstract and logical methods, statistical data territories of national importance and the terms of their analysis, analysis of causal relationships, and data exploitation. The agricultural territories of national generalisation. importance are concentrated in Zemgale region, besides, ___________________________ 1&RUUHVSRQGLQJDXWKRU7HOID[( mail address: [email protected] Economic Science for Rural Development No. 30, 2013 43 ISSN 1691-3078 I. Vitola, S. Avota Economic Analysis and Development Prospects of The Crop Farming Sector in Latvia Source: authors’ construction based on the CSB data, 2012 Fig.1. Percentage distribution of the grain output in Latvia in 2006-2010 Source: authors’ construction based on the CSB data, 2012 Fig.2. Percentage distribution of the sown area in Latvia in 2006-2010 it is estimated that the agricultural territories of national increase in the production of wheat was also stimulated importance located in Zemgale might account for 3% by a stable increase in the export of wheat. of the total agricultural area in Latvia (Bierande R., In 2010, feed and forage crops occupied the largest 2010). proportion or 38% of the total sown area; yet, it tended In 2010, the most popular crop products were grain to decline. The area sown with wheat, on the contrary, in Latvia, accounting for 33.3% followed by potatoes has steadily increased since 2006. It has increased with 11.2%. However, in 2010, the largest increase by 9 percentage points; whereas the area sown with in output was observed for rapeseed when it rose barley has steadily declined – by 5.5 percentage points by 1.1 percentage points compared with 2008. RYHU ¿YH \HDUV 7KH DUHD VRZQ ZLWK SRWDWRHV KDV DOVR The proportion of wheat in the total output of grain decreased; whereas the rapeseed area has increased has consistently increased, accounting for the largest E\ SHUFHQWDJH SRLQWV RYHU ¿YH \HDUV UHDFKLQJ D share or 73.3% in the total quantity of grain produced; proportion of 10.5% of the total sown area in Latvia in WKH SURSRUWLRQ RI ZKHDW KDV ULVHQ E\ RYHU ¿YH 2010. It is important to analyse the average yield of crops years. The growth was due to an increase in the sown to draw conclusions on the causes of and correlations in area, which, in its turn, was stimulated by the effect changes in the sown area and total output. of prices, particularly wheat prices which were higher. According to the data of selected farms, the average The proportion of other grain decreased with the yield of wheat decreased in 2009 and 2010, yet, it was increase of wheat proportion in the total output of grain. 3.3 t/ha in 2010 which was 0.6 t/ha more than the In 2010, oats accounted for 7.6%, barley – 13.9%, average yield in the country. The same situation was and rye – only 5.2% of the total grain output. The observed for other grain, except oats, the yield of which 44 Economic Science for Rural Development No. 30, 2013 ISSN 1691-3078 I. Vitola, S. Avota Economic Analysis and Development Prospects of The Crop Farming Sector in Latvia Source: authors’ construction based on the FADN data, 2012 Fig.3. Average yields of crops on the FADN farms in 2006-2010, t/ha Source: authors’ construction based on Latvian Agriculture, 2011 Fig.4. Grain balance by season in Latvia in 2006-2010, thou. t slightly rose by 0.1 t/ha in 2009 compared with 2008. the season 2009/2010, 1.036 mln t were wheat which The yield of rapeseed decreased, and, according to the accounted for 62% of the total grain volume; 1.135 mln t data of selected farms, it was 2 t/ha in 2010 which was of wheat were exported comprising 85% of the total grain 0.1 t/ha less than in the country on average. The yield of exports. The majority of wheat was consumed as food, potatoes has decreased by 2.1 t/ha over three years and ZKLOHWKHFRQVXPSWLRQRIIHHGJUDLQÀXFWXDWHGZKLFKPD\ was 14.9 t/ha in 2010. Yet, it has to be noted that the be explained by the quality of grain in a season, i.e. if average yields in the largest group of farms, according to the quality of wheat is poor and it corresponds to the WKH)$'1FODVVL¿FDWLRQZHUHKLJKHUIRUWKHPDMRULW\RI standard of feed, the price of grain is lower and more crops which may be explained by their ability to provide wheat is consumed as feed. appropriate conditions for growing crops. One can Food and agricultural produce were the second conclude that the year 2010 was equally unfavourable for most important export industry in Latvia in 2010. The all crops which resulted in lower average yields in Latvia. exports of these products accounted for 17.9% of the The grain balance shows that the output of grain total value of exports in Latvia in 2010. The exports totalled 1.663 mln t in Latvia in the season 2009/2010, RI ZRRG DQG LWV SURGXFWV UDQNHG ¿UVW DFFRXQWLQJ of which 1.334 mln t were exported and 0.983 mln t for 19.3% of the total value of Latvia’s exports. were consumed domestically. The majority or 0.467 mln t Yet, the imports of agricultural produce comprised of domestic grain consumption consisted of feed grain, 16.3% of the total value of Latvia’s imports, and and 0.276 mln t were consumed as food grain.
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