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Baltic States: The Worst Times Are Over For Farmers

London, 22 October 1996 (RFE/RL) -- A new report says the farming sectors of the three Baltic countries, whose output fell by about half between 1989 and 1995, now have recovered to the point where they have the future potential to compete for international markets.

The report, "The Transformation of Baltic Agriculture," appears in the latest edition of the "OECD Observer," published by the Paris-based Organization for Economic Cooperation and Development.

The report says: "The farming sectors (of Estonia, Latvia and Lithuania) now have the potential to develop as internationally competitive sectors."

After regaining their independence in 1990-91, the three countries embarked on reforms that included the privatization of collective and state farms and restitution of property rights. The result was a period of transitional hardship and a big drop in food output. (Farming is important in all three countries, accounting for 8 to 9 percent of gross domestic product and between 7 and 24 percent of total employment).

But the OECD says that the worst is over. Gross domestic product, including farm output, of Estonia and Lithuania increased last year, although it remained stagnant in Latvia. And the three countries are seeing the benefits of the restructuring of their farm and agro-food industries to a more market-oriented approach.

Trade with the EU is increasing steadily and exports to the former Soviet Union, that fell sharply in 1991-93, began to rise again in 1994/95, reflecting the re-establishment of traditional trading links.

The new post-Soviet farming structures are still evolving and vary across the three Baltic countries, reflecting different approaches to land reform. The Estonian government did not favor any particular type of farm structure, whereas the Lithuanian and Latvian authorities showed a clear preference for medium-sized family farms.

In Estonia, large-scale farms predominate and operate on 60 percent of agricultural land. Household plots and family farms occupy the remainder. Estonia's 360 collective and state farms have been transformed into about 1,000 farming enterprises producing mainly grains and milk. There are a further 13,500 family farms.

In Latvia, restitution and privatization have encouraged the emergence of family-type farms. Individual farms and household plots now operate on about 80 percent of agricultural land with an average size of 20 hectares per family farm. The rest is farmed by 120 reformed state or collective farms and some 460 new corporate farms.

In Lithuania, almost one third of all agricultural land is farmed by 2,340 large agricultural companies. In addition, there are 135,000 individual farms accounting for another third of agricultural land. Household plots account for the remainder and, despite their small size, produce half of all crops and about a third of livestock products.

Although striking a positive note, the OECD report says the Baltic states face the need to overcome enduring problems in privatization; to eliminate inefficiencies in the production and processing of foodstuffs; and to counter pressures for farmers to be given more price support.

Problems have arisen in establishing legal titles in all three states, with many conflicts occurring between new owners and those who had worked the land during the Soviet period. Complicated procedures for land registration and lack of qualified staff to carry out surveying and mapping operations have slowed privatization and restitution of land.

In Estonia, only 20 percent of agricultural land is not subject to major disputes between previous owners and current operators.

In all three countries, meat and poultry-processing plants have proved difficult to privatize because of the heavy burden of outstanding debt, outdated processing facilities and shrinking demand. And farmers still face the problem of depressed prices, although energy and fertilizer prices have risen to those prevailing in world markets.

The report says Baltic trade in farm and food products will increase in coming years. But authorities face the challenge of improving quality and hygiene standards; developing the transport infrastructure and trading links; and overcoming bureaucratic trade barriers in many importing countries including some in the European Union.