Opportunities and Challenges Explored for Pig Farming in Baltic States

Despite a number of significant challenges, pig production in the region appears to have a great deal of untapped potential, which was revealed at this year’s annual meeting of the European Pig Producers (EPP). Senior editor, Jackie Linden, reports.
calendar icon 10 August 2012
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This year’s EPP Congress, attended by almost 300 participants from 19 countries, was held in Lithuania’s capital city, Vilnius. The theme of the meeting – the 22nd in the series – was ‘Pig Production in the Baltic Region – Chances and Challenges’, giving an opportunity for delegates to find out more about pig production in the region, which comprises Lithuania, Latvia and Estonia.

Lithuania’s Minister of Agriculture, Kazys Starkevicius, gave the welcome address. His country achieves one of the highest grain harvest yields per hectare in the world, he said. Since joining the European Union in 2004, pig producers have benefited from EU support, while also becoming subject to a high level of regulation.

The Minister said he was confident about the continued development of pig farming in Lithuania, adding that the sector will reach the targets set for it eventually.

Economic Potential of Agriculture and Pig Production in the Baltic Region

In his review of the economic potential of agriculture generally and pig production in particular in the Baltic states, Mindaugas Jurgelis of DNB Bank in Vilnius set the scene by saying that food prices have been rising rapidly since 2000 as slow expansion of production has struggled to keep up with growing demand. Furthermore, across the world, the food sector has become more closely connected to energy production as cereals are increasingly being grown for biofuel production. The prospects for the food industry will be a continuation of current high and volatile food prices.

Agriculture has been one of the core industries for the Baltic region historically, he said, especially in Latvia and Lithuania. However, livestock farming has been in decline for the last decade. This is related to two factors: demographics and the regulatory situation. Migration of the population from rural areas to the towns and cities has left just eight per cent of the population of Lithuania and Latvia now involved in agriculture, further increasing the pressure on farming to produce more with less. In Lithuania particularly, the difficult situation for pig production is exacerbated by an unfavourable legal system.

Mr Jurgelis identified a number of obstacles to the further development of agriculture in the Baltic region, first of which is that agricultural productivity is relatively low compared to most competitors in other countries. Investment by local and foreign companies in agriculture has been lacking as a result of a difficult legal situation and the high environmental requirements that come with EU membership. Domestic markets have been falling, especially in Lithuania and Latvia, as young people leave the countryside for the larger towns and cities. At 15 per cent, the unemployment rate is high and inflation is outpacing wage increases.

Market growth is key to the recovery of agriculture in the region but with limited prospects for growth at home, the future of agriculture generally in the Baltic states is dependent on the competitiveness of the national food industries and their ability to access foreign markets, said Mr Jurgelis. Because of their proximity and size, Russia and Poland are particularly important to the Baltic countries in this respect. However, Russian policy is to reduce its reliance on meat imports and has a target for 95 per cent self-sufficiency, which makes exporting to this market especially challenging. In Poland, the economy is strong and growing, largely unaffected by the economic uncertainties in the Euro-zone.

Pig populations in Baltic countries
Source: Eurostat

Pig meat production in Baltic countries (tonnes)
Source: Eurostat

Pig Production in Lithuania

An overview of pig farming was given by Algis Baravykas, Director of the Lithuanian pig producers association, which hosted the EPP annual conference.

The country covers 6.53 million hectares, of which 60 per cent is categorised as ‘agricultural land’ although between 700,000 and 800,000 hectares have been abandoned and are not in production.

Currently, he said, pig production in Lithuania accounts for around 10 per cent of agricultural production behind milk, grain and fodder production, which are also the top exported products in value terms. Meat and fish exports were valued at €173 million in the latest statistics from 2010. Overall, exports of agricultural products exceed imports, with Russia, Latvia, Germany, Poland and Estonia the main markets for Lithuanian exports.

Grain production is showing a rising trend, reaching around four or five million tonnes in recent years. Of this volume, up to half is exported, while around one million tonnes goes into animal feeds.

Recession has been evident across the whole agricultural sector since Lithuania gained its independence in 1991, and pig numbers have fallen from a peak of more than 2.7 million in the late 1980s to 790,000 at the last count in December 2011, of which around 68,000 were sows.

Pig farming is carried out across most of the country but is concentrated in the central region, where the best land is found. There is a good network of 76 slaughterhouses that accept pigs, of which many run at well under their capacity. The 10 biggest abattoirs slaughter around 70 per cent of the pigs.

Turning to meat trade in Lithuania, Mr Baravykas reported that pig meat accounted for around five per cent of Lithuania’s total meat exports of around €125 million in 2010, with beef accounting for 70 per cent of the total and the rest is poultry meat.

Imports of pig meat started to grow rapidly after the country joined the European Union in 2004 but production has not, so that Lithuania is now 44 per cent self-sufficient in pig meat, importing the equivalent of almost 800,000 pigs in 2011. Germany, Poland and Belgium are the sources of most imported pig meat, while most is exported to Latvia, Russia and Belarus.

Exports of live pigs peaked in 2009, with the majority of slaughter pigs and piglets destined for Russia but this trade has reduced dramatically since Russia introduced tariffs in such imports in 2009.

Total annual per-capita meat consumption in Lithuaina is around 70kg. Pork is the most popular meat, accounting for between 30 and 40kg per person, followed by poultry meat at around 20kg and beef around 5kg.

There are a number of issues holding back pig production in Lithuania, according to Mr Baravykas.

Consumers are often misled by the mass media about pig production, he said, and they have become distrustful of commercial producers. Protests against pig farming are not uncommon, especially relating to bad smells, despite Lithuania having among the lowest pig densities in the EU. The public has been led to believe that the wrong feed is given on large farms and that the pigs are forced to grow too fast. Blaming supermarkets for rising prices, they prefer to buy pork at farmers markets from small producers.

But this, he said, raised another issue. There is a substantial differential in Value Added Tax in his country (at 20 per cent) and Latvia (22 per cent) compared to Poland (five per cent). Traders at farmers markets often source pork in Poland and sell it in Lithuanian ‘farmers markets’. Cash registers were introduced at markets last year to counteract this problem but their uptake is not yet universal.

Mr Baravykas highlighted a number of issues that he sees as important challenges to the Lithuanian pig industry, including the disease situation: African Swine Fever outbreaks continue to be reported in the Russian Federation and Classical Swine Fever has occurred in Lithuania itself. The restoration of live pig exports to the Russian Federation would help the industry. The EU sow stall ban from January 2013 will help to level the playing field for Lithuania as very few farms there have installed them. Finally, a reduction in the VAT rate to match that of Poland would reduce competition from cheaper imports from that country.

With high grain production, plenty of land available to spread the manure, a large pool of labour and a tradition of eating pig meat, Lithuania has all the components necessary for a strong pig industry if these key issues can be resolved, concluded Mr Baravykas.

Number of farms with pigs in Baltic countries
Source: Eurostat

August 2012
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