The Estonian farming sector clearly emerges as the leader in the Baltic region in terms of raising the efficiency of production with large enterprises having a dominant position as a result of mergers, whereas in Latvia and Lithuania there are still many small producers, SEB Pank finds.
"The average size of a farm is 48 hectares in Estonia, 20 hectares in Latvia and 10 hectares in Lithuania. Considering the amount of arable land and the number of producers, it can be said that the degree of consolidation is four times higher in Estonian agriculture than in the neighbouring countries," head of the bank's retail banking and technology division Eerika Vaikmäe-Koit said.
"If in Latvia and Lithuania 8-9% of all employed persons are engaged in agriculture, in Estonia the rate is half of that at 4.4%," she added.
Successful agricultural businesses have worked for years to make production more effective and due to that their financial state is stronger than ever before, Vaikmäe-Koit said. "Purchasing new machinery is at the top of the agenda – the leasing of agricultural equipment through SEB soared 59% last year. We issued 38% more long-term investment loans which were mostly used to build new modern cattle sheds," she observed.
"Consolidation of agricultural production will probably continue in Estonia, Latvia and Lithuania alike as large producers' sales growth, profitability, liquidity and capitalisation are clearly stronger than those of smaller ones. Investments will be made mainly in the acquisition of arable land and producers and renewal of machinery and equipment this year as well as following years," Vaikmae-Koit said.
A survey conducted last fall showed that among customers of SEB Pank Estonian agricultural enterprises were planning to invest more than other businesses. Of agricultural enterprises 65% intended to invest over 30 000 euros this year while the average percentage for all businesses was considerably lower at 48%.
Estonian Farming Sector Most Efficient in Baltics