DECLINE IN GRAIN EXPORTS HITS LITHUANIAN GDP.

Agricultural production in Lithuania fell 12 percent in 1999, primarily due to a 25 percent fall in grain output (RFE/RL, March 6). This is particularly disturbing because the agricultural sector accounts for a higher share of GDP–an estimated 12.1 percent–than in Lithuania’s neighbors or, for that matter, most developed countries.

As of October 1999, 68,500 Lithuanian farmers (over one-fifth of total employed) were farming 825,500 hectares (Statistics Lithuania, November 1999). With already-high surpluses set to grow as agricultural entities grow in size and efficiency, it is not necessarily a negative trend that the amount of sown land is decreasing. In 1999, there was a 6 percent drop in crop area. Part of the reason behind that drop is a discouragingly low profit margin for farmers. The average purchase price of agricultural production, for example, rose 2.0 percent in the third quarter of 1999 year-on-year, while the price index of agricultural inputs grew 9.3 percent in the same period, mostly due to the higher costs of fuel. In addition to the decline in grain output, last year’s milk yield was 9 percent down–which can be attributed to smaller cow herds. Lithuanian farmers still have nearly half a million dairy cows, almost twice as many as Estonia and Latvia combined, but Lithuania uses just 40 percent of the milk produced domestically.

Food and agriculture now account for about 14 percent of total exports. The main export items are milk and dairy products; these account for one-third of agricultural and processed food exports. Russia has traditionally been the primary market for dairy exporters. Only a miniscule, and declining, portion of Lithuania’s dairy exports find their way to the European Union (EU). In Soviet times, Lithuania had no difficulty finding foreign markets for its agricultural and food products. But the country is finding it difficult to reorient these exports to a saturated, highly regulated Western market. Moreover, Lithuania has already found its relative dependence on agriculture a sticking point in WTO negotiations, and it may well be seen as even more of a burden once negotiations begin on the EU’s agricultural chapter.

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