Latvian Agriculture from the Past to the Future: Insights from Economic History

Latvian Agriculture from the Past to the Future: Insights from Economic History

Viesturs Pauls Karnups From ancient times, Latvia has been an agricultural nation. For all that, in more recent Latvian agricultural economic history, where the Latvian farmer is a subject and not an object, in fact began in 1861 after the abolition of serfdom in the Tsarist Russian Empire. This enabled Latvian farmers to purchase land from the manor-estates and establish their own farms. By 1913, 39% of all land in Latvia belonged to Latvian farmers, with an average size of over 35 hectares. They were able to compete with the manor-estates (average size 2000–2500 ha) through the development of co-operatives. Up to the First World War (WWI), there was a slow movement from the production of grain crops towards animal husbandry, especially dairy and pig farming. After WWI and the War of Independence, a massive land reform program took place in Latvia. The manor-estates were expropriated and the land was divided into smaller farm holdings. Some 54 243 new farms were established with an average size of 17.1 ha. The movement towards dairy and pig farming gained pace and became the main form of agriculture in Latvia. Again, competitiveness on the European and world markets was maintained through the rapid expansion of co-operatives. Latvia had become basically an agricultural nation with over 60% of the population involved with agriculture. The main export products and therefore the main source of income for farmers were butter and bacon. In the 1920s, this concentration on animal husbandry meant that food grains and animal fodder were imported in large amounts. However, the Great Depression of 1929–1932, led to import substitution. Grain production, as well as other aspects of agricultural production, was subsidized by the Government and in the 1930s, Latvia became self-sufficient in cereals. In general, agricultural product exports during the interwar period were 35–50% of Latvia’s total exports. Agriculture provided nearly 40% of Latvia’s National Income in 1938. As well, 28% of Latvian industry was involved in the processing of agricultural products. After Second World War (WWII) Latvia was occupied and annexed by the Soviet Union. Although Soviet propaganda during the first Soviet occupation (1940–1941) and immediately after WWII insisted that there will be no collectivization of agriculture, there were attempts to “voluntarily” force the establishment of collective farms (kolkhoz). This was resisted by Latvian farmers and the regime turned to terror and mass deportations as instruments to collectivize Latvian agriculture. By the beginning of 1949 only 12% of Latvian farmers had joined a kolkhoz. On 25 March 1949, mass deportations took place and 43 000 people were deported to Siberia. Terror worked and by 1950 98% of farmers had joined a kolkhoz. As result agricultural production fell and in some instances had not reached the pre-WWII level in the 1980s. As in the interwar period the main emphasis of Soviet Latvian agriculture was animal husbandry. Due to forced industrialization Latvia was becoming an industrialized state. By 1990, only 16% of the population was involved in agriculture. Nevertheless, agriculture was still important and some 82% of Latvian agricultural production was utilized by the Latvian food processing industry. After regaining independence in 1991, Latvia undertook another large-scale land reform, transforming kolkhozes and sovkhozes (state farms) into individual land holdings once again through the restitution of land ownership to former owners and/or their descendants. Unfortunately, many of the new owners were city dwellers with little interest in farming. Up to 2000, agricultural production fell by an average of 7% per year. In 2000 only 9.5% of the population was engaged in agriculture and agriculture provided only 4.1% of GDP. Changes occurred in 2004 when Latvia joined the European Union (EU). By 2011, agriculture provided only 1.6% of GDP and employed 7.2% of the population. Nevertheless, Latvian agriculture is the mainstay of the Latvian food processing industry, which is the largest industrial sector in Latvia and employs 20% of the total workforce. Latvian agriculture will never regain the dominant position it had during the interwar period, but the needs of the Latvian food processing industry will guarantee its sustainability over the longer term albeit in a much reduced form.