Projections for the Latvian dairy and beef sector

Abstract

Abstract. Milk production is the second most important agricultural sector in Latvia with 17.7 % in the distribution of agricultural final products in 2015. However, the proportion of milk production decreased by 5.3 percentage points in comparison with 2014, reaching the lowest proportion recorded. The agriculture of Latvia depends on the Common Agricultural Policy (CAP) that continuously changes and is reformed. The European Union (EU) decision makers have traditionally used the results of a wide range of quantitative tools in framing their choices among alternative policy instruments. To do it, it is necessary to make long-term projections for the sector. Modelling is a way of solving problems that occur in the real world. There are two important motivations for agricultural model development; 1) scientific understanding; 2) decision making or policy support. In 2016, the Latvia University of Agriculture developed the Latvian Agricultural Sector Analysis Model to simulate the development of agriculture and its key sectors for the period until 2050. The present paper reflects part of the research results -a simulation of dairy farming and a projection made for it. The following factors were taken into account when simulating the dairy sector of Latvia: commercial sales of milk, consumption of milk for food, consumption of milk for feed, milk prices, milk yields, the number of dairy cows, costs (total, as well as feed, labour and investment costs and depreciation expense), and the produced projection is useful for making policies and applying special support instruments.Keywords: dairy farming, projections, modelling. IntroductionMilk production is the second most important agricultural sector in Latvia with 17.7 % in the distribution of agricultural final products in 2015. However, the proportion of milk production decreased by 5.3 percentage points in comparison with 2014, reaching the lowest proportion recorded. In the period 2007-2014, milk production accounted for on average 21.4 % of the total value of agricultural commodities in Latvia [1]. That was under the conditions when, on the one hand, the global demand for dairy products rose, while, on the other hand, there was a complicated situation in the European market related to abolishment of milk quotas and Russia's imposed embargo. The dairy sector developed in Latvia, and it provided jobs and stabilised the economies of rural territories [2]. The current low prices for dairy commodities and milk are mainly the result of a surge in the world and EU supply at a time when China has started to reduce its purchases and Russia has introduced an import ban. However, the import demand from other regions of the world has risen significantly and is expected to grow steadily over the outlook period, driven by population growth and a change in diets in favour of dairy products. In addition, Chinese imports should resume growth [3]. Since 2004, the agriculture of Latvia has depended on the Common Agricultural Policy (CAP) and changes in it. For this reason, it is i...

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