The Minister of Agriculture is interviewed by the journalist Māris Ķirsons and Pauls Rēvelis, editor of zemeunvalsts.lv

What can Latvia's land give to the people who live and work in Latvia, and to the state budget?

The question is equally philosophical and practical. If we take the philosophical side – land is the place we come from, it is a territory, it is a country or a region. Historically, most of our traditions took shape in the countryside, and Latvianness has been preserved most firmly there rather than in the cities. If we recall, Riga, for example, was once a distinctly German city. Leafing through the pages of history, in the era of the manors Latvian traditions were formed and carried on in the farmsteads; in the Soviet period it was much the same – the strength of tradition lies in places where people are closer to the land. As I am an agronomist, I will quibble slightly with the idea that land is the place we come from, because strawberries, wheat and potatoes, for example, are planted or sown in the soil. Of course, in everyday speech, rather than in the professional sense, we call it land.

Land is bound up with crops, forest grows on it, and our waters too are closely tied to the land. If we look at agriculture, food production and forestry, they account for an enormous share of our gross domestic product (GDP) and of our exports. Here we should certainly bear in mind that not everything can be measured in money, and this is often argued over. In my view (and I am convinced of it!), everyone in the forest sector sees the forest broadly and in many ways – economically, emotionally, with care and with enjoyment. In cultural and historical terms there are plenty of folk songs about the forest, we have many veteran trees, and respect for old, ancient trees is self-evident. It should be noted that in Latvia everyone has free access to the forest. Travelling to other countries, one sometimes sees signs saying 'Private property! No entry!' For the most part, that is not the case with us.

How do we in Latvia use our most important resource – land?

Land was, is and will remain an important cornerstone of the Latvian state. Land is the asset on which the food needed by people and animals is grown. Agriculture was, is and will be a significant employer and taxpayer. The second most important use of land is forestry, and if we add the woodworking and furniture industries to it, we obtain another very important sector of the Latvian economy, one that accounts for roughly 9% of Latvia's GDP and about 17% of Latvia's total goods exports. Taking these two important land-based sectors together, we get a very substantial generator of export earnings, an employer of people – especially in the regions – and an important taxpayer. Forests are not merely a source of raw material for the woodworking industry; they also provide ecosystem services, sequester CO₂ and produce oxygen, and they are places for berries and mushrooms. The ministry has never stood up for logging alone; after all, foresters themselves do not see the forest as some sort of bank from which money is simply withdrawn (something they are often reproached for, incidentally) – they also plant young stands, tend them and, of course, at some point fell what has grown.

As I have said, in Latvia the forest is accessible to everyone, unlike in other countries (the USA, for example), where there are fences and warnings (prohibitions) marking the boundaries of private property. The forest also has an intangible – cultural and historical – value. Our ancestors, when clearing land for cultivation, left the oaks standing, and many of these we can still see today as veteran trees; they were not destroyed even during the era of land drainage schemes. The oak was seen not as a tree to be felled, but as something special – something to be preserved.

How much of the land resource do we use in Latvia?

If we look at agriculture, many sectors have developed very well in Latvia; grain growing and milk production, for example, are at a European level. In these fields there are very modern farms, though of course the full potential in Latvia has not been realised. For instance, Latvia currently lacks efficient processing of grain output and raw milk into products with higher added value. (In the context of the forest sector too, roundwood ought not to be exported from Latvia.) At present we export a great deal of grain and raw milk; some of it returns to our shops from neighbouring countries in the form of dairy products. The processing could just as well be done here in Latvia, since it would mean jobs and taxes for the state, to be used for maintaining schools, hospitals and roads, along with the other benefits associated with local production.

So what is needed is the processing of what Latvia grows, at least into industrial products, and better still into a product ready for the end consumer?

There is no doubt that we need to encourage the processing in Latvia of what we grow, in order to increase the number of jobs and the taxes paid, to earn more from exporting these products and, possibly, to allow farmers in the sectors concerned to receive a higher price for what they grow. The benefits of processing our produce in Latvia are felt at every level, yet the crucial thing is not just to process it, but even more so to be able to sell it on the market. That is not simple. It is undeniably easier to export grain that is processed in another country into food for people or into animal feed. At present there are several significant food-processing plant projects in Latvia at various stages of development. In Jelgava, construction of a pea protein plant has finally begun, with EU co-funding of 15 million euros reserved for it, dating even from the previous EU programming period. This plant will also have a considerable effect on crop growers, as it will give them the 'pleasant headache' of deciding what to grow and how much. In Bauska, meanwhile, construction of a new cheese factory has begun, which should reduce the volume of raw milk exported from Latvia. Although I take a positive view of the very modern dairy processing plant created through cooperation between the Latvian dairy producers' cooperative and an Estonian cooperative, I regret that it is located in Estonia and not in Latvia.

The picture in the forest sector is perhaps somewhat different: in Latvia, producers of various industrial products – sawn timber, panels – have developed successfully and are highly competitive on world markets. As with farmers, there are currently several significant wood-processing plant projects at various stages of preparation, and these will undoubtedly increase the sector's already impressive contribution to export earnings. Of course, in the ports we can still see roundwood being shipped for processing in Scandinavia – mostly to pulp mills – because Latvia unfortunately lacks processing capacity adequate to the volume of that timber assortment. There is a wood chemistry industry project, but its implementation will still take time. Naturally, I would only be glad if, instead of some of the sawn timber and panels, Latvia's factories exported more wooden furniture, wooden houses and their components, which are higher value-added products.

So what is needed is high-capacity large-scale producers?!

Essentially, the food sector needs producers of every size – large, medium and small. Why? Each has its own niche. A large industrial producer works very efficiently, is productive and sells its output in many countries around the world, including Latvia; a medium-sized producer sells regionally; while small processors, with what are effectively unique products, supply their immediate neighbourhood. I see no added value in producing kefir in Vidzeme, for example, and carting it to consumers in Kurzeme, because the transport and logistics costs are considerable, and in future the CO₂ emissions generated by the distance travelled may have to be added to them. It would be more logical, more efficient and cheaper for Kurzeme to consume the kefir, milk and so on produced in Kurzeme. Small, broadly speaking lifestyle producers were, are and will be with us – there is demand for their output, since it is hardly going to be profitable for industrial producers to take on special products in very small volumes.

Large food producers must become more competitive – and that means investment in technology. Yet, visiting a modern food plant abroad, I could not help concluding that there were no workers in it and that a few IT specialists were 'minding' everything from their computers. Competitiveness was, is and will be a kind of synonym for sustainability. This question will also require attention in the next EU programming period of 2027–2034, for which Latvia must be able to define its wishes by the end of next year. In practice we have only 2025 and 2026 in which to agree on the essential directions, in consultation with farmers' organisations and food processors' associations. I think making processors more efficient and modern could be one direction in which the state provides support. At the same time, there will certainly be questions about the future for farmers too, including for what count as large farmers by Latvian standards.

How should that be understood?

Agriculture involves more risk factors than other fields. In crop growing, when winter crops are sown in the autumn, nobody can foresee what the winter will be like or how the sown crop will come through it; nobody can predict whether the summer will be dry or wet, and consequently there is no predicting what the harvest will be or what prices it will fetch. Alongside the climatic factors there are others that farmers cannot influence: quite recently, for example, we experienced very high prices for mineral fertilisers, plant protection products and fuel, yet at harvest time, as a result of the fall in crop product prices, there were farms where the income per tonne did not cover the cost of producing that tonne. Moments when several risks materialise one after another – bad weather, high input prices but comparatively low prices for the harvest – are not a very frequent occurrence, but for those who have invested too heavily they bring very serious solvency problems.

Every farmer must understand that crop and livestock farming are not free of economic risk, and that if everything has gone very well in previous years, it does not mean things will be just the same in future. A farmer has to be able to assess the risks, but as the findings of the agricultural advisory centre, and of 'Altum' and bank specialists regarding the viability of particular farms show, in many cases they are not able to – unfortunately even on large farms. Yes, Latvian farmers have managed to grow comparatively quickly; there has been corresponding support from the EU structural funds for renewing technology, with the result that many Latvian farmers' tractors and machinery, for instance, are better (newer, more modern) than those of farmers in some 'old' EU member state. In such a situation it is no surprise that there are (and will be) farms whose owners have grown accustomed to constant growth and good years and have got carried away, 'over-investing' in their development, which can lead to insolvency even after a single year of difficulty. Of course, farms that have grown more slowly are also finding things hard, but the scale of their financial problems does not raise the question of to be or not to be. The state cannot directly influence or regulate a farmer's decisions, and we unfortunately have to get used to the fact that there will be farms whose owners, having overdone their investment in modern, expensive production technology without taking the risks into account, will cease operating. For one person such a situation is deeply sad; for another it may be an opportunity to expand or to acquire agricultural assets at a comparatively low price. Latvia's farmers must accept reality and become more pragmatic.

I have visited a great many farms in Europe that are run with much older machinery than in Latvia, which means that farmers in other European countries do not replace their machinery and technology anything like as often. That means others assess risks far more pragmatically and treat additional risks on their farms with great caution. The rate of growth on these farms is many times slower than it has been in Latvia. At the same time, since the collapse of the USSR in the nineties Latvian farmers have needed investment in machinery and technology, and for the past 20 years there has been state support for replacing machinery – for buying new equipment. In conditions of continuously rising prices, this tactic delivered growth, perhaps creating the misleading impression that the situation would continue in the years ahead as well. Unfortunately, 2022 and 2023 proved that the situation can change rapidly and that excessive risk-taking can end badly for the individual farmer. The same applies to the future, because nobody today can forecast or foresee how the EU's common agricultural policy will change.

Why should the EU's common agricultural policy change?

Such changes will come when Ukraine, a producer of agricultural output that is very large by European standards, becomes part of the EU. At present the EU has 157 million hectares of utilised agricultural land; Ukraine (before the war began) had around 41 million hectares – the country has a belt of fertile black earth with very rich soil. Ukraine has expressed its wish to join the EU. At the moment it is fighting against Russia's invasion, but the process has begun. It is hard to predict how long Ukraine will need to meet all the EU's requirements – perhaps five, seven, ten years or more. Ukraine's accession to the EU will mean that another 20% of all the EU's utilised agricultural land is added, and agricultural policy will undoubtedly change, because the EU will not be financially able to pay area payments on that scale. That means Latvia's farmers too must prepare for that moment, which will of course not come tomorrow, or in a year or three, but come it will. (Infographics: What is agriculture like in Latvia compared with other EU countries?)

If we recall, Latvia needed nine years from submitting its application for EU membership to gaining member state status; for Ukraine it may take considerably longer. But farmers working in Latvia have to be ready to work and compete in different conditions – and already now Ukrainian producers can bring their goods into the EU, including Latvia, comparatively freely, and that country's producers' competitive advantages are plain for all to see. Of course, one nuance has to be taken into account – producers in Ukraine do not fully comply with all the requirements that producers of the equivalent goods in Latvia and other EU member states must observe. Farmers are currently keeping quiet about this unfair situation because they support Ukraine in its war against Russia, but as soon as Ukraine recovers its lost territories, protests and objections about unfair competition will most likely follow. At the same time, there is no doubt that Ukraine's farmers will sooner or later meet the requirements set by the EU, and that means what was said above – we must begin in good time to assess how efficient and competitive the growing of wheat, buckwheat and other crops, for example, will be in Latvia if yields in Ukraine are higher because of objective climatic conditions. Change will come, and we must start preparing for it well in advance.

Part II of the interview (continued) on 14 February