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EDITIONS
Tuesday, 29 October, 2002, 08:05 GMT
The sour taste of enlargement
Cattle
Estonia's dairy industry is becoming disillusioned

Peeter and Ulvi Pihlakas have run their own dairy farm near Tallinn since Estonia's independence more than a decade ago.

Their 54 cows, now sheltered from an early bitter winter, produce some of the highest yields per head in the country.

With the European Union beckoning, this couple dreamt of expanding their herd, to be a bigger competitor in the EU's enlarged marketplace.

But the bloc's agriculture market is tightly controlled.

Peeter and Ulvi Pihlakas
Peeter and Ulvi Pihlakas ponder the future
And under orders from EU governments, the European Commission has to stifle its newcomers' plans.

"We have bought an old farm place where we want to put 200 cows. But with the milk quota, we don't know if we can do it," says a frustrated Peeter Pihlakas.

Before finalising entry negotiations, all EU candidate countries must agree on strict production limits for their farmers.

These quotas are supposed to stabilise the market by preventing unsold stocks of foodstuffs, milk and wine from accumulating. The EU also provides subsidies to support farmers' incomes.

Massive cull

But for Estonia, Brussels proposes limiting milk output to around last year's level.

Which means, for high-yield farmers like Peeter and Ulvi, this quota could even result in them culling up to 30% of their herds to cut back on production.

It's the most contentious issue still at stake in Tallinn's negotiations with Brussels.

The European Commission's delegation here accepts that although most Estonians live in its few main cities, there are still strong emotional ties with the countryside.

Next autumn's referendum on EU membership could well be a close call.

During the times of the Soviet Union, Moscow would reward Estonians for overproducing.

They have a hard job understanding why, in the European Union, dictates from afar should order them to produce less.

Consequently, there's virtually no support for EU membership amongst this country's milk farmers.

Cut back to crisis years

But the proposed quota would also hurt food producers.


Estonia must produce more because investments that were made must be recouped

Taavis Aas, Dairy Cooperative Director

According to Andres Oopkaup, Deputy Secretary General of Estonia's Agriculture Ministry, 37% of food and farm output is dependent on domestic milk production.

Estonia has healthy exports of butter, cheese and milk powder - mainly to Germany, Denmark and the Netherlands.

During the mid 1990s, farmers and food processing firms invested heavily in new equipment to comply with EU standards ahead of membership and so have early access to the western European market.

But three years ago the industry was hit hard by the after-effects of the Russian financial crisis.

Many Estonian farmers went bankrupt as production plummeted when demand from its huge neighbour collapsed.

The problem is, the milk quota on the table today is based on Estonia's output during the lean times.

"Currently, the decline in Estonia's milk production has stopped," explains Taavis Aas, Financial Director of E-PIIM Dairy Co-operative.

"But our potential is greater. Estonia is not producing as much milk and milk products as it can. And Estonia must produce more because investments that were made must be recouped."

This year's production is set to double the 2001 level.

Which means, producers here will have to scale back and cull its herds if Brussels has to stick to its milk output proposals.

Sure, farmers will receive EU subsidies - albeit at a quarter of the rate that western European farmers operating in the same market enjoy.

But reversing the Estonian milk industry recovery will cost jobs, even close down whole businesses.

And it will also sour the ambition of Estonia's rural talent - like dairy farmers Peeter and Ulvi.

See also:

25 Oct 02 | Europe
25 Oct 02 | Politics
24 Oct 02 | Europe
24 Oct 02 | Europe
08 Oct 02 | Business
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