This past summer was the best in years for grain growers, but a good harvest does not necessarily translate into strong financial results. The outlook for grain prices remains uncertain.
According to the Ministry of Regional Affairs and Agriculture's food security report, grain quality was poor last year due to excessive rainfall. Low prices also weighed on producers' profits. This year, however, was one of the strongest harvest years in recent memory for Estonian grain growers.
According to Statistics Estonia, the total grain harvest reached nearly 1.55 million tons this year, while wheat yields were the highest in 14 years. Ants-Hannes Viira, head of agricultural policy at the Estonian Chamber of Agriculture and Commerce, said that when grain, pulses, rapeseed and turnip rape harvests are combined, this summer was the third most productive in Estonia's history.
"We were lucky with the weather this time. In the spring, there were fears that it would be a very dry year. There was very little rainfall until May, but after that, precipitation was above average. The grain will be sold, of course. Fortunately, prices are better this year than last year," Viira said.
Viira added that the grain sector's financial results are positive. Looking ahead to next year, the key factors will be the same as this year.
"We don't know what the weather will be like. Fertilizer prices will remain high next year, just as they have been this year, and there is uncertainty about grain prices. It depends on the situation in the Black Sea and whether the Ukrainian and Russian grain harvests, which have also been good this year, can reach the global market," Viira said.
The difficulties Ukrainian and Russian grain face in reaching global markets are helping support grain exports and prices elsewhere, but that may not be the case next year.
Estonian grain is exported to the Middle East and North Africa, while peas are shipped to Spain and Norway for use in animal and fish feed. Grain growers would welcome the opportunity to expand their farmland, but subsidy policies limit their ability to do so.
"For more than 20 years, we've been in a situation where permanent grassland must remain permanent grassland and arable crops cannot be grown on it. This has prevented the expansion of grain-growing areas. Ultimately, the soils and fields suitable for grain production are already being used for that purpose. There isn't much room for a major expansion in cultivated land. Arable crops cover around 400,000 to 500,000 hectares. The area has gradually increased, yes, but not significantly," Viira explained.
The more difficult years have also affected investment. According to Bank of Estonia statistics, the agricultural sector's leasing portfolio has fallen from approximately €370 million in September 2023 to around €305 million today. Marjan Savtšenko, head of business banking at Luminor, said farmers should avoid drawing up overly optimistic budgets for next year based on a single exceptionally good year. There are already signs that purchases of new machinery, for example, have declined.
"Farmers would be wise to remain conservative and build up financial reserves. Most investments go into machinery because it is essential for harvesting crops. If a neighboring property comes up for sale, farmers take the opportunity to expand their farmland," Savtšenko said.
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