Dynamics in the Agricultural Sectors of the Baltic States: the Effects of the Common Agricultural Policy and Challenges for the Future

Sustainable agriculture is the basis for long-term economic growth ensuring employment for the rural population. The aim of this research is to assess the dynamics in agricultural output, investments, direct payments and energy use in Estonia, Latvia and Lithuania under the Common Agricultural Policy (CAP) during 2008-2017. The method of research is the evaluation of production factors generated by agriculture and related activities carried out by the model of the EAA system. The performance of the agricultural holdings is measured using economic indicators: output of the agricultural 'industry', gross fixed capital formation (GFCF), direct payments, return on capital, total labour force input, average farm income. We discuss the trends in absolute and relative indicators relates to different aspects of the sustainable agricultural development to identify the key priorities of the CAP in the Baltic States which are new European Union Member States. The results indicate that in Estonia, Latvia and Lithuania EU support has affected investments in capital. The amount of GFCF over ten years annually grew an average by 0.1% in Estonia, by 8% in Latvia and by 17% in Lithuania which has led to increase productivity on farms, positively influenced growth on output agriculture and income as well. During the period 2008-2017 marked growth in the agricultural output levels and direct payments on average annually by more than 4% and 56%, respectively. These induced higher capital investments which require reasonable revision of the CAP measures in order to avoid overinvestment and address changes in the global agricultural markets.