Agriculture is the best survivor during a crisis.

VILNIUS--Even during the crisis, agriculture remains among the well established sectors in the Lithuanian economy which is suffering because of the tightened bank policy and the reduced scope of loans. The current brief milk war, announced by Russia, seems to be finished, and rivers of Lithuanian milk flow again to the East.

According to the Lithuanian department of statistics, in the second quarter of 2009, negative results were observed for all business activities, but the value added decrease was much slower in agriculture (4.9 percent) than in other sectors. In the first half of 2009, versus the first half of 2008, total Lithuanian exports dropped by 31 percent while live animals and animal product exports dropped just by 6.9 percent; export of dairy products, eggs and natural honey - by 23.3 percent; export of vegetables - 20.4 percent; export of cereals by 19.3 percent; prepared foodstuffs, beverages and tobacco - by 1.1 percent.

Export of dairy products makes up a significant part of Lithuanian food exports. In August 2009, Lithuanian farmers received 31.4 percent less per liter of milk than a year ago. It was the reason for Lithuanian President Dalia Grybauskaite to meet with Agriculture Minister Kazys Starkevicius, on Sept. 21. After the meeting, during his press conference in the presidential palace, Starkevicius said that such a situation is caused by milk processing companies, which take a large part of the profit. He promised to sponsor, with state money, a milk processing enterprise which would act as a farmers' cooperative.

"One of the reasons why milk is bought from farmers at such a low price is the lack of a farmers' cooperation. Our farmers produce only some three percent of the final milk products," Starkevicius said. The food sector accounts for a major share of the value added (20.9 percent in 2008) created by the Lithuanian manufacturing industry. More than 400 enterprises are engaged in the meat, fish and milk processing industry in Lithuania.

The proportion of agriculture in the total value added output of 2008 was 4.4 percent, while the EU average was 1.8 percent, according to the Lithuanian Institute of Agrarian Economics. The share of value added created by Lithuanian farmers in 2008 was similar to the value added created in Poland, and it was much higher than in the other Baltic countries (Lithuania - 4.5 percent, Poland - 4.5 percent, Latvia-3.1 percent, Estonia - 2.6 percent).

During the five years since joining the European Union, exports in agricultural and food products tripled in volume and accounted for 16 percent of the total Lithuanian export value in 2008, amounting to 8.8 billion litas (2.5 billion euros). Lithuania's trade balance in agricultural products is highly positive. A great help for Lithuanian farmers, since 2004, has been various payments from EU funds, especially export refund payments from the EU budget for exported production into third countries (non-EU countries), though two-thirds of Lithuania's trade in agricultural products is made with EU members. Almost all pork, bread and pastry by Lithuanian producers is sold on the Lithuanian market while producers of products from milk, beef and poultry are very much dependant on the situation of external markets.

Most of exported goods traditionally consist of dairy products. On Aug. 17, Russia banned butter, sour cream and cottage cheese from four Lithuanian producers because it said it had found tetracycline in the products. It is an antibiotic used to treat sick cows. The EU rules allow some tetracycline in milk products while Russia has a policy of zero tolerance. In September, three out of those four Lithuanian milk product producers were allowed to export their products to Russia while the fourth did not care too much, because exports to Russia made up just one percent of its turnover.

According to the Lithuanian Agriculture Ministry, 29 percent of Lithuanian milk product exports go to Russia. Lithuania has a five percent share of the total Russian milk product market. In September, a delegation of Russia's Federal Service for Veterinary and Phytosanitary Oversight arrived to Lithuania to inspect 16 milk processing companies exporting to Russia.

"It has nothing to do with politics. Last year, we got a new regulation banning all traces of antibiotics in milk products. The same problems we experienced with companies in Belarus, the Czech Republic and the U.S.," said Alexei Alekseyenko, a representative for the Russian organization.

Some 99 percent of Lithuania's exported milk products are of Lithuanian origin while, for example, an absolute majority of Lithuanian fruit and vegetable exports to Russia are re-exported from other countries. However, Lithuanian companies seem to be not very proactive in the Russian market. This market is considered to be profitable and risky at the same time. On Sept. 15-18, at the exhibition World Food Moscow, only one Lithuanian company took part. Estonia, having a much smaller agricultural and food sector, was also represented by one company while 17 Latvian companies participated in that exhibition. Only Granum Food, a Lithuanian company packing and trading nuts, dried fruits and berries, and dry breakfast cereals, decided to take part.

In the fruits and vegetables sector, Lithuania, trading more than it produces, is somewhat similar to the Netherlands. As the world's re-export king, the Dutch are the second biggest agricultural and food exporter after the U.S.. According to value, the Netherlands is the main exporter of fruits and vegetables to Lithuania. By volume, most of the fruit and vegetables come from Poland. However, the Lithuanian products are better known, and Polish products are often labeled as 'Lithuanian' in farmers' markets.