By Working the Fields with Heavy Machinery, Applying Pesticides and Synthetic Fertilizers, and Focusing Primarily on Grain Production, We Are Degrading the Foundation of Lithuania’s Farming While Earning Meager Returns.

“In autumn, the fields empty out, and farmers tally up the season’s results. As always, there was no shortage of challenges: farm costs rose, produce prices fluctuated, and unpredictable weather conditions complicated harvest forecasts. Under these circumstances, it is evident that neither higher subsidies nor an expansion of cultivated land will solve the sector's fundamental problems. In the long run, the competitiveness of Lithuanian farms will depend on the ability to use existing resources more efficiently, diversify operations, and generate more value from the same hectare of land.

 

The value added per hectare in Lithuanian agriculture lags significantly behind that of other European Union countries. According to preliminary Eurostat data, the value added per hectare of cultivated land in Lithuania last year was roughly one-third of the European Union average: while the EU figure stood at approximately €1,500/ha, in Lithuania it was around €500/ha.

 

A stark gap in value added is evident when comparing the situation with neighboring Poland. Last year, the value added per hectare of arable land in Poland amounted to approximately €1,450/ha. Meanwhile, based on results from the last three years, the value added generated in Poland averaged around €1,200/ha—roughly 2.5 times higher than in Lithuania.

 

Farmers in Poland face many similar challenges, yet they generate more value added per hectare because production is more diversified, with significant value created in the livestock, fruit, and vegetable sectors.

 

Key factors include what is grown, the efficiency of resource use, the technologies applied, and—crucially—the proportion of harvested raw materials subsequently processed into higher-value products.

Diversifying operations: 30% more profit

 

One structural characteristic of Lithuanian agriculture is a heavy reliance on grain cultivation. Consequently, one way to increase the value generated per hectare would be to diversify operations further, placing greater emphasis on non-grain agricultural sectors. Moreover, this would enhance resilience against adverse weather conditions and geopolitical fluctuations.

 

The Polish example demonstrates the potential of this approach. Last year, the growth of agricultural value added in the country was significantly bolstered by the production of fruit, vegetables, and poultry products. In other words, higher earnings are achieved not merely by increasing the volume of primary produce, but also by expanding activities that allow for the creation of greater economic value from the same raw materials.

 

According to SEB Bank data, farms that diversify their operations—for instance, by combining crop and livestock farming—generate, on average, about 30% higher profits in the long run compared to specialized crop farms. A broader operational structure can also stabilize income by reducing reliance on price fluctuations affecting a single commodity.

We export raw materials rather than finished products

 

One of the key untapped opportunities for Lithuania’s agricultural sector lies in processing. A large share of the country’s agricultural output is still exported unprocessed; consequently, the opportunity to generate earnings from subsequent stages of the value chain is lost along with the raw material. At the same time, the sector becomes highly vulnerable to global commodity price fluctuations.

 

According to data from the State Data Agency, slightly more than 80% of the wheat grown in Lithuania has been exported over the past five years. At the same time, rapeseed exports accounted for approximately 65% ​​of total output. If farms were to convert a larger share of this produce into ingredients, food products, feed components, or other higher-value goods within Lithuania, they would boost their operational profitability. Furthermore, a greater share of the economic benefits would remain within the country.

 

Admittedly, positive changes are already visible in the market this year. The opening of a large rapeseed processing plant is expected to significantly increase the volume of rapeseed processed domestically, potentially reducing the share of exported raw material to 45–55% in the future.

 

Lithuanian milk is already part of a much longer value chain—extending from the farm to the final product on store shelves in Lithuania or abroad. In 2025, as much as 97% of the raw milk purchased in Lithuania was processed domestically; consequently, raw material exports in this sector are negligible. There is still room to increase the share of finished dairy products, as a significant amount of intermediate production goods is currently exported.

 

Applying similar logic on a larger scale to the grain, meat, and vegetable sectors—among others—would allow a greater share of the final product's value to remain in Lithuania, potentially narrowing the gap with other EU countries.

Costs are rising faster than product prices

 

The need for farms to alter their business models is further reinforced by rising operating costs. According to Eurostat data, key agricultural input costs in the European Union rose by an average of about 30% between 2020 and 2025. At the same time, the prices of certain crop products—particularly cereals—did not increase at the same rate. For instance, wheat prices rose by only about 15% between 2020 and 2025, whereas rapeseed prices increased at the same rate as input costs,  about 30%

 

A business model focused solely on grain crops is becoming unsustainable: higher production volumes do not necessarily translate into higher earnings. Therefore, to ensure sufficient cash flow for investments and loan servicing, it is crucial to increase production in higher value-added segments.

 

Technological solutions—such as soil testing, data analysis, precision farming systems, milking robots, and livestock health monitoring—could also help farmers boost efficiency. Technology automates certain processes and reduces labor costs. Furthermore, reliable data enables farmers to use fertilizers, feed, and other resources more precisely.

The greatest opportunity: generating more value from what we already produce

 

While technology enables more efficient production and cost reduction, processing offers the chance to earn more from the same raw materials. It is precisely the combination of these two approaches that can help Lithuanian farms enhance their competitiveness.

 

By transforming grain, milk, meat, or vegetables into ingredients, functional foods, feed additives, or strong regional brands—rather than just export commodities—a larger share of the final product's value would remain in Lithuania. The dairy sector already demonstrates how an extended local value chain can work. It is now important to capitalize on similar opportunities in other sectors that are still dominated by raw commodity trading or remain heavily focused on grain crops.

 

The author of the commentary is Modestas Kieras, Head of the Business Client Services Department at SEB Bank.”