Interview: Namık Kemal Parlak

Speaking to Miller Magazine, Karolis Šimas, President of the Lithuanian Grain Processors and Traders Association, highlights the strengths of Lithuania’s grain industry, from its high-quality production to its sustainable logistics and adaptability in the face of geopolitical shifts. He also shared that Lithuania is diversifying its grain exports, shifting from Eastern markets to new territories in Africa and South America in response to global changes.

Lithuania, a small but agriculturally robust country in the Baltic region, plays a significant role in global grain production and exports. Together with its Baltic neighbors Latvia and Estonia, it has established itself as a vital exporter. Over two-thirds of Lithuania’s grain production is exported, with wheat and rapeseed being the dominant crops. The focus on quality has been a defining feature of Lithuanian grain exports, with the country known for its uniform, high-quality wheat. Additionally, Lithuania’s advanced logistical infrastructure ensures the efficient transport of grain to global markets.

Karolis Šimas
President of Lithuanian Grain Processors
and Traders Association

In an exclusive interview with Miller Magazine, Karolis Šimas, President of the Lithuanian Grain Processors and Traders Association, shared valuable insights into Lithuania’s role in global grain markets and the challenges and opportunities it faces. He underscored the significance of export markets for Lithuania’s agricultural sector, noting, “This season, Lithuania is likely to be among the top three wheat exporters in the European Union.”

In recent years, the Lithuanian grain industry has seen substantial investments in processing facilities. The country has been expanding its production of value-added products such as flour, pasta, and biofuels. “We aim to process as much grain as possible in Lithuania, which is why we are investing in new processing plants. With new investment projects, Lithuania could process more than 1 million tonnes, we will have more than 50 % local processing growth,” Mr. Šimas shared.

The changing geopolitical landscape has prompted Lithuania to reconsider its role in the global grain trade. In response, the country has shifted its exports toward new markets in Africa and South America. “Lithuania’s grain exports are moving from the Eastern side to the West,” Karolis Šimas explained. “Turkey and Saudi Arabia have been replaced by emerging markets such as Nigeria, Germany, South Africa, Morocco, and Spain. We’ve also made our first sales to the Americas, including Mexico and Canada.”

Mr. Šimas, how significant is the contribution of Baltic countries to global grain production? What are the most prominent crops in the region?

Lithuania, like its neighbours, is a small country, so we do not produce as much grain as the big countries. However, Lithuania, Latvia, and Estonia are all important exporters of cereals.  Lithuania exports more than 2/3 of the grain produced and the rest is processed locally. The most popular crops exported are wheat and rapeseed. This season, Lithuania is likely to be among the top three wheat exporters in the European Union. For faba beans export we are among the top three in the world. These are the main commodities we export, others, like barley, triticale, yellow peas have a smaller global role. 

LITHUANIA PLANS TO BOOST PRODUCTION OF GRAIN VALUE-ADDED PRODUCTS

Can you give us an overview of the Lithuanian grain industry? What are its key strengths and contributions to the country’s economy?

Declared main eight commodities area are stabilized at around 1.8 million ha. Around two-thirds of the grain harvest - around 5 million tonnes - is exported each year, while the rest remains for local consumption and processing.  

As I mentioned before, we are a very small country, but we are a big agricultural country, with a large amount of arable land, in total more than 1 ha per capita (around 3 million ha of total agricultural land in use). Lithuania exports an average of 1.3 tonnes of wheat each year per capita basis, 0.5 tonnes of wheat per capita basis go for processing and local consumption. These per capita figures are among the highest in the world. 

In 2023, members of the Lithuanian Grain Processors and Traders Association produced 1.76 million tonnes of products: pet food; foodstuffs such as flour, pasta, instant porridges, noodles, corn flakes, groats, and granola,  malt, starch, gluten, and syrups, as well as biofuels, rapeseed oil, glycerol. About half of these products were exported. We also aim to process as much grain as possible in Lithuania, which is why we are investing in new processing plants. The new investment projects we have yet started will increase wheat processing up to 0.5 million tonnes, 0,3 million tonnes rapeseed etc. So, Lithuania could process more than 1 million tonnes, we will have more than 50 % local processing growth. 

We hope that this increase in processing volumes will not lead to a decrease in exports of the existing production potential. The potential of Lithuanian farmers encourages us to think so.  Farms in Lithuania have been consolidating recently  which has a positive impact on quality control and assurance nationwide. Currently, around 75% of Lithuanian farms are advanced and technologically strong, but around 25% are small and often not professionally managed. Increasing their productivity would help them to achieve higher average cereal yields. Our goal is to maintain or even improve the quality level of our grains. This exclusivity will continue to ensure our competitiveness.

How would you describe the performance of Lithuania’s grain processing and trading sector over the past year? What were the most significant achievements and challenges?

There are four main achievements of Lithuania’s grain processing and trading sector. The first is that all three Baltic States have traditionally been established as transit countries and Lithuania has a well-developed railway structure. The restrictions imposed on Russia because of the war in Ukraine have significantly reduced the transit volumes.  A good site of this situation is the potential of railway and port system has increased the extra capacity for faster logistics of agriculture products.

We  also have sustainable logistics to ensure a fast route for grain, to Klaipėda Panamax ice-free port. Around 2/3 of Lithuania’s grain is transported by rail, while the rest reaches the port by trucks. Wagon logistics produces 6 times less CO2 emissions compared to trucks, which is one of the important advantages in implementing an EU green deal policy in the future.

Another advantage is that Lithuania is a very small territory, with grain transported 100-200 km to the port,  meaning our logistics are sustainable, cheap, and can fulfill orders quickly.

Lastly,  we have a well-developed infrastructure of grain elevators and warehouses with huge local grain/oilseed storage capacities. Most of them have already paid for themselves, but they are not too old, so they will last another 15-20 years.

Lithuanian-owned companies dominate Lithuania’s grain processing and trading sector, but we also have several Scandinavian-owned companies. Many of these companies have been operating since Lithuania’s independence, and in fact, they have grown the sector. Lithuanian traders and collectors are well-known as reliable contractors.

LITHUANIA’S COMMITMENT TO QUALITY

Lithuania is known for its high-quality grain exports. What makes Lithuanian grain competitive in global markets?

Yes, Lithuania is known as a country with good-quality grain. Most of our grain is not sold through imported country state tenders, but directly to the global millers. Grain quality depends on several things. First, it depends on the professionalism of the farmer but it also depends on the quality of the seed and its preparation. Therefore, if the weather is favourable, we produce very high-quality grain. In Lithuania, the most popular grain are the food-grade varieties. We use the wheat seeds as E-grade and A-grade, practically we don’t have feed wheat seeds. 

In the past, about 70 % of the wheat harvest was 13,5-15 % protein milling wheat. In recent years, the reduction in fertiliser levels due to the European Green Deal has led to a slight decline in grain quality. Nowadays, about 50% of the total wheat harvest is 12.5% protein milling wheat, about 25% is 13-14% protein and 25% is 11.5% protein.

We only export our own wheat, we do not import it from other countries, so our grain is homogeneous and of uniform quality. Every year, the Lithuanian Grain Processors and Traders Association carries out special baking tests in different laboratories around the world to purify and select the best miller’s wheat varieties.

What are Lithuania’s grain production and export expectations for the upcoming season?

70 % of the total planted are winter wheat and rapeseed. At the moment, they are in an ideal condition, with slightly larger areas, so we expect a better harvest than last year, if the weather continues to be favourable. Usually, our harvest starts in July.

LITHUANIA’S GRAIN EXPORTS SHIFT WESTWARD

How has the global grain market volatility, including supply chain disruptions and geopolitical tensions, impacted Lithuanian grain processors and traders? 

Regarding market volatility, the local collectors and traders became well-experienced and strong financially. They offer the farmers many price fixing and delivery methods. The farmers use futures, options and OTC hedges methods, but these instruments are managed by collectors and traders and help to eliminate the price volatility for farmers. The trader’s task is to balance the risks arising for the farmers.

As I have already mentioned, we can adapt quickly to organize big volumes for export when the export competition windows open. We export grain to 50 countries around the world and we have wheat of different qualities, finding the right markets for them. In the past, most Lithuanian export destinations were Saudi Arabia, Iran, Turkey, east Africa, and other MENA countries.

Due to Russia’s aggressive use of grain exports as a political tool in its foreign policy, Lithuania’s grain exports have shifted westwards in recent years. Turkey and Saudi Arabia have been replaced by new markets such as Nigeria, Germany, South Africa, Morocco, and Spain; we also made our first sales to the American continents like Mexico and Canada, and sometimes reach Asia – Indonesia, Thailand, Vietnam, India, Bangladesh, maybe someday we will reach – Brazil, Venezuela (we already have the phytosanitary certificates agreement) too. 

Lithuanian farmers are among the most competitive in the European Union, so we are trying to adapt to these geopolitical risks, in order to export more and more grain to the European Union itself.

With geopolitical disruptions affecting grain trade routes, what steps are Baltic exporters taking to ensure stable supply chains? How has the war in the Black Sea influenced the role of Baltic countries in providing an alternative route for grain exports?

Lithuania could have played an important logistics corridor roll for the rail export of Ukrainian grain to Baltic Sea ports, however this railway line crosses the territory of Belarus, making it unsuitable for Ukrainian grain exports.

Lithuania has practically everything it needs to process grain, and only imports some feed additives, so the geopolitical challenges of recent years have not significantly disrupted our companies’ operations. However, they have prompted us to prepare properly for possible crises and to invest in alternative energy sources. Nowadays, practically all grain elevators and relevant companies have solar panels.

How do European Union policies and regulations affect Lithuania’s grain industry? Are there any challenges you face in aligning the industry with EU green initiatives and sustainability goals?

Yes, these regulations are very strict, and the quality of Lithuanian wheat fell a bit. Lithuanian farmers have invested much, taken maximum measures, reduced the use of fertilisers and pesticides, and adapted to  the Green Deal. This has been costly, but we have now stabilised the situation, farming has become more precise.

What trends do you see shaping the future of the grain processing and trading sector in Lithuania? Have there been noticeable shifts in export destinations for wheat?

Lithuania’s grain exports are shifting from East world side to more West, and we plan to export more and more of our harvest to the European Union. Due to the climate change and the decreasing efficiency of the farms in the Western European countries, wheat import from the Baltic States, Poland, Romania, and Bulgaria will increasingly dominate. 

Is there collaboration among the Baltic states to strengthen their collective role in the global grain trade? Are there any ongoing investments on ports and logistical infrastructure to enhance the grain export capacity?

Many Baltic traders operate in all three countries, so sometimes Lithuania, Latvia, and Estonia are seen as one market. Our ports were expanded about 10-15 years ago, to make them more suited to handling grain. Now, with the stoppage of transit from the Eastern countries, the port capacity is even at under capacity.

Would you like to share anything else with the industry?

We have all the logistic possibilities to export our harvest quickly. Lithuanian grain quality brand becomes well known globally with the stable quality, strictly controlled logistic chain, and with phytosanitary certificates already recognised in many countries. 

Lithuania is a strong and reliable player in the grain export market, able to offer not only raw materials, but also a wide range of grain-based products.