Development of the dairy sector in Latvia: AGMEMOD scenario analysis

The dairy sector is one of the most important and complexly regulated agricultural sectors, making a significant contribution to the national economy, public employment, and rural development. At the same time, it is a strategically important part of the food supply system, which is influenced by political, economic, technological, social, and environmental factors. Due to these circumstances, it is essential to develop and analyze scenarios for the development of the sector, which allow for the prediction of possible future situations and the assessment of the impact of policy measures or market changes on the sustainability of the sector. This is made possible by various forecasting models that are widely used in the agricultural sector. One such model is AGMEMOD, which was developed to forecast the agricultural and food market in the European Union (EU). In this study, using the AGMEMOD, scenarios for the development of the Latvian dairy sector were analyzed based on current sector trends and expert opinions obtained during interviews. Two scenarios were developed and the results show that gradual and structured integration of technology into milk production processes can promote productivity growth and ensure more stable adaptation of the sector to political and economic challenges without increasing herd size. Overall, the introduction of technology is the most promising direction for the development of the sector, allowing the potential for innovation to be balanced with practical adaptation processes.

The aim of this study is using the AGMEMOD model to assess how different assumptions regarding technological progress and policy uncertainty may influence future milk production, herd size, and productivity.