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Opportunities: Agri Business |
The information below is provided
by Prague Business Journal
www.pbj.cz
Czech agriculture is catching up with
European Union (EU) countries, and after many years of
losses has become profitable, partly thanks to state compensation
of farmers' losses due to drought and mad cow disease
(BSE). Wages in the agriculture sector remain far below
the national average and the agricultural trade deficit
stayed at Kc 20 billion. The sector now faces a fight
to harvest the most important crop: future EU subsidies.
The latest assessment report of the European Commission
(EC) of November 2001 said that the Czech Republic had
made progress in bringing the agricultural policy closer
to its EU counterpart, especially in the harmonization
of legislation. It is expected that the sensitive agricultural
chapter will be among the last closed during talks with
the European Union. The expedition of this process depends,
however, on the crucial matter of how to fund the agricultural
sector after the candidate countries accede to the EU.
For the time being, the Czech Republic does not agree
with the current proposal of the European Commission that
the candidates have a 10-year transition period for so-called
direct subsidies.
The EC says that after entry in 2004, newcomers will be
entitled to 25 percent of direct support, with a 5 percent
rise a year until 2006. "This will help stabilize
the farmers' incomes. If the EU provided 100 percent,
Czech farmers would receive more than double their average
national income and it would undermine attempts at restructuring
and lead to social inequalities," explained Franz
Fischler, EC commissioner for agriculture. Market subsidies
and purchase prices alone, without any direct support
from the European Union, will increase revenues of Czech
farmers after the country becomes an EU member by up to
60 percent, the commissioner added
Czech farmers are unhappy with EC proposal and say that
it doesn't secure their competitiveness with their EU
counterparts. Agriculture Minister Jan Fencl said that
even if Czech farmers received 100 percent of direct subsidies,
they would still be at some 60 percent of the EU level.
The volume of direct subsidies is calculated on both the
area of land and hectare yields, which are lower in the
Czech Republic than in the EU, he explained.
Since July 2000 the Czech Republic has liberalized trade
with the EU in pork, poultry, salami and cheese. Recently,
the two sides agreed to liberalize also trade in such
sensitive commodities as corn, milk, beef and wine. Experts
say that the EU profits from the liberalisation more.
Last year a half of Czech agricultural imports came from
the EU and the agricultural trade deficit remained at
the 1998 level. On the other hand, trade with CEFTA countries
posted a surplus. Experts say that the structure of agricultural
exports has worsened, because the share of primary products
was on the rise to the detriment of final products. In
the case of imports it was the other way around. Although
the Czech agricultural sector moved to the black in the
last two years, wages did not grow much. In 2000 the sector
reported a profit of Kc 3.7 billion and the figure for
last year is estimated up to Kc 2.4 billion, but it is
increasingly dependent on subsidies, said Miroslav Jírovský,
the head of the Czech Agricultural Association. "Subsidies
help farmers do business and in part also cover activities
other than production, but not sufficiently." This
year, Czech farmers should receive Kc 10.7 billion in
subsidies, down from Kc 11.6 billion earmarked for the
sector in 2001.
Last year the average wage in agriculture reached Kc 11,146,
or 76 percent of the country's average. Czech farmers
had to cope with many problems, including mad cow disease
(BSE), which was detected in the Czech Republic in June
2001. The Agricultural Chamber said that the disease brought
about a surplus of some 60,000 tonnes of beef and consequent
losses amounted to some Kc 2 billion. Thanks to a state
subsidy worth nearly Kc 500 million, half of the surplus
was exported. The state contributed another Kc 150 million
to tests for BSE last year. There is no such state contribution
as of this year. In 2000, farmers got a Kc 5 billion state
subsidy because of drought, which caused damage of over
Kc 10 billion, according to the estimate of the Agriculture
Ministry.
Overall, subsidies do not reach the EU level. While according
to OECD (the Organization for Economic Cooperation and
Development), in the EU various subsidies account for
up to 56 percent of farmers' income, in the Czech Republic
they make up some 15-20 percent of agricultural sales.
The government has been both praised and criticized for
the organization of the domestic milk and sugar markets.
While some farmers dislike the system of milk and sugar
quotas, a number of producers say they contribute to stabilization,
thus bringing the country closer to the EU market order.
The chief agricultural products of the Czech Republic
are wheat and pork.
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