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Transformation Process in Agriculture Lecture 3

Transformation Process in Agriculture Lecture 3. Structure. What is economic transformation ? Different starting points Main goals T ools Transformation of agriculture restitution privatisation transformation of cooperatives results.

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Transformation Process in Agriculture Lecture 3

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  1. Transformation Process in AgricultureLecture 3

  2. Structure • What is economic transformation ? • Different starting points • Main goals • Tools • Transformation of agriculture • restitution • privatisation • transformation of cooperatives • results

  3. Was transformation ofagriculture generally the same in all post-communist countries ? Definitely not, since the history and state of agriculture differed For example….

  4. Czech Republic • middle to worse natural conditions • since the pre-war period, industrial country with agriculture losing in importance (share in GDP 7 % in 1989) • net importer of food and agricultural products • cheap food owing to fixed prices and subsidies • diminishing share of population in agriculture (9 % in 1989) and rural areas • highly intensive large-scale agriculture • good economic and social position of workers in agriculture, relatively high incomes • low concern for environment

  5. What did Czech agriculture look like at the end of the 80ies • large-scale agriculture • state farms of 6,200 ha in average • cooperatives 2,600 ha in average • private sector almost non-existent • concern for land and property almost forgotten • high concentartion of animals

  6. What did Czech agriculture look like at the end of the 80ies • production oriented on quantity • overproduction • orientation on self-sufficiency • relatively high yields • high intensity • economically stabilised sector • high subsidies • low environment care

  7. What did Czech agriculture look like at the end of the 80ies • social orientation • high level of employment • relatively high education level of workers • above-average incomes • good social care : housing, catering, recreation, culture, child and pensioners care

  8. Time periods I. etap :restitution, transformation according to the Transformation Act, starting privatisationof state farms 1992 – 1993 II. etap :extension of restitutions, 2. wave of co-ops transformation, main part of privatisation 1994 – 1997 III. etap:Restitutions basically finished, 3. wave of co-ops trasformation, sale of state land, preparation to the EU accession and the CAP 1998 – EU accession IV.etap:After-accession adaptation to the CAP

  9. Main goals and tools of the • basic transformation period • 1992-1995 • property re-structuring • transformation of the legal forms • wide market liberalisation • low support level • (food quality and environment issues, sustainable agriculture) • no consistent agricultural policy

  10. Three main transformation processesin Czech agriculture • Restitutionof property expropriated by the state in the period 1948-1989 to the original owners or their heirs • Privatisation of state property • (not liable to restitution) • Transformation of co-operatives

  11. Three main transformation processesin Czech agriculture • Restitution • in agriculture, there were about 232 ths individual restitution claims • claims were primarily settled in kind, not in money • the responsible institutions (state, state farms, original UACs) were often trying to keep the best property • problem of built-up land • problems of “property valuation“ • many people felt new wrongs besides the old ones • problem of church and pre-war cooperative property • almost 4 million of individual land owners

  12. Kristan farm, MilotickyThe family restituted farm building and land which had been in the family ownership for more than 300 years before having been expropriated in 1953. They had to pay 1.5 mill CZK for its “valuation“

  13. Former estate of Prague bishopsin Cervena Recice

  14. Is the restitution process already finished? • The percentage of granted claims does not, however, mean that the property was really returned, since about 5 % of the granted decisions are not legally valid yet and there is a lot of legal processes still pending

  15. Three main transformation processesin Czech agriculture • Privatisation of state property • it was done by the way of : • Public auctions (7.21%) • Public competitions ( 12.77 %) • Direct sale ( 41.05 % - most numerous ) • Coupon privatisation ( 6.12 %) • Transfer without payment to municipalities and public institutions ( 32.90 %) • The process was very slow and lead to loss of property value and also of jobs

  16. Privatisation of state property • By December 31,2007, in total 99.12 % of all property assigned to privatisation in agriculture was already privatised (sold or given over) • The remaining property amounts to approx. 407 mil. CK and is in a great part farmed by 7 so-called “remainder“ state farms • Czech state still owns about 400 ths ha of agricultural land, which is in majority let on lease

  17. In total, privatisation in agriculture regarded the property of 189.5 bill.CK

  18. Three main transformation processesin Czech agriculture • Transformation of co-operatives • the most complicated part of transformation • the idea was to allocate to each co-operative member and also the original members and their heirs an adequate part of the co-operative assets according to: • the input of land (50 %) • the input of other property (30 %) • working years spent in the co-operative (20 %)

  19. Three main transformation processesin Czech agriculture • Transformation of co-operatives • The possible new legal forms were : • family farms • co-operatives of the new type (“owners’ co-ops”) • any form of business company according to the law (Ltd., joint-stock….) • At the beginning, co-operatives were the most numerous, gradually they were re-transformed into joint-stock companies

  20. Three main transformation processesin Czech agriculture • Problems of the co-op transformation • property was divided “on paper“, the real market value was lower • people, who wanted to start family farming, were often offered inappropriate assets • most people just wanted money, but the co-ops were unable/unwilling to pay their share • payments were postponed by 7 years, but partially were never paid ( debts of about 15 bill.CK) • most co-ops divided into several smaller units, some of which were laden with debts and went bankrupt • worsened social feelings in villages

  21. Number of co-operatives decreased from 1,253 in 1989 down to 678 in 2004 and 608 in 2007

  22. Diving into the icy waters of free market • drop of food consumption owing to the price liberalisation in 1991 • low market protection • growing competitive imports of food products • invasion of the market-chains •  decrease of home production (30 % GP) • decrease of support •  steep decrease of labour in agriculture • problems with access to credits • three-generation indebtness • agriculture operating at a loss

  23. Enterprise structure according to share in a.l. (%) Enterprise structure according to number of farms (%)

  24. Average acreage of farms • is 99 ha as the arithmetic average • but 1,500 ha as the weighted average (taking the numbers of farms in individual size groups as the weight)

  25. Land ownership structure • Land ownership in the Czech Republic differs considerably from the farm structure and is very atomised, owing mainly to the restitution process. • By January 1, 2005, there were registered 4,875,860 individual ownership lists and 15,146,737 registered land plots. • Majority of agricultural land , i.e. more than 3,500 ths hectares, is owned by physical persons or different types of business companies. • Approximately 700 ths hectares of agricultural land is still in the ownership of the state and is managed by the Land Fund of the CR. It is leased to different users and gradually offered for sale since 1999.

  26. Scope of land on lease Most Czech agricultural enterprises do not farm their own land, but lease it:

  27. Development of nominal monthly wages

  28. Development of nominal and real wages indices in agriculture, industry and NE as a whole Real wages agriculture Real wages industry Real wages NE Nominal wages agriculture Nominal wages industry Nominal wages NE

  29. Numbers of workers, real wages and productivity of labour in Czech agriculture Numbers of workers Labour productivity Real wages index

  30. Development of gross agricultural production, 1989-2004 Plant production Animal production GAP

  31. Numbers of cattle, milking cows, milk yield, 1989-2004 Cattle heads Milking cows heads Milk yield l/cow/year

  32. Price indices of inputs and outputs to agriculture, index 1989=100 Input prices Output prices Inflation rate

  33. Economic results (in bill.CK), capital returns and indebtness (in %) of Czech agriculture, 1999-2004 Economic results (profit) Capital returns Indebtness rate

  34. Profit/loss including subsidies, without subsidies and the amount of subsidies according to legal forms in agriculture, 2003 and 2004 Profit/loss Subsidies Profit/loss without subsidies Cooperatives Joint-stock co. Ltd.co. Family farms Business co.total

  35. SWOT analysis of Czech agriculture by the EU accession • Weaknesses • large-scale production • transformation problems still not completely solved • low productivity of labour compared to the EU • ageing farm population • growing income disparity • low inputs • non-developed land market • divided land ownership and land use • lower level of support • indebtness of farms • weak farmers lobby • Strengths • large-scale production • stabilised economic situation • stabilised farm structure • growing productivity of labour • good technological level • cheap land • cheap labour • flexible farmers, good education level • developed ICTs • low level of support • application of the CAP EU

  36. SWOT analysis of Czech agriculture by the EU accession • Opportunities • Eastern markets • foreign capital investments • EU structural funds • utilisation • growing demand for organic • products • growing demand for agri- tourism and environmental services • water resources protection • renewable energyresources • labeled country products Threats • lower competitiveness with both old and new EU members (Poland…) • high demands for the SF projects quality and co-financing • unequal position of new • member countries • CAP reforms, the EU budget • international food chains • low social image of agriculture in society

  37. Brno, 2003

  38. Athens, 2004

  39. And what are the impacts of the EU accession on agriculture?

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