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Farmers in dire straits

Slovak farmers have their backs against a wall. Besides the perennial shortage of cash in the agriculture sector, high interest rates and the reluctance of banks to lend money, this year has brought additional trials in the form of an unusually rainy autumn, a fall in crop prices and an 8% shortfall in the 1998 budget for agriculture.
"This is not an ordinary situation, and it requires extraordinary solutions," said Ivan Oravec, vice chairman of the Union of Slovak Cooperative Farms (ZPD). "The situation is not improving, instead it's getting worse," he added.
As a result of the inclement weather and the general financial crisis in farming, old crops have not been fully harvested nor new ones seeded. Cash flows between farmers, consumers and the state are frozen, and Slovakia has come under pressure from cheaper, better and more plentiful crops from neighbouring countries.


An unusual sight. Because of drenching rains this fall, farmers have had problems harvesting their crops.
Vladimír Hák-Profit

Slovak farmers have their backs against a wall. Besides the perennial shortage of cash in the agriculture sector, high interest rates and the reluctance of banks to lend money, this year has brought additional trials in the form of an unusually rainy autumn, a fall in crop prices and an 8% shortfall in the 1998 budget for agriculture.

"This is not an ordinary situation, and it requires extraordinary solutions," said Ivan Oravec, vice chairman of the Union of Slovak Cooperative Farms (ZPD). "The situation is not improving, instead it's getting worse," he added.

As a result of the inclement weather and the general financial crisis in farming, old crops have not been fully harvested nor new ones seeded. Cash flows between farmers, consumers and the state are frozen, and Slovakia has come under pressure from cheaper, better and more plentiful crops from neighbouring countries.

Robbing Peter to pay Paul

According to Jarolím Augustín, head of the supervision board of the Slovak Agriculture and Greengrocer's Chamber (SPPK), Slovak farmers are mired in debt and unable to collect on the credit they have extended to purchasers. The insolvency of farms in Slovakia has reached 4 billion Sk ($111 million), Augustín said, "and this is the reason behind the high reliance of farmers on state subsidies."

On the other hand, the same indebted farms have enormous receivables that they are unable to collect. "Our forecast is 5 to 7 billion Sk ($138-194 million)," said Oravec, explaining that such mutual insolvency between creditors and debtors was typical for Slovakia these days. "It's a chain. It seems that everyone, including the state, owes money to someone else."

The Slovak state has contributed its share to the insolvency crisis. The 1998 state budget earmarked 9 billion Sk ($250 million) for the agriculture sector, but since January, the government has withheld 2% of this money each quarter. The frozen funds have now reached 8% of the promised sum.

"This [frozen money] comes to 722 million Sk ($20 million)," explained Ján Paciga, SPPK Chairman, adding that 346 million Sk ($9.6 million) of this figure has already been spent on compensating areas in the east of the country which suffered heavy damage in July's flooding. A further 107 million Sk ($3 million), Paciga said, had been spent on "saving flooded land in the same region," all at a time when the state had still not paid last year's farm subsidies. "That [1997 figure] amounts to 249 million Sk ($6.9 million), and must be given to farmers," Paciga said.

Oravec argued that the flood damage money should not have come from funds intended for all farmers. "We agree that the flood damages must be compensated, but not from the budget of the agriculture sector," he said, adding that his ZPD farmers' union had already asked the Agriculture Ministry to release the 8% of budget money being withheld. "We want to negotiate, but we won't back down from this request," he said.

A hard rain

On top of farmers' financial troubles, this year's fall season has brought a deluge of rain. According to experts, rainfall figures have exceeded four times the usual average, hindering the harvest and postponing the seeding of new crops.

"Due to the bad weather, only 25% of the sugar beet harvest has been collected so far, and its sugar percentage has fallen from 16% to 14%," explained Oravec. The quality decline, he said, meant an inevitable fall in sugar beet prices.

The wheat crop has also been harmed by the rains. Cash-strapped farmers, who were unable to purchase seed wheat in the spring, were given loans by the State Fund of Market Regulation . In return, farmers were to supply the state fund with a comparable amount of high quality grocery wheat, but because of the weather, the quality of the crop has been low and the debt to the fund cannot be honoured.

Peter Harag, director of the state fund, said that the fund had contracted for 213,000 tons of high quality wheat at 426 million Sk ($11.8 million), but had so far received only 124,000 tons. "More than 300 agrarian producers, including 80 individual farmers, haven't fulfilled their duties," he said, adding that the fund is now short about 190 million Sk ($5.3 million). Farmers groups have proposed that the fund be compensated with a mixture corn and low-quality fodder wheat.

Farm politics

Slovakia's shortage of high quality grocery wheat attracted the immediate attention of agricultural exporters in neighbouring countries, especially in Hungary with its 2.35 million tonne grain surplus. To defend itself against an import glut from its southern neighbour, the Slovak government decided on September 10 to impose a 70% tariff on Hungarian grocery wheat

This step was sharply criticised by the Central European Free Trade Association (CEFTA) and the World Trade Organisation as highly discriminatory. In reponse, the Slovak government decided on October 13 to broaden the tariff to include all foreign countries, effective November 2.

Anna Majkútová, spokeswoman for the Agriculture Ministry, said that "this order is valid for 200 days after it takes effect," which means until mid-April, 1999.

Ivan Rosíval, an agriculture expert with the largest party in the new governing coalition, the SDK, said that a 70% tariff would ultimately hurt domestic farmers. "70% is too high," he said. "Although it's important to protect the domestic market, such a high tariff can easily de-motivate our farmers. They may lose their natural competitive environment, and that's not positive."

But Oravec said that the country's 'competitive environment' had left farmers on the verge of bankruptcy, and demanded to know who would now address their complaints. "Is it realistic to ask the outgoing minister, or should we approach members of the newly formed government?" he asked.

Rosíval was in no doubt as to who was responsible for the crisis - "it should be the old agriculture minister Peter Baco for sure, he is fully responsible" - but said it was "more than probable" that the blocked budget funds would not be released by the incoming government.


Main problems in Slovak agriculture sector

- High insolvency of Slovak farms - 4 billion Sk ($111 million)
- Receivables of agriculture companies at 5-7 billion Sk ($138-194 million)
- Interest rates of 30 to 35% on farm loans
- 62% of agriculture sector companies not profitable
- Agricultural wages only 77% of national average
- Agricultural imports exceed exports by 13.2 billion Sk ($367 million)
- Cut and later cancel state subsidies to non-efficient cooperative farms.
- Support exports of agrarian products at level comparable with neighbour countries
- Cancel land tax, and accept land as collateral for loans
- Put State Fund for Market Regulation, which supports farmers, in public hands.
- Create financial institution to lend to agricultural sector and help establish new farms.

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