Tomas Ratinger and Jaroslav Prazan
Research Institute of Agricultural Economics, Prague
At the time the reform process started, the Czech republic was more than self-sufficient in the production of the main agricultural commodities. High food consumption per capita was dominated by quite a large number of meat and dairy products. It was recognized as a success of the Czech farming system mainly in comparison with other countries of the Soviet block. In fact, the food system was driven to high production and consumption by planning and ideological demagogy at the expense of economic efficiency and the quality of life. Very often, the misallocation of resources was reduced only by the high cost of pre-reform production, but one also had to question the concentration of collective farms on the production of non-agricultural goods having practically no link to agricultural production (neither outputs nor means).
Highly intensive, very industrialized, agricultural production led to the severe pollution of water; degradation, to a large extent, of its own essential resource - soil; and gave little respect to the well-being of farm animals and the surrounding environment. Collectivized agriculture also completely changed the social environment in rural areas, mainly by eroding traditional habits and values.
It is evident that such a system could not be considered to be sustainable in a democratic system in a market economy. A set of institutional reforms and policy instruments had to be defined and implemented to create incentives for the sector to improve its sustainability. Obviously, the process had to be sequenced by introducing reforms giving different priorities to various policy goals instruments.
This paper tries to investigate if the preference was given to economic viability of farming system, environment protection, technological innovation or social feasibility when politicians designed their agricultural reforms and stabilization policies.
A lack of responsibility and interest of individuals in nationalized firms and collectivized agriculture is usually considered to be the reason for the malfunctioning of the centrally planned system, particularly in respect to sustainability. While many authors (Begg, 1991; Brooks et al; 1991; Swinnen; 1994) emphasized that the economic efficiency objective created reforms, particularly privatization in CEEC, Ratinger & Rabinowicz (1997) argued that the ideology that assets and distribution have to be primarily owned by individuals was what shaped Czech land reform. Analysing the institutional, especially the legal framework of ownership reform (Land Law, Act No. 229/1991), four principles can be identified (Ratinger& Rabinowicz, 1998):
The reform was implemented in three ways reflecting the above principles - restitution, transformation of collective farms into private cooperatives, and the sale of state assets.
Restitution rules restricted the eligibility to individuals, Czech citizens whose assets were expropriated after February 1948 and obliged the current user (later Land Fund) to give back the assets physically only if the eligible person was a farmer or his/her rights were transferred to any farming organization. The restituent was compensated if the original assets could not be returned (Decree of the Czech government from 4 December 1991).
Since collectivized land was never expropriated and did not constitute collective farm assets, the transformation procedure focused only on non-land assets. The originally collectivized assets were allocated to the owners or their heirs. The rest (newly created assets) was distributed to land owners (50 percent), original asset owners (30 percent) and member workers (20 percent) in the form of shares. The individual recipient had the right of disposal of the share. If the shareholder wanted to farm independently from the successor organization (transformed cooperative), the withdrawal of the property had to be settled within a period of 90 days. If the withdrawal was for non-agricultural purposes, the settlement could be delayed until the end of 1999. The shareholders who became members of the successor organization subordinated the rights of disposal of their shares to the internal rules governing the new entity, which are, in turn, subject to the Commercial Code.
Although state farms could be privatized within the framework of large scale privatization, due to the very large number of restitution claims only a few of them were privatized in this way. The majority of state farms were sold in privatization projects approved by the Ministry of Privatization. In both cases, however, land was excluded from privatization. Non-land assets could be acquired not only by individuals but also by legal entities. This definitely contravenes the schemes as land is supposed to be sold only to individuals.
In 1991, the Land Fund of the Czech Republic was established to watch over state land and other property before these were to be privatized. Most of the property has been leased to allow farming activities to continue.
To ensure that the transition from the centrally-planned economy to a market-led one preserves sufficient stability, a strict macro framework has been settled: the establishment of fiscal credibility, providing nominal anchors (low rate of inflation) through a nominal exchange rate backed up by tight credit and a temporary freeze on wages, and current account convertibility. Complete reform has been sequenced further to market liberalization, privatization, taxation reform (income tax, VAT, new health and social care payments), trade liberalization (less protection, fewer subsidies, more competition from abroad), liberalization of wages and capital account convertibility (Begg, 1992). It is obvious that those are overlapping processes, some of them could be done overnight (price liberalization), while others lasted longer (privatization) (V.Klaus, 1992).
In the middle of 1990, during the first reform, the government removed the legal and administrative barriers to market entry (and exit in 1991) thereby both allowing and stimulating the disintegration of markets. At the same time, the cut in the deficiency payment, (initially compensated for by the lump sum of CZK 140 per person per month) ended with different price ratios for producers and consumers. However, prices remained under the governmental control untill January 1991. Full price liberalization has not yet been completed. While all prices of manufactured goods, including agricultural and food products, were liberalized during 1991, very sensitive housing prices, railway tariffs and few other services have remained under state supervision and have gradually been raised to their expected "market" level.
Price liberalization brought with it a significant shift in price structure and a tremendous adjustment on both the consumer and producer sides. Consumer prices jumped by 58 percent and real income of households dropped by 27 percent in 1991. Consumers appeared to be able to adjust quickly their consumption pattern by adopting budget constrained utility maximizing behaviour. (Ratinger, 1992). As a consequence, food consumption fell by more than 17 percent in 1991. Obviously, this caused oversupply on the agricultural market with a significant depression of farmers' prices. The situation developed most dramatically in the meat market, where supply surpluses were multiplied by the effort of farmers to reduce the size of their herds. With large (financial) assistance from the government, most of the surpluses were exported between the second half of 1991 and 1993. This calmed the situation on the domestic market. Markets of the majority of agricultural commodities have been more or less balanced since that time. The exceptions are the milk and sugar markets where adjustments have been slow (or slowed down) due to, besides other factors, expectations of the introduction of quota regimes when the domestic policy is harmonized with the CAP (Doucha, 1999). In autumn 1998, the pork market collapsed, but not as a consequence of the post-liberalization adjustment.
The gross domestic product dropped by 20 percent during the first three years of reform. Between 1994 and 1997, the economy enjoyed moderate growth as a result of the success of macroeconomic stabilization. However, insufficient economic and institutional reforms and slow restructuring has returned the economy to recession since the middle of 1997. The social impact of the recession in the early 1990s resulted in a fall in real income while the recent economic slump has brought with it a sharp increase in unemployment (from only 2.9 percent in 1995 to 8.1 percent in January 1999).
The land lease scheme (land cannot be accepted as a collateral) and the bad economic performance of the whole agricultural sector made access for farmers to bank credits difficult (�ilar, Doucha, 1999). As a result, investment activity decreased by 70 percent between 1989 and 1993. The government offered several schemes to encourage investment giving slight preference to new farming entrepreneurs (family farms, partnerships and farming companies).
In 1993, the Support and Guarantee Fund for Agriculture and Forestry (SGFAF) was founded. This fund offers guarantees for bank credits and refunds a portion of interests paid by farmers. The maximum level of guarantee ranges from 30 percent to 80 percent. The level of interest subsidies is defined by the SGFAF in compliance with its real financial possibilities. The interest rate paid by a client has to amount to 1 percent at least. In the period of 1994 - 1998, the bank loan interest rate for agriculture was on average 17.58 percent20 and the average interest rate subsidy from the SGFAF amounted to 12.32 percent. This means that the nominal interest rate paid by a client was reduced to 5.26 percent (�ilar, Doucha, 1999). As a result of the operation of the support and guarantee fund, investment activity in agriculture has improved since 1994. The annual real investment level was 75 percent higher between 1995 and 1997 than in 1993.
However, arguments have already appeared that highly supported credits have not sufficiently influenced the restructuring of Czech agriculture. To the contrary, it seems that, together with other measures and instruments of agricultural policy, the supported credits have functioned like income subsidies and have enabled the less effective farm structure emerging during the first years of the reform to petrify. SGFAF operations have to a large extent, substituted normal agricultural credits with stricter conditions, emitting distorted signals to the market (�ilar, Doucha, 1999).
In the pre-reform period, 39 percent of the total agricultural land (TAL) was state land. The rest was formally private, but almost completely collectivized. The restitution process restored the property rights of private persons in nearly 80 percent of TAL. In 1993, state land subjected to privatization was transferred to the Land Fund and leased to expected owners. This accounted for 22 percent of TAL in 1995. An area of 202 220 hectares (4.7 percent of TAL) was retained as public land operated by public organizations.
Three million hectares of agricultural land was returned to three million owners. Thus, the average size of this ownership is around a one hectare. Most of the restituted land was not physically taken by owners, but directly transferred for renting to successor organizations. In this way, 89 percent of land used by the former collective farms was transferred to new cooperatives between 1992 and 1993. Nevertheless, 700 thousand hectares of agricultural land (16.4 percent of TAL) was physically returned to former owners by the end of 1994 including land reclaimed from new cooperatives. Three quarters of this land was in small plots of less than 20 hectares. Consequently, four fifths of the land is leased. A quarter of this area is still state land and leased by the Land Fund. According to the Agro-census of 1995, 95 percent of land on which corporate farms operated was rented. Family farms used more of their own land, but, nevertheless, the share of leased land was still over 70 percent. The rental rate is usually low, around 1 percent of the administrative price of land.
From surveys which were conducted by VUZE, land transactions accounted for only 8 500 hectares (between 1993 and 1996). This indicates relatively low interest in investing in land and points to some barriers to land exchange. Currently, it seems there are three objections hampering the land market: the national principle in land ownership; the difficulty of demarcation of the plots (Doucha, 1999); and the awaited privatization of state land.
Between 1989 and 1997 the TAL changed only slightly (a contraction of only 0.4 percent). However, an area of fallow land appeared and increased to 100 000 hectares (2.3 percent of TAL). Also, a slight shift in the land use structure was observed, with only 141 000 hectares of arable land converted into grassland over the same period.
Price scissors opened between almost stagnating farm gate prices and jumping input prices (of 69 percent) during the first three years of the reform. In reaction to a such dramatic price change, agricultural producers reduced rapidly the consumption of most inputs - mainly fertilizers and pesticides. The application of fertilizers dropped by more than 60 percent between 1989 and 1993. Since 1994, the price development of agricultural outputs and inputs has been parallel and the consumption of intensification inputs slightly increased.
Contrary to price development which was negative to agricultural producers, the assortment and quality of inputs, particularly agro-technical services, improved significantly over the transitional period and this process is likely to continue. Suppliers of services are specialized firms and very often farmers or farming companies which offer their extra capital and labour capacities.
Since land reforms were introduced in 1992, Czech farms have passed through essential organizational change. In 1989, individual farmers accounted only for less than 1 percent in the TAL, while the sector was dominated by collective farms with more than 60 percent and state farms with one quarter of the TAL. Remaining area was operated by various types of public companies, not necessarily specialized in agricultural production. The most dramatic change was observed between 1992 and 1993, when farming entities were forced to adopt new legal forms.
Most collective farms were turned into new private production cooperatives in 1992 (until 28 January 1993). Land owners, whether they became cooperative members or not, usually leased the land and assets to new cooperatives. At that time, only 11 percent of former collectivized land was withdrawn for use in new cooperatives. This land was used by successor farming joint stock companies, limited liability companies and individual farmers (family farms). Since land continued to be withdrawn from cooperatives, the area used by cooperatives consequently dropped from 53 percent of TAL (as for January 1993) to 43 percent of TAL in 1995. Most state farms terminated their agricultural activities by the end of 1994. Some of them ceased to exist at all (160 of the 303 original state farms were liquidated by the end of 1995). An area of more than one million hectares used by state farms in 1989 dropped to only 19 thousand hectares (0.4 percent of TAL) in 1995
Nearly one third of TAL is utilized by individual farmers and partnerships (1997); the rest is managed in a corporate way. Family farms in this context also involve part-time farming. Farming joint stock companies, which appeared as an alternative resulting from the transformation of collective farms, joint agricultural enterprises on collective farms and the privatization of state farms within the framework of large-scale privatization (voucher method), have been a minor type of farm business operating on only 9 percent of TAL so far. Limited liability firms covered almost 20 percent of agricultural land in 1997. They originated predominantly from the process of privatization of state farming enterprises.
Most of the non-agricultural activities21 were quickly separated from the collective farms as a consequence of the abolition of the restrictions on emerging new businesses in the early 1990s. While shifts in land ownership and farm operational structures are consequences of legal changes and the administrative process, the structure of production has mostly been influenced by depressed markets for agricultural products. From 1989 to 1997, total gross agricultural output (in 1989 prices) contracted by 29 percent. Livestock production dropped by 35 percent and crop production by 21 percent. The ratio between crop and livestock gross output shifted from 41:59 to 46:54.
The markets for animal products (milk, beef, pork, poultry) and sugar beet were affected most seriously by the price adjustment, while the market for cereals was touched only slightly and has improved since 1995. Opposed to that, the oilseed market has expanded since the beginning of the reform. The changed market situation caused a radical reduction of cattle herds and numbers of other animals. By spring 1998, the number of cattle fell about 52 percent compared to 1989, pigs about 17 percent and poultry by only about 10 percent. The intensity (use of variable inputs, and consequently yields) of all types of production dropped as the new price relationships encouraged a lower input strategy during the transition period (1990-1997). Despite these dramatic changes, the Czech Republic remains self-sufficient in basic foods.
More than half of the national herd of cattle is to be found in cooperatives, but almost all the beef and milk production of state farms was transferred to private (non cooperative) hands. Pigs and poultry moved out of the cooperatives to a large extent. Forty-nine percent of pigs and 62 percent of poultry are in farming companies, partnerships and family farms.
The degree of specialization of agricultural producers was low in the pre-reform period. State farms were a bit more specialized22 with 12 percent in crop production and 17 percent in animal production, while 96 percent of collective farms had mixed production. This phenomena is persisting in post-reform farming. The most specialized among agricultural enterprises are farming join-stock companies with 30 percent of farms oriented to animal production.
Since the beginning of agrarian reform, the average size of farms has decreased significantly (from 842 hectare in 1989 to 41 hectares in 1997). And this is not only due to an emergence of individual farmers. The average size of former collective farms, today cooperatives, fell from 2 500 hectares to 1 086 hectares over the same period.
The increase of full-time farming was reflected by the growth of the average size of family operated farms from 4 hectares in 1989 to 14 hectares in 1997. Eighty percent of individual farmers are smaller than 10 hectares, with an average size of 3.8 hectares and covering only 12 percent of single farming land (4.9 percent of TAL). This is a considerable change since 1993 when small plots occupied only 1.7 percent of TAL. On the other hand, family farms with more than 100 hectares occupied 51 percent of individually managed land in 1997.
During the transition period, the use and composition of factors of production have significantly changed. First of all, labour moved out from farms very rapidly. Labour resembled a variable input adjusting accordingly to declining output. The total labour force fully engaged in agricultural decreased from more than half a million to 200 thousand in 1997 (a fall of 62 percent). Much of this labour outflow is associated with the separation of non-agricultural production from farms (52 percent of the change 1989-1995) and cuts in excessive managerial staff (19 percent of the change 1989-1995), but a lot of the labour outflow is associated with the reduction of production. The cut in agricultural labour caused problems only in a few industrially underdeveloped regions (MZe, 1994), local unemployment rising up to 8 percent. But the national economy, in general, offered enough opportunities for employment outside agriculture so that the released agricultural labour force did not affect national unemployment figures.
Consequently, the labour to land ratio dropped from 15 per 100 hectares in collective farms in 1989 to 6-7 per 100 hectares in cooperatives and farming companies today. Since family farms have a smaller proportion of livestock production than large scale farming and owner labour is employed more than 8 hours per day, their labour intensity is around 3 people per 100 hectares. Overall, average labour productivity increased about 88 percent between 1992 and 1997. The operational efficiency of capital however, decreased. This is particularly true for original or transformed collective farms, from where capital, particularly fixed assets, is moving out only slowly. In spite of the structural changes and the decline of output, more than 99 percent of total agricultural land remained in agricultural production, hence land productivity fell as well.
Three million owners of land plus some others acquired nearly 200 billion state and collective farm assets, 120 billion of that being fixed assets. Personal capital in agricultural organizations is under the 40 percent level. This is because a large proportion of privatized assets have not been repaid yet and also because a large proportion of assets are in the possession of individuals having no interest in leaving it in agriculture. Certainly, less than one tenth of owners want to work in agriculture (only 4.6 percent of the total work in agriculture).
The share of agriculture in GDP decreased to almost only two percent. A characteristic feature of Czech agricultural production is a high share of intermediate inputs (68 percent in 1997) in the final output, hence a low formation of value added. Despite the release of labour, labour costs account for nearly 70 percent of the gross value added to market prices. In total, the agricultural sector generated losses over the whole transitional period. The situation slightly improved in the second half of the 1990s, which might suggest that the adjustment progressed. On the other hand, governmental transfers to agriculture significantly increased at the same time (subsidies on production tripled between 1994 and 1997).
The low performance of the sector was also mirrored by the development of agricultural wages. The dynamics of real income growth has been substantially lower in agriculture than in the rest of the economy, and thus agriculture belongs among the sectors with the worst parity (20 percent below) to the national average. However, according to the sociological survey of VUZE, between 60 and 70 percent of households depending on agricultural income considered this income sufficient to cover their basic needs in 1994, and that probably still holds. More than 80 percent of those employed in farming companies and cooperatives work less 60 hours per week, while almost 70 percent of individual farmers work more than 60 hours (Horsk�, Spn�, 1996).
Over 50 percent of the total territory is used for agricultural purposes. The agricultural land area is fairly stable, with a slight downward tendency. The area of arable land has been decreasing slightly, giving place to fallow land, meadows, pastures and forest. In the period 1990-1996, the proportion of grasslands increased by 3 percent. However, the magnitude of this trend was insufficient. The share of arable land at 72 percent is unacceptably high and is amongst the highest in Europe. Further growth in the proportion of permanent grassland and forest is necessary. Traditionally, around 50 percent of the arable land is sown with cereals, between one quarter (1997) and one third (1989) of the arable land is used for forage production, and the rest is covered by potatoes, sugar beet, rape seed, flax etc. Obviously, changes in forage production are associated with the decline of cattle (beef and dairy) production. The production of both cereals and forage relaxed in intensity, measured by yields and fertilizers consumption (CSO 1998).
According to estimates by the Research Institute of Melioration and Soil Protection, close to 70 percent of agricultural land was jeopardized by water and wind erosion in 1996. Erosion was classified from slight to medium over most of the country ,with the average annual loss of soil about 5 000 kg/ha of arable land (Praan, K�, 1997). This is mainly due to a big proportion of arable land being located on slopes. Usually the off-site effects (silting rivers or water reservoirs, contamination of water etc.) are documented. It is estimated that the social cost of the off-site effects of erosion might amount CZK 20 bn (around 20 percent of the agricultural final output) each year (Praan, K�, 1997). The use of heavy machinery in many regions resulted in severe soil compaction. Unfortunately, there is lack of information on the extent and cost of that degradation.
Besides a significant reduction in the consumption of industrial fertilizers, the decline of animal production has also affected soil fertility. This has been due to first: lower production and consequently a lower application of manure; and second, a lower need for forage has constrained possibilities for rotation. One may see that farmers have tried to avoid this effect by reducing the intensity of forage production since the number of cattle dropped to half and the area used for forage only by 25 percent during the transition.
All of the above mentioned factors have contributed to a slowly declining content of humus in the soil (erosion by run off, declining animal production followed by a lower input of organic components). Obviously, the process of unbalanced consumption on soil fertility the impact of which is less observable in the short run, might threaten farm production and sustainability in the future. On the other hand, extensively utilized intensive technology might threaten economic viability in the short run.
Contamination of the soil has been inherited mainly from the environmentally improper mining of mineral materials and the expansion of the metallurgical industry during the period of communist industrialization. However, unacceptable levels of heavy metals have been detected only locally, and the extent of pollution has not been very significant.
The use of fertilizers and the input of manure was relatively high during the communist period. In the middle of the 1980s, the nitrogen balance reached more than 100 kg/ha of agricultural land (Kl�r, 1998). The cost minimizing behaviour of farmers resulted in a rapid fall in the application of industrial fertilizers during the first years of transition. Due to a structural shift away from animal production, the application of manure dropped as well. As a result, the biggest improvement of agricultural nitrogen balance in OECD countries was observed in the Czech Republic, i.e. down over 80 percent to 51 kg/ha of agricultural land in the period 1988 - 1996. This figure might still be over the OECD average value of 17 kg/ha of total agricultural land. However, it is close to the EU average of 46 kg/ha, and definitely substantially lower than in Benelux or Denmark (Brower, Loewe, 1998).
Although there has been an upward tendency in the use of plant protection substances in recent years, their level still remained below half of the pre-transition figures. In 1996, nearly four thousand tonnes of active substances of plant protection products were used in the Czech Republic, which, in turn, corresponds to 0.91 kg/ha, compared with the application of 2.42 kg of active ingredients per hectare in 1980s.
Czech water resources are relatively small, and the intensity of use significantly higher than the OECD average. Agriculture is not a big user of water resources, but it is one of the biggest water polluters. This is mainly due to concentrated animal production units with improper manure management, and agricultural land use, with 72 percent arable land, consolidated into large fields (24 hectareson average). Such land management also allows the absorption of only a small proportion of rainfall, while the rest with a high content of nutrients runs off. Most of the country is subject to floods, and in some regions a significant deficit in ground water has appeared.
The sharp reduction in the use of fertilizers and pesticides did not seem to have a substantial influence on water quality. In the 1990-1996 period, a modest decrease in ammonia nitrogen, organic pollution and phosphates concentration in major rivers (not observed in small watercourses) was reported. The concentration of nitrates remained roughly the same. Only in the case of organic pollution, oil and NO2, was there a small and gradual improvement. It seems that the level of contamination is affected mostly by a large number of point pollution sources. While on average the concentration of cattle per farm and per hectare of agricultural land decreased by 50 percent, concentration of pigs and chicken remained almost unchanged. Thus a large number of pig and poultry farms, with a large concentration of animals and still using inappropriate systems for the management of organic fertilizers and slurry, have been responsible for most of the water pollution.
Water pollution causes off-site damage rather than problems for the farms themselves. Its effect on farm sustainability can be indirect if the local community or society as a whole is concerned with the negative implications of polluted water and thereby requires strict measures for improving water quality. Moreover, a loss of water (ground water deficit) and the run-off of nutrients affect yields and consequently farmers' income.
The contribution of Czech agriculture to the total emissions of the main greenhouse gases is 5 percent, slightly lower than the OECD average of 6.7 percent.
A high proportion of habitats have been destroyed, especially wetlands, semi-natural meadows, field banks, scattered trees, small woodlands, and ponds. All Czech land was changed by agriculture and forestry. In some regions, semi- natural habitats were formed due to traditional farming, but the proportion of such areas is relatively small. It is estimated that 35 percent of mammals, 43 percent of birds and 36 percent of fish are endangered. There is an increasing danger to some grass ecological systems, connected with the decrease in the intensity of agricultural production-leaving meadows and pastures fallow decreases the species composition, supports the spreading of invasive and non-indigenous species, an invasion by tree species and thus leads to the disappearance of rare species. These factors have a substantial influence on fauna and flora, especially because of the relatively short period of time affecting the extent and numbers of the individual species. A significant part of valuable areas are managed in Landscape Protected Areas.
It is obvious that a loss of fertility due to the run-off of nutrients from eroded fields has either to increase cost of production or to reduce yields. In addition, the compaction of soil generates higher costs in cultivating the land. However, these phenomena are hardly recognized by farmers, rather declines in yields have always been accounted for by insufficient application of fertilizers because of a lack of operation capital.
Since political changes in November 1989, environmental policy has been institutionalized in the Ministry of Environment together with separate departments in other ministries and policy objectives have been spelled out. However, the governments has been constrained by the predominance of a need for economic growth over the need for sustainable livelihood from the beginning. Early governments concentrated very much on reducing pollution, particularly, air pollution which seriously harmed nature, especially forests, and human health. Most attention was paid to technological improvements for the largest (state) polluters (coal power stations). Restrictive legislation was adopted to prevent the emergence of new producer - polluters, while those already existing were treated rather softly.
An agri-environmental policy which would be an integral component of agricultural policy and environmental policy has not been formulated in the Czech Republic so far. Many instruments declared as agri-environmental measures often fulfilled other objectives and their contribution to environmental improvement was negligible (Praan, 1998).
The framework for agri-environmental policy is given by overall environmental legislation and sector specific legislation. The first one rests on three key laws: the Environmental Act (law No. 17/1992) incorporating fundamental relations and links of environment protection policies; the Law on the State Environmental Fund (law No. 388/1991) completing the above mentioned act with financing and budgeting; Law No. 244/1992 including ecology among the criteria for the selection of all relevant human activities in the landscape. The second one includes The law on Fertilizers and Norms, Legal Restrictions, on Organic Fertilizer Management on Farms and Law 252/1997 with the accompanying Decree 341/1997 which both define programmes for supporting production of high natural values on farms. These legal bases would already permit the creation of a comprehensive agri-environmental policy rich in its instruments and measures if objectives were well spelled out. The last mentioned law will require prompt revision to make it fullly compatible with the EU Act 2078/92.
Current agricultural policy is poor in environmental instruments. Beside restrictions on the use of improper polluting technologies, there are a few support programmes: investment support by the SGFAF in the programmes FARMER and LANDSCAPE, direct payments and investment grants from the state budget.
Because particular directions of investment support by the SGFAF have not been reported, it is impossible to assess the impact of that instrument. The objectives of direct payments and investment grants from the state budget varied substantially from year to year. To illustrate the recent targets of the budgetary outlays, we present the structure of 1997:
The government has spent on these programmes over CZK 2 billion, the total area benefiting from that budget amounting to 12.3 percent of TAL. Despite the intention to present these programmes as social contracts for the public good, their actual character was close to direct income support since getting a subsidy was not subjected to the effective monitoring of the delivery of environmental goods (benefits). From this point of view, such programmes would not be compatible with the EU ACT 2078/92. Because the primary goal of these programmes is a transfer to farmers' income, the institutional back-up for achieving environmental improvements (benefits) is missing. Neither an extension network nor a monitoring body has been yet introduced.
The national programme for the conservation and utilization of the genetic fund (micro-organizms, plants and animals) was supported by CZK 48 millions in 1997 (CZK 45 millions in 1996). Another essential contribution to environmental and landscape stability should come from the land consolidation programme. For this purpose, over a half a billion crowns was spent in each of the last two years (1996, 1997). However, the programme has progressed only slowly, hence anyenvironmentally positive impact is rather negligible at present.
Farmers have had access to Ministry of Environment programmes, but the actual support and effect is small.
Current policy has effectively prevented the neglect and degradation of grasslands, and has modestly reduced a further increase of the off-site effects of erosion by turning some of the eroded land into grassland and forests and has supported conversion from intensive dairy production to less ecologically harmful extensive beef and sheep production, particularly in LFA.
On the other hand, such a policy has not addressed a number of other serious environmental issues such as the preservation and creation of high natural values including the cultural landscape in all its aspects, environmentally sensitive farming practices mainly in respect to preventing further pollution of water by nitrates, and targeted technological innovation in order to eliminate point pollution resources.
The government has concentrated only on two instruments; restrictions and subsidies. If, as we pointed out in the introduction, behind the reforms there was an implicit wish to restitute individual responsibility of individuals, no particular emphasis is given to this aspect in the implementation of the agri-environmental policy. A lack of evidence toward the spontaneous production of environmental welfare or benefit points to a lack of farmers` awareness of the negative ecological impact of agricultural activities, of what is socially demanded, and how to produce this benefit. Therefore, there is a need to improve in the dissemination of information, the building up of extension services, and the issuing of guidelines (a codex) for the best environmentally friendly agricultural practices. Some of these aspects have already been recognized by policy makers and will be (it seems) included in the Agricultural Agenda for the next 4 years.
In general, early reform governments paid only little attention to the role of civil society organizations in the transition. As a reaction, most of the non-governmental organizations concentrated on the development and implementation of individual projects contributing to the improvement of the environment, more less from a local or particular perspective, while they were effectively discouraged from suggesting and debating agri-environmental policy objectives and measures. The greatest concern of non-governmental organizations, particularly the largest one, the Czech Union of Nature Conservation, has been landscape management and the preservation of natural values.
With preparations progressing for EU accession, the attitudes of both sides, the government and non-governmental organizations, to mutual communication has been slowly changing. A number of Czech non-profit organizations and associations for environmental protection have learned from their EU colleagues and have been encouraged to start the preparation of programmes or programme frameworks which are flexible enough to fit in with future governmental and EU structural programmes. The extensive programme for improving the environmental situation in the Bile Karpaty region (headed by the Foundation for Organic farming and Czech Union of Nature Conservation) might be a good example of an EU like approach to institutional cooperation. The programme is rich on agro-components, designed to fit in with the objectives and condition of the SAPARD programme.
One of the most important observations of transitional conduct in agriculture is that of the overall relaxation of production intensity. It might be judged as an opportunity for establishing an environmentally friendly farming system in the long run. Nonetheless, extensively utilized intensive technologies might seriously threaten in the short run the economic viability of farms. It has to be stressed that less intensive production originates in a lack of operational capital rather than in ecological concerns. When interviewing farmers and production specialists (VUZE, 1999), respondents always complained that the current economic situation of farmers did not allow them to utilize their land and assets optimally; intensively enough. From this perspective, the adoption of CAP after accession might return the farming system to the methods of high intensity.
Farmers' behaviour also cannot be separated from their wish to generate maximum income from recently acquired property. Thus, conservation, or a claim to environmentally sensitive extensive farming practices, always comes into conflict with this aspect of land property rights. Therefore, only a fully institutionally equipped agri-environmental policy with well-defined objectives and powers can contribute to overcoming this conflict.
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Table 1: Use of land (thousand hectares)
| Year | Total Agricu-ltural Land | Arable Land | Perma-nent Crops | Gardens | Meadows | Pastures | Share of Arable Land in TAL | Conve-rsion to Grassland | Farmers per hectare of TAL |
| 1989 | 4 296 | 3 232 | 78 | 157 | 572 | 257 | 75% | 0 | 0.124 |
| 1990 | 4 287 | 3 219 | 78 | 158 | 577 | 256 | 75% | 13 | 0.120 |
| 1991 | 4 284 | 3 185 | 78 | 158 | 602 | 262 | 74% | 47 | 0.096 |
| 1992 | 4 283 | 3 175 | 77 | 158 | 609 | 263 | 74% | 57 | 0.073 |
| 1993 | 4 282 | 3 173 | 77 | 158 | 610 | 263 | 74% | 59 | 0.063 |
| 1994 | 4 281 | 3 158 | 77 | 158 | 620 | 267 | 74% | 74 | 0.058 |
| 1995 | 4 280 | 3 143 | 77 | 159 | 630 | 272 | 73% | 89 | 0.052 |
| 1996 | 4 279 | 3 098 | 77 | 159 | 663 | 283 | 72% | 134 | 0.051 |
| 1997 | 4 280 | 3 091 | 77 | 159 | 668 | 285 | 72% | 141 | 0.047 |
Source: CSO
Table 2: Price indices
| Price indices | 1989 | 1993 | 1997 |
| Input prices | 100% | 169% | 232% |
| Farm gate prices | 100% | 119% | 152% |
| Consumer food prices | 100% | 204% | 258% |
| CPI | 100% | 231% | 327% |
Source: CSO
Table 3: Application of fertilizers (kg/ha)
| Crop year | 1989/90 | 1990/91 | 1992/93 | 1994/95 | 1996/97 | Index 1996/97 1988/89 |
| Total fertilizers | 217.9 | 121.8 | 82.0 | 97.2 | 91.3 | 42% |
| Nitrogen | 98.5 | 73.3 | 55.8 | 66.8 | 64.4 | 65% |
| Phosphorus | 63.5 | 25.8 | 14.8 | 18.2 | 15.7 | 25% |
| Potash | 55.9 | 22.7 | 11.4 | 12.2 | 11.2 | 20% |
Source: CSO
Table 4: National Economy Indicators
| Unit | 1989 | 1991 | 1993 | 1995 | 1997 | |
| GDP in constant prices 1994 | CZK billions | 1 445 | 1 228 | 1 156 | 1 222 | 1 282 |
| GDP deflator | index | 1 | 1.62 | 2.21 | 2,7 | 3,16 |
| CPI | index | 1 | 1.72 | 2.31 | 2.77 | 3.27 |
| Government budget balance | CZK billions | -1.2 | -8.4 | 1.1 | 7.2 | -15.7 |
| Current account balance | CZK billions | 3.4 | -50.2 | -100.1 | ||
| Unemployment | % rate | 4.1 | 3.5 | 2.9 | 5.2 | |
| Wages | real index | 1.00 | 0.70 | 0.80 | 0.93 | 1.03 |
| Exchange rate | CZK/USD | 15 | 29.49 | 29.2 | 26.6 | 31.7 |
| GDP growth | real index | 1.00 | 0.85 | 0.80 | 0.85 | 0.89 |
Source: MA (1998)
Table 5: Gross Agricultural Production (CZK millions)
| Item | 1989 | 1991 | 1993 | 1995 | 1997 | Index 1997/89 |
| Crop Production | 44 694 | 43 072 | 37 387 | 35 694 | 35 138 | 79% |
| Animal Production | 63 939 | 53 611 | 45 672 | 46 337 | 41 665 | 65% |
| GAO total | 108 633 | 96 683 | 83 059 | 82 031 | 76 803 | 71% |
| Crop Production Share | 41% | 45% | 45% | 44% | 46% | |
| Animal Production Share | 59% | 55% | 55% | 56% | 54% | |
| Total Labour | 53 3057 | 410 911 | 270 849 | 221 620 | 200 590 | 38% |
| Labour Productivity Index | 100% | 115% | 150% | 182% | 188% |
Source. CSO
Table 6: Production structure
| CR | EU-15 | |||
| Item | Total | Corporate | Sole | |
| farms | farmers | |||
| Average area of surveyed farms (ha) | 131.9 | 1 000.0 | 34.2 | 17.5 |
| -farms over 5 hectares (ha) | 186.1 | 1 144.9 | 48.6 | 38.2 |
| Share of enterprises with more then 100 hectares (%) | 90.4 | 99.6 | 60.1 | 39.7 |
| Share of arable land (%) | 80.1 | 81.3 | 76.2 | 56.6 |
| Share of enterprises (%) having - Cattle | 65.5 | 73.4 | 64.4 | 25.9 |
| - Pigs | 53.6 | 60.8 | 52.8 | 16.0 |
| - Poultry | 47.4 | 16.7 | 50.8 | 31.4 |
| Number of animals per farm (thousand) - Cattle | 109.1 | 797.9 | 20.9 | 44.7 |
| - Pigs | 249.0 | 1925.5 | 31.6 | 95.1 |
| - Poultry | 1 932.5 | 42 419.1 | 436.4 | 426.0 |
| Concentration of animals - Cattle (heads/100 ha AL) |
54.2 | 58.6 | 39.6 | 66.2 |
| - Pigs (heads/100 ha AL) | 126.3 | 143.9 | 64.1 | 154.2 |
| - Poultry (heads/100 ha AL) | 866.2 | 870.3 | 852.0 | 1353.4 |
| Share of own land (%) | 11.1 | 5.4 | 30.2 | 59.4 |
Source: CSO, MA (1998), Eurostat
Source: MA (1994) -MA(1998)
Table 7: Real wage growth
| % | 1989 | 1991 | 1993 | 1994 | 1995 | 19972) |
| Agriculture | 149.8 | 95.9 | 95.3 | 100.0 | 108.0 | 112.9 |
| National average | 116.4 | 81.2 | 92.8 | 100.0 | 108.7 | 120.4 |
| Agriculture/National economy wage ratio | 108.99 | 100 | 87.004 | 84.711 | 84.214 | 79.411 |
Source: Doucha (1998)
Table 8: Economic Accounts for Agriculture (CZK millions)
| Item | 1994 | 1995 | 1996 | 1997 |
| Final Production | ||||
| Crop Production | 39 879 | 40 279 | 47 390 | 45 615 |
| Animal Production | 55 045 | 59 175 | 66 759 | 65 293 |
| Total Production | 94 923 | 99 454 | 114 149 | 110 908 |
| Intermediate Consumption | ||||
| Intermediate consumption | 62 936 | 60 846 | 72 825 | 75 535 |
| Indicators | ||||
| Value added in market prices | 31 987 | 38 608 | 41 324 | 35 373 |
| Subsidies on production | 2 255 | 4 631 | 6 338 | 7 259 |
| Taxes on production | 2 270 | 2 384 | 2 503 | 2 503 |
| Value added at factor costs | 31 972 | 40 855 | 45 159 | 40 129 |
| Depreciation | 9 449 | 10 551 | 11 839 | 10 702 |
| Net value added | 22 523 | 30 304 | 33 320 | 29 427 |
| Compensation of employees | 21 971 | 21 412 | 23 853 | 23 960 |
| Net operation surplus | 552 | 8 892 | 9 467 | 5 467 |
| Rents | 1 600 | 1 374 | 1 557 | 1 600 |
| Interests | 4 509 | 5 038 | 4 878 | 5 094 |
| Net income for total labour | 16 414 | 23 892 | 26 885 | 22 733 |
| AWU | 246 549 | 221 620 | 217 208 | 200 590 |
| Indicator 1 (NVA/AWU/INF) | 0.0914 | 0.1253 | 0.1291 | 0.1139 |
| Indicator 2 (NVA/AWU/INF) | 0.0666 | 0.0988 | 0.1042 | 0.0880 |
| Profit/loss | -5557 | 2480 | 3032 | -1227 |
| GDP in market prices | 1148600 | 1348700 | 1532600 | 1649500 |
| Share on GDP | 2.8 | 2.9 | 2.7 | 2.1 |
| CPI | 100.0 | 109.1 | 118.8 | 128.8 |
Source: MA (1998)
Table 9: Agri-environmental programmes of MA
| Programme | Budget outlay (CZK millions) |
Change (%) |
Area affected (ha) |
|
| 1996 | 1997 | 1996 | 1997 | |
| Forestation | 27.3 | 17.1 | -37% | 433 |
| Reconstruction of vineyards, hop gardens and orchards | 92.5 | 74.5 | -19% | 978 |
| Cultural landscape management | 1 452.2 | 1 669.3 | 15% | 524 000 |
| Support to apiculture | 64.3 | 76.3 | 19% | |
| Support to extensive animal production on pastures in mountain and sub-mountain regions | 354.8 | 278.0 | -22% | |
| Support to biological plant protection | n.a. | 9.9 | ||
| Total | 1 991.1 | 2 125.1 | 7% | 525 411 |
Source: MA (1998)
Table 10. Operation Structure
| Operation Structure | No. | Publicly owned and operated | Private but collectivized | Privately owned by operator | Rented to private organizations | Total area | Average size | Number of employees | Total Labour | Men per hectare |
1989 |
||||||||||
| State Farms | 174 | 1089414 | 1089414 | 6261 | 127865 | 127865 | 0.12 | |||
| State Cooperative (collective farm) | 1024 | 262246 | 2360218 | 2622464 | 2561 | 403192 | 403192 | 0.15 | ||
| Private Cooperative | ||||||||||
| Farming Company | ||||||||||
| Partnership | ||||||||||
| Family Farm (sole proprietorship) | 3205 | 12820 | 12820 | 4 | 2000 | 0.16 | ||||
| Other, including non agr. enterprise | 342781 | 228521 | 571302 | |||||||
| Totals | 4403 | 1694442 | 2360218 | 241341 | 4296000 | 846 | 531057 | 533057 | 0.12 | |
1993 |
||||||||||
| State Farms | 240 | 552000 | 552000 | 2300 | 25157 | 25157 | 0.05 | |||
| State Cooperative (collective farm) | ||||||||||
| Private Cooperative | 1334 | 97385 | 2019673 | 2117058 | 1587 | 184965 | 184965 | 0.09 | ||
| Farming Company | 1088 | 31171 | 592253 | 623424 | 573 | 51744 | 51744 | 0.08 | ||
| Partnership | included in farming companies | |||||||||
| Family Farm (sole proprietorship) | 52003 | 211652 | 360381 | 572033 | 11 | 8493 | 17807 | 0.03 | ||
| Other, including non agr. enterprise | 189964 | 228521 | 418485 | 0 | ||||||
| Totals | 54665 | 741964 | 568729 | 2972307 | 4283000 | 71 | 270359 | 279673 | 0.07 | |
1997 |
||||||||||
| State Farms | 22 | 19000 | 19000 | 864 | 508 | 508 | 0.03 | |||
| State Cooperative (collective farm) | ||||||||||
| Private Cooperative | 1256 | 61762 | 1302238 | 1364000 | 1086 | 89480 | 89480 | 0.07 | ||
| Farming Company | 2152 | 60303 | 1164697 | 1225000 | 569 | 79602 | 79602 | 0.06 | ||
| Partnership | 56 | 907 | 17466 | 18373 | 328 | in farming companies | ||||
| Family Farm (sole proprietorship) | 91708 | 494311 | 805377 | 1299688 | 14 | 33000 | 0.03 | |||
| Other, including non agr. enterprise | na | 148939 | 205002 | 353941 | na | 18350 | 0.05 | |||
Totals |
95194 | 167939 | 822284 | 3289778 | 4280001 | 41 | 220940 | 0.05 | ||
Source: Ratinger/Rabinowicz, 1997: Own estimates for 1996 and 1997 based on the Report on Agriculture for 1997, MA 1998
20 The average interest rate in the banking sector for all credits amounted to 13.03 in 1994 and to 15.55 in 1998 (January - September).
21 Former collective farms often had various non-agricultural activities, which were not linked to agricultural production at all, like construction activities, production of computers, spare parts for cars etc.
22 Specialized production: more than 66 percent of output creates crop or animal production; Mixed: otherwise. Percentage in operational form output.
