Hogan urges Czech farmers to invest in processing agri-products to boost competitiveness

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Czech farmers have to invest more in processing agricultural products if they want to improve their position in an increasingly competitive environment, EU Commissioner Phil Hogan said in an interview with Aktuálně.cz.

“I think the further processing of basic commodities, in particular, would improve further the position of Czech farmers on EU market – instead of delivering only raw agricultural material,” he said.

Phil Hogan is the European Commissioner for Agriculture and Rural Development. He spoke to Aktuálně.cz, EURACTIV’s media partner in the Czech Republic.

The Common Agricultural Policy (CAP) has had a lot of positive effects on the new EU member countries after 2004 but it has also opened the door for very hard competition. Have Czech farmers been well prepared for such a fundamental change?

Following my visit and current experience from my services, I am pretty sure that Czech farmers were well prepared for open markets. Of course, one could spot a drop in production of some commodities (meat, milk) as in most other member states that joined the EU in 2004. On the other hand, solid competitiveness can be seen for crops – oilseeds or the famous Czech malting barley. In order to compete on the common EU market, various support tools were open to farmers in the Czech Republic, especially under the rural development programme (2007-2013) in which 99.88% of total financial allocation was used.

The EU funds have helped farmers from Eastern and Central Europe to modernise and enhance their production. In recent years, though, this process has slowed down. What is your recommendation to the Czech farmers in this respect?

First of all, I do not think that the modernisation has slowed down. At least the data on the new programming period and the use of measures like “investment in agricultural holdings” and “investment in processing of agricultural products” gives positive output. Where I still see a certain deficiency is the low added value to agricultural products.

I think the further processing of basic commodities, in particular, would improve further the position of Czech farmers on the EU market (instead of delivering only raw agricultural material). The role of cooperation between the holdings and setting of own storage and processing facilities should, in my opinion, be a priority for further investment.

Post-communist countries currently import many agricultural products because of the high-level state subsidies in Western Europe. For example, 75% of traditional fruits are imported to the Czech Republic. Should the EU consider some legislation to improve the situation of these farmers?

In the fruits and vegetables sector, the level of subsidies for producers is exactly the same in all member states. Subsidies are available for Czech fruit farmers according to the same rules in Belgium, Spain or Italy. Today, there are only 5 producer organisations recognised in the Czech Republic for an average annual expenditure of €1.5 million.

In case Czech fruit farmers wish to benefit more from EU support, there is no need for additional legislation. Any expansion of Czech fruit production can take place under the current regime. Contrary to other CAP measures, there is no financial ceiling!

The sanctions against Moscow have severely impacted many smallholders in the Czech Republic. Czech fruit producers had to close down almost one-quarter of their plantings because of low purchase prices.

Immediately following the Russian embargo, the Commission adopted emergency measures allowing additional withdrawals of fruit and vegetables to compensate for the market losses incurred. These measures were in place for more than 4 years until the end of September 2018. However, uptake in the Czech Republic has been minimal, which indicates that Czech fruit producers found normal outlets at better prices.

Small farmers in the Czech Republic are complaining about the complexity of applications for EU grants and the red tape linked to it. Can the application process be simplified?

A small farmers’ scheme already exists for direct income support with the objective to grant certain aid under simplified conditions. Unfortunately, the Czech authorities decided not to implement this scheme. On the other hand, the legislation must be respected by all types of the holdings regardless of their size.

The role of advisory services is essential in this respect and small farmers should receive appropriate help, including instruction how to fill in aid applications or how to design the projects. I was informed that Czech authorities decided not to implement the measure “advisory services” under the rural development program but my services were assured that the national advisory scheme is working well to the satisfaction of all types of beneficiaries.

For the future CAP proposal, I would like to draw your attention to Article 25 of the proposal, under which member states will be allowed to continue to grant to small farmers lump sum payments under a simplified scheme which will replace direct payments.

Do you believe that capping subsidies for large farmers to €100,000 will fundamentally change the situation?

The purpose of capping direct payments is to achieve rebalanced distribution. Its “savings” will remain available for agriculture support in the member states concerned. One of the driving principles of reduction of payments/capping is the economies of size that farmers achieve when getting per-unit payments.

The proposal also includes the possibility of exemption of salaried and unpaid labour which makes reduction/capping not only fairer but it also considerably mitigates its effect on the labour intensive larger farms.

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