Agriculture in Slovakia: Public Expenditure Review & SWOT Analysis

Slovakian Agriculture Public Expenditure Review Comments on the Draft Report Workshop | Bratislava | November 12, 2018

Objectives of current public policies in agriculture and rural development mentioned in the report Agriculture An exhaustive listing of all of the current objectives needed, for each of the public policies addressed Promote agriculture productivity Support farmers income (implicitly) Rural Development Reference to national or European strategies Improve living conditions of rural population Favour innovation Address environmental sustainability Motivation behind recent decisions can help identify these objectives, for example: - What was the SK position during CAP 2014- 2020 negotiations? - Which of the public policy objectives the decision to reallocate funds from the 1stto the 2ndpillar was aimed at fulfilling? Forestry Increase production and productivity Enhance forest health Implications for the review: Is there a need for a change in policy objectives? Are all current public expenditures targeted at fulfilling these objectives?

Agriculture in Slovakia: a SWOT analysis WEAKNESSES STRENGTHS - - - - - Decline of some sectors: fruits and vegetables, livestock Low organic carbon in soils Lack of RD spending compared to other countries Low qualifity of SK scientific research Negative outcome of the external balance in food products: low value-added exports Domestic processing low in some cases Low value-added in the food industry High level of regulation creates barriers to changing agricultural patterns THREATS Neighbouring countries with higher public spending per hectare (Austria, Czech Republic, Poland) Low influence of Slovakia in european negotiations Volatility of commodities price in global markets Volatility linked to weather /climate conditions Dependance on imports for fruits and vegetables (climate) / from other EU countries and in particular from CZ Increase of land prices, linked to direct payments - Low emissions due to agriculture / low impact of agriculture on biodiversity High level of education Technology growth mesured by TFFP above the average in the EU A farming structure that should favour production Net exporter for beef production /Increase in trade margins for meat Relatively low level of land prices - - - - - - - of the land market which - OPPORTUNITIES - - Higher share of GDP in agriculture, forestry and fishing than average in the EU Benefits from the CAP (1stand 2ndpillars): transfer to farmers / + national co-financing More supported by public expenditure than other EU countries High profitability of R&D spending in agriculture Growing demand for poultry meat, milk, vegetables - - - - - - - - -

Rural development in Slovakia: a SWOT analysis WEAKNESSES STRENGTHS - - Rural unemployment among the highest in the EU Average wages in agriculture below average monthly wages in the economy - - Good environmental conditions Preserved biodiversity OPPORTUNITIES - Agriculture as a possibility to reduce unemployment in the countryside Benefits from the 2ndpillar of the CAP : competitiveness of agriculture, forestry and food, rural development and environmental protection Benefits from the Integrated Programme THREATS - Structure of agricultural production employment (cereals rather than fruits and vegetables) Low number of small farms integrated in local economic systems does not favor - - - Regional Operation

Impact assessment : Farming structure Largest farms benefit from the majority of public expenditure (CAP) 94% of land cultivated by 20% of largest farms Economic analysis tend to show largest farms are more competitive Should result in high level of competitiveness Implications for the review: What are the exact reasons for the lack inf productivity / low production level of large farms? What can be done to correct this? How to increase level of employment and innovation in large farms?

Impact assessment : Price fixation and product positioning Consumers : - Average price lower than in the EU but higher than in other V4 - Demand for more expensive products such as organic products? Retailers : - How do they negotiate with farmers? - What are their average margins? Farmers : - Are they well-structured in agricultural sector? - What are their average margins? - Do they sell the majority of their products to retailers?

Impact assessment : effectiveness of public spending to reduce the impact of volatility Volatility due to weather and volatility of commodity price on global markets : In which dimension? Evaluation of the economic and social consequences of this volatility Market-oriented expenditure ( 15m in average) : which specific tools? At national level, any expenditure targeted at limiting the impact of volatility Which results? How does it help reduce volatility? Useful to explore other tools? Implications for the review : Does weather related volatility prevent from diversification of agriculture (fruits and vegetables for example)? Does it have a huge impact on the level of production?

Policy recommendations : Commissions proposal for CAP 2021-2027 in Slovakia Reduced CAP envelop (-30% for direct payments and 21% for rural development) Ceilings for direct payments at 100,000 per year (and degressive between 100,000 and 60,000) Increased envelop for interventions in case of crises Level of expenditure Monitoring system performance: focus on outputs and results, moving from beneficiary compliance to policy performance More subsidiarity / responsibility given to MS Crises oriented expenditure Types of expenditure

Policy recommendations: mentioned in the report Increase added-value in agriculture Explore product positioning : labels, organic farming. What would be SK assets in organic farming? Explore possibilities to increase added-value with the same farming structure Explore the diversification possibilities Re-direct expenditure to capital-intensive farms Explore how to better share direct payments Explore the type of products that would be the most capital-intensive How to better integrate farms in their local environment? Improving the quality and research