CZECH REPUBLIC: ESTIMATES OF SUPPORT TO AGRICULTURE

Contact person: Vaclav Vojtech

Email: vaclav.vojtech@oecd.org

Tel :

(33-1) 45 24 92 66

Fax :

(33-1) 44 30 61 02

DEFINITIONS AND SOURCES

Note: The series of estimates of support to agriculture for Czech Republic are ending in 2003, as from 2004 the estimates of support to Czech agriculture are part of the EU estimates.

Country Total Support Estimate (TSE) and derived indicators in Table 1 cover all agricultural production, i.e. all agricultural commodities produced in the country. Definitions of basic data sets refer to the specific name of the programmes with specific sources indicated in square brackets. For the Producer Support Estimates (PSE) and Consumer Support Estimates (CSE), the description of policy measures indicates the commodities covered by the measures, as well as the method of allocation of the corresponding transfers among commodities. "MPS commodities", which vary across countries, are those for which market price support is explicitly calculated in Table 2.

Market Price Support (MPS) and Consumer Support Estimates (CSE) by commodity in Table 2 are calculated for the following commodities: wheat, barley, rapeseed, sugar, milk, beef and veal, pig meat, poultry meat, and eggs. Definitions are provided only for basic data sets from which all the other data sets in this table are derived, following the formula indicated in each commodity table. Specific sources are indicated in square brackets.

Producer Support Estimates (PSE) by commodity in Table 3 are calculated only for commodities produced in the country within a common set of commodities (wheat, maize, barley, oats, rice, sorghum, soybeans, sunflower, rapeseed, sugar, milk, beef and veal, pig meat, poultry meat, sheep meat, wool, and eggs), provided that the value of production of that commodity exceeds 1% of the total value of production in the country concerned.. All data sets in the calculation of PSE by commodity come from Tables 1 and 2 where definitions are included.

Definitions of the indicators, criteria of classification of programmes included, and methods of calculation can be seen in OECD, Methodology for the measurement of support and use in policy evaluation [http://www.oecd.org/agr/policy].

Crop year: for example 1997-98 crop year is attributed to calendar year 1997, but vary according to commodities. For wheat, barley and rapeseed the crop year ends 30 June; for sugar/sugar beet the crop year ends 30 September.

Marketing year: For livestock products, the marketing year corresponds to the calendar year, while for crops it corresponds to the crop year.

Fiscal year: Corresponds to the calendar year.

Table 1. CZECH REPUBLIC: Total support estimate

Definitions:

I. Total value of production (at farm gate): Total agricultural production valued at farm gate prices, i.e. value (at farm gate) of all agricultural commodities produced in the country [1].

1. Of which share of MPS commodities (%): Share of commodities for which MPS is explicitly calculated (in Table 2) in the total value of agricultural production.

II. Total value of consumption (at farm gate): Consumption of all commodities domestically produced valued at farm gate prices, and estimated by increasing the value of consumption (at farm gate) of the MPS commodities according to their share in the total value of agricultural production [(II.1) / (I.1) x100].

1. Of which MPS commodities: Sum of the value of consumption (at farm gate prices) of the MPS commodities as indicated in Table 2.

III.1 Producer Support Estimate (PSE): Associated with total agricultural production, i.e. for all commodities domestically produced [Sum of A to H; when negative, the amounts represent an implicit or explicit tax on producers].

A. Market Price Support: On quantities domestically produced (excluding for on-farm feed use -- excess feed cost) of all agricultural commodities, estimated by increasing the MPS for the MPS commodities according to their share in the total value of agricultural production [(A.1) / (I.1) x 100].

1. Of which MPS commodities: Sum of the MPS (net of price levies and excess feed cost) for the MPS commodities as calculated in Table 2.

B. Payments based on output

1. Based on unlimited output

Differential payments for disadvantaged areas (1986-1991): Payment to farms in less favoured areas (LFAs) provided in the form of a fixed share on receipts from sold agricultural production, net of the tax per hectare of land cultivated in favoured areas. In 1991, the amount of collected tax was distributed to LFAs in a per hectare basis, in 1992 the tax was collected but not distributed to the LFAs, and the system was disconnected since then. The payments are allocated to all commodities according to the share in the total value of production.

Supplementary price payments (1986 - 1990): Payments per tonne of marketed output of specific commodities to encourage production, in light of the plan [1]. Due to a lack of information on the amounts of the annual payments to specific commodities, the total amount of these payments are allocated to all commodities according to their share in the total value of production.

Compensation payments for milk (2000): Payments per litre of milk sold to the market [1]. The total amount of these payments are allocated to milk production.

2. Based on limited output

C. Payments based on area planted/animal numbers

1. Based on unlimited area or animal numbers

Support to cattle production in less favoured areas (1991): Payment per head of all cattle to farmers in less favoured areas [1]. Allocated to beef, milk and sheep according to their relative value of production.

Support to meat cattle production (from 1994 to 2000): Payment per dairy cow whose milk is not delivered and per calf (of meat race) fed with this milk in less favoured areas (from 1998 the payment is only per calf) [1]. Allocated to beef production.

Support to bee keeping (from 1995): Payment per colony of bees [1].

Support to flax production (from 1997): Payment per hectare of harvested flax area, using certified seed and under buying contract with a processor [1].

Support to sheep production (from 1998): Payment per sheep in less favoured areas [1].

2. Based on limited area or animal numbers

Support to milk production (from 1998 to 2001): Payment per dairy cow with an annual yield higher than 4 500 litres (from 2000 higher than 7000 litres) in farms with at least five milk cows, in the LFAs these payments are limited to a density of one livestock unit per hectare. Allocated to beef and milk according to their relative value of production [1].

Payments for animals on extensively used pastures (from 2000): Payments for cattle, sheep, goats and horses rearing on pastures (at least 4 months a year). A payment of CZK 2 500 per Livestock Unit (LU) is provided if the livestock density remains bellow 1.4 LU per hectare of pasture land. Allocated to beef and milk (90% of the payment) according to their relative value of production [1].

Payments for set-aside arable land (from 2001): Payments of CZK 5 500 per hectare of set-aside arable land are provided to farms with minimum 10 ha of arable land which set-aside min. 5% and max. 10% of their arable land. The set-aside arable land can be used for production of rape seed for methylester production, plants for green fertilising, energetic herbs, hemp and flax (in case of flax cultivation on set-aside arable land the payment is of CZK 7 000 per hectare). Moreover, farmers who set-aside arable land receive a compensation payment from CZK 200 to CZK 600 per hectare of arable land which was not set-aside [1]. Allocated to crops according to the share in the total value of crop production.

Disaster payments for drought (2000, 2001): A one off payment per hectare of agricultural land damaged by the drought in 2000. The rate of the payment reflected the estimated crop losses. From the agreed amount CZK 850 million were paid to farmers in 2000 and remaining CZK 4 150 million were paid in 2001 [1]. Allocated to crops according to the share in the total value of crop production.

Landscape maintenance(Krajina programme) (from 2001): Payments per hectare of permanent grassland in LFAs, areas with specific limitations, National Parks and Protected Landscape zones. Allocated to beef and milk (90%).

D. Payments based on historical entitlements

1. Based on historical plantings/animal numbers or production

2. Based on historical support programmes

Landscape maintenance(Krajina programme) (from 1998 to 2000): Payment per hectare to all agricultural land, based on the former differential payment system. The rate of payment is fixed (inversely proportional) according to the historical land use value, with a bonus per hectare of agricultural land in areas with high natural value (National parks, natural protected areas) and in socially sensitive areas.

E. Payments based on input use

1. Based on use of variable inputs

Interest concessions: Calculated as the difference between the average commercial interest rate and the interest rate paid by farmers, multiplied by the volume of outstanding loans for purchasing variable inputs, including:

o        25 per cent of soft loans supporting creation of private market oriented farms extended in the period from 1991 to 1993 to newly created and restructured farms [1]. [75 per cent included under 3. Based on use of fixed inputs.]

o        State Guarantee Fund for Farming and Forestry (SGFFF) 20 per cent of interest subsidies on commercial bank loans provided under several programmes of the SGFFF [2]. Allocated to all commodities according to their share in the total value of production. [10 per cent included under 2. Based on use of no farm services and 70 per cent in 3. Based on use of fixed inputs.]

o        granted under Disaster payment programmes [1], 25 per cent of interest subsidies allocated to all commodities according to their share in the total value of production. [75 per cent included under 3. Based on use of fixed inputs.]

o        On variable inputs granted by the State Land Fund (from 1996): Interest rate subsidies extended to farmers who privatised the former state farm assets in less favoured areas [3]. Allocated to all commodities according to their share in the total value of production.

o        Non-repaid interests write-offs (by the Ministry of Finance) (from 1997), 25 percent of the outstanding debts to repayable loans extended from the state budget before 1991 [4], are allocated to all commodities accounting to their share in the total value of production. [75 per cent included under 3. Based on use of fixed inputs.]

Calculated on a fiscal year basis and allocated to all commodities according to the share in the total value of production.

Fertiliser, lime and chemical payments (1986 - 1990): Budgetary expenditures to finance lower prices of inputs supplied through the state-owned Agricultural Supply and Procurement Agency (ZZN), which had a monopoly on supplying inputs to producers [1]. Allocated to all commodities according to their share in the total value of production.

Water subsidies (1999): Budgetary expenditures to finance part of the expenditure for irrigation water [1]. Allocated to all crops according to their share in the total value of crop production. [The Secretariat needs more clarification on implementation of this new programme].

Fuel subsidies (1999): Budgetary expenditure to compensate the fuel tax increase to farms [1]. Allocated to all crops according to their share in the total value of crop production. [the Secretariat needs more clarification on implementation of this new programme].

Subsidies to organic fertilisers (2000): Payments supporting the use of organic fertilisers (compost without turf content) in the scope of doses from 10 to 40 tonnes per hectare of arable land, limited to 20% of arable land on the farm. [1]

Feed subsidies:

Compound feed subsidy (1986-1989): Budgetary expenditure to finance lower prices of compound feed supplied to farms through the state-owned Agricultural Supply and Procurement Agency (ZZN], which had a monopoly on supplying inputs to producers [1]. Allocated to livestock products according to their share in the total value of livestock production.

Support of cattle and sheep production on grassland (1992-1997): In 1992-1993, payments per hectare of land converted from arable to grassland with extensive livestock production. Limited intensity of livestock production (one livestock unit per hectare) was set as condition for eligibility. From 1994, payments per hectare of all extensively used grassland areas in less favoured areas (less than 1 livestock unit (LU) per hectare and in 1997, a minimum of 0.15 LU per hectare) [1]. Allocated to beef and milk and sheep.

Subsidies for wheat and rapeseed seeds (2001): Payments to farms partly compensating the cost of high quality seeds of winter wheat and rapeseed [1]. Allocated to wheat and rapeseed.

2. Based on use of on-farm services

Interest concessions: Calculated as the difference between the average commercial interest rate and the interest rate paid by farmers, multiplied by the volume of bank loans for financing on-farm services, estimated as 10 per cent of interest concessions provided under several programmes of the State Guarantee Fund for Farming and Forestry (SGFFF) [2]. Calculated on a fiscal year basis and allocated to all commodities according to the share in the total value of production.

Plant and disease control -Budget expenditures to finance the eradication of specific animal and plant diseases [1]. [Inadvertently included under K. General Services Inspection, in current database]

3. Based on use of fixed inputs

Capital grants:

Payments to farms through the Intensification Fund (1986 - 1990) covering part of investments for machinery and buildings [5].

Payments covering part of farm investments in developing private market-oriented enterprises in agriculture and restructuring and privatisation of enterprises in the farming sector (1991-1992) and payments covering part of the costs of converting arable land into grassland, payments per hectare in the less favoured areas (1994-1995) [1]. Calculated on a fiscal year basis and allocated to all commodities according to their share in the total value of production.

Payments for investment in special agricultural machinery (mainly harvesting machines) for sugar beet and potatoes (1991) [1], calculated on a fiscal year basis and allocated to sugar beet and potatoes according to their relative value of production.

Payments per hectare covering part of the costs of planting new vineyards, hop gardens and orchards (from 1995) [1].

Interest concessions calculated as the difference between the average commercial interest rate and the interest rate paid by farmers, multiplied by the volume of outstanding loans for investment, including:

o        75 per cent of the soft loans supporting creation of private market oriented farms extended in the period from 1991 to 1993 to newly created and restructured farms [1]. [25 per cent included under variable input use];

o        70 per cent of commercial bank loans provided under several programmes of the State Guarantee Fund for Farming and Forestry SGFFF [2]. [20 per cent included under variable input use and 10 per cent to use of on-farm services];

o        75 per cent of loans granted under Disaster payment programmes [1]. [25 per cent included under variable input use];

o        75 per cent of budgetary expenditure on Non-repaid interests write-offs (by the Ministry of Finance in 1997) on outstanding debts to repayable loans extended from the state budget before 1991 [4]. [25 per cent included under variable input use];

Calculated on a fiscal year base and allocated to all commodities according to the share in the total value of production.

Land rent payments: Relieves of 90 per cent of land rents for state land due to the State Land Fund for farmers in less favoured areas (from 1996) [3]; and relieves on land tax for own land used by family farms (1995-1997). Calculated on a fiscal year basis and allocated to all commodities according to the share in the total value of production.

Grassing payments (2000): Payments covering part of the costs for converting arable land into grassland. [1]

Investment grants to agriculture financed by the SAPARD programme (from 2002): Payments provided to finance part of investment on farms in the projects agreed under the SAPARD programme. Calculated on a fiscal year basis and allocated to all commodities according to the share in the total value of production [1].

Investment grants to young farmers (from 2002): Payments provided to finance part of investment on farms set by farmers younger than 35 years. Calculated on a fiscal year basis and allocated to all commodities according to the share in the total value of production. [1]

F. Payments based on input constraints

1. Based on constraints on variable inputs

Water protection measures (1989 - 1992): Payments per hectare of specific groundwater areas or areas close to reservoirs of drinking water, where use of chemicals and fertilisers was limited or prohibited, to compensate for costs incurred [1]. Allocated to all commodities according to the share in the total value of production.

Payments to organic (alternative, biological) farming (1992-1993, reintroduced in 1998): Payments per hectare of agricultural land where farmers operate without chemicals and fertilisers on voluntary basis (not imposed by environmental regulation) [1]. The payments are allocated to all crop commodities according to the share in the total value of crop production.

2. Based on constraints on fixed inputs

Environmental damage compensation programme (1991 - 1992): Payment per hectare of agricultural land damaged by mining activities and exhalations (acid rains) to compensate for associated costs [1]. Allocated to all crop commodities according to the share in the total value of crop production.

Disaster payments for animal diseases (from 1998): Payment per head of slaughtered animal compensating preventive slaughtering to limit contagious animal diseases [1]. Allocated to all livestock commodities accounting to their share in the total value of livestock production. [Inadvertently included under G.1. in current database]

3. Based on constraints on a set of inputs

G. Payments based on overall farming income

1. Based on farm income level

Tax concessions: On profit tax to large scale farms (1986-1990). Allocated to all commodities according to the share in the total value of production.

2. Based on established minimum income

H. Miscellaneous payments

1. National payments

2. Sub-national payments

III.2 Percentage PSE [(III.1) / ((I) + (Sum of B to H)) x 100]

III.3 Producer NPC: For all agricultural commodities the Producer NPC is estimated as a weighted average of the producer NPC calculated for the individual MPS commodities and shown in Table 2. For each commodity Producer NPC = [domestic price received by producers (at the farm gate) + unit payments based on output] / border price (also at the farm gate).

III.4 Producer NAC [1 / (100 - (III.2)) x 100]

IV. General Services Support Estimate (GSSE): Total budgetary expenditure to support general services provided to agriculture [Sum of I to O]

I. Research and development

Budget expenditure provided through the Ministry of Agriculture (MoA) to several research institutions, including for the developments and maintenance of plants, animal genetic fund [1] and the National Grant Agency to finance projects in agro-food research selected under tenders [6].

J. Agricultural schools

Budget expenditures to finance school farms (1986 - 1991) and agricultural vocational schools.

Budget expenditures to finance training and education to farmers provided through the Czech Agricultural Chamber; and through the activities of the MoAs Institute for Education and Training. [1] [Compared with the 1999 version, data were added for 1986-1994.]

K. Inspection services

Budget expenditures on inspection of agricultural and food production by Czech Agricultural and Food Inspection Authority (CZPI), State Veterinary Service, the Central Agricultural Institute for Control and Testing (KZUZ) [1].

L. Infrastructure

Budget expenditure on the operation and maintenance of public drainage and irrigation equipment financed by the Land Fund, Ministry of Agriculture, State Fund for Environment [1, 3, 7].

Budget expenditure financing Land Offices activities in setting and updating agricultural land registration (database) in rural cadastres [1].

Budget expenditures financing the renewal of rural infrastructure in flooded areas [1].

Budget expenditures (1999 2001) financing the building of institutions to implement the SAPARD programme.

M. Marketing and promotion

Budget expenditure to finance marketing, mainly price monitoring systems implementation programme; and to contribute to finance the participation on international fairs and exhibitions and other forms of promotions [1].

Budget expenditure to finance support programmes to enhance the creation and development of sales organisations of primary producers (sales co-operatives). [1]

N. Public stockholding

O. Miscellaneous

V.1 Consumer Support Estimate (CSE): Associated with agricultural production, i.e. for the quantities of commodities domestically produced, excluding the quantities used on-farm as feed -- excess feed cost. [Sum of P to S; when negative, the amounts represent an implicit tax on consumers].

P. Transfers to producers from consumers: Associated with market price support on all domestically produced commodities, estimated by increasing the transfers calculated for the MPS commodities according to their share in the total value of production [(P.1) / (I.1) x 100].

1. Of which MPS commodities: Sum of the values of transfers from consumers to producers associated with market price support for the MPS commodities as calculated in Table 2.

Q. Other transfers from consumers: Transfers to the budget associated with market price support on the quantities imported of domestically produced commodities, estimated by increasing the transfers calculated for the MPS commodities according to their share in the total value of production [(Q.1) / (I.1) x 100].

1. Of which MPS commodities: Sum of the transfers to the budget associated with market price support on the quantities imported of the MPS commodities as calculated in Table 2.

R. Transfers to consumers from taxpayers: Consumer subsidies provided in the form of a "Negative turnover tax" applied on basic food products under the command economy (1986 to mid-1990) and allocated to commodities for which there were directly paid.

S. Excess Feed Cost: Associated with market price support on quantities domestically produced and used on-farm as feed as calculated in Table 2.

V.2 Percentage CSE [(V.1) / ((II) - (R)) x 100]

V.3 Consumer NPC: For all agricultural commodities the Consumer NPC is estimated as a weighted average of the consumer NPC calculated for the individual MPS commodities and shown in Table 2. For each commodity Consumer NPC = domestic price paid by consumers (at the farm gate)/ border price (also at the farm gate).

V.4 Consumer NAC [(1 / (100 -(V.2)) x 100]

VI. Total Support Estimate [ (III.1) + (IV) + (R)] and [ (T) + (U) - (V)]

T. Transfers from consumers [ (P)+(Q)]

U. Transfers from taxpayers [ (III.1)-(P)+(IV)+(R)]

V. Budget revenues [ (Q)]

Sources:

[1] Ministry of Agriculture

[2] State Guarantee Fund for Farming and Forestry

[3] State Land Fund

[4] Ministry of Finance

[5] Intensification Fund

[6] National Grant Agency

[7] State Fund for Environment

Table 3. Producer Support Estimate by commodity

Definitions and Sources: see Tables 1 and 2 above.