Subsidies and profitability of Slovak farms

Slovakia's accession to the European Union had an impact on the entire economy, especially on agriculture. It was followed by increase of public funds in form of CAP subsidies. Their main aim is to support farm income as well as rural development. The aim of this paper is to analyze the impact of the CAP on the economy of farms based on an analysis of a dataset of agricultural farms operating in Slovak regions. Our analysis was based on the database of Ministry of Agriculture and Rural development for agricultural farms over the period 2009-2012. The database contained individual data including balance sheets and income statements for each farm. For our analysis, data were selected according to the 8 Slovak regions. Administratively, Slovakia is divided into 8 sections (regions), which correspond roughly to the areas surrounding the eight largest cities, and are named after them. Each of these administrative units consists of several districts, approximately on the scale of counties. Slovakia is perceived as a leader among the European countries due to its size of farms. Despite of a high concentration of farms - up to 90% of the utilized agricultural land is farmed by large farms - the Slovak agriculture is considerably less productive. The Slovak agricultural farms in our sample displayed low profitability measured by profit per hectare. The farms in "LFA" regions have better profitability, because they gain higher subsidies per hectare and their production is less demanding on costs and are less dependent on sales. On the other hand after integration into EU in 2004 the majority of farms generate profit. Increase in subsidies was followed by lower ability to generate profit without subsidies. Based on our analysis we conclude that farms in Slovakia are, by achieving their individual target - profit, dependent on CAP with increasing tendency. In terms of food self-sufficiency, should the state endeavour that the ability of farms to outreach profit is pegged to market success and not only to public resources eligible regardless of market output.