Acta Univ. Agric. Silvic. Mendelianae Brun. 2011, 59(7), 293-300 | DOI: 10.11118/actaun201159070293

Subsidies of agricultural production in the Czech Republic and their economic context

Marie Prášilová, Lucie Severová, Jan Chromý

Katedra statistiky, Katedra ekonomických teorií, Česká zemědělská univerzita v Praze, Kamýcká 129, 165 21 Praha 6 - Suchdol, Vysoká škola hotelová v Praze 8, spol. s r. o., Česká republika

An important part of evaluating common economic politics of countries in the European Union (EU) is the observation of microeconomic consequences of governmental subsidies in agriculture. This article mentions some basic theoretical and practical connections regarding subsidies in agriculture and of agricultural products on the Czech market, and regarding consequences of implemented price intervention programs. If a subsidy is directed to large-scale producers as well as to geographically unfavourably situated small-scale producers, it can not only miss its own target, but even deepen the existing problem. It is now becoming apparent that prospering large companies have an overall bigger profit from each crown of the subsidized price than small farms, which were originally the reason to implement the subsidies. The size structure of agricultural companies in the Czech Republic has so far been relatively favourable with respect to subsidies. After 2013, a reform of the Common agricultural politics of EU is planned and the amounts of direct payments for agriculture from the EU budget will be newly set. However, the European Parliament supports a proposal of limiting subsidies according to size of farms. Along with that, there is a real threat of growing prices of agricultural products on the market. Results of statistical analyses of source materials have revealed the largest proportion of subsidies in the outputs of Czech agricultural companies in the last years as compared to our neighbours, and also in up to now balance of subsidy level and aid in terms of economic size of the companies. The European Parliament's support of limiting direct payments for agriculture from the EU budget based on size of companies is unfavourable for the Czech Republic and will impact the price level of agricultural products.

Keywords: subsidy, price intervention, European Union, agricultural policy, European Size Unit, agricultural product, equilibrium, long-run costs, short-run costs

Received: July 31, 2011; Published: January 26, 2014  Show citation