Country Focus: Czech Republic

by Intern Intern1
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Developments in Czech agriculture have paralleled broader economic conditions. Productivity and output initially declined after the Velvet Revolution, but already have or are expected to rebound. Agriculture accounts for about 6% of G.D.P.

Agricultural policy. The Czech Republic gradually has been privatizing various agriculture sectors. Through a series of "privatization sales," Czech citizens have purchased state assets using a combination of state-issued vouchers and private financing. Flour milling is virtually 100% privatized, and feed milling operations have passed into the hand of shareholders.

But privatization of agricultural land lags behind in this process. Some state farms have been split up and privatized, but state agricultural companies continue to farm a large percentage of productive land. Cooperatives also are an important segment.

Earlier this year, the Czech Land Fund presented a proposal to privatize more agricultural land. Under the proposal, the program was set to begin in January 1996, initially with 500,000 hectares of state-owned land available for purchase by Czech citizens.

Although grain prices now are market-driven, a price floor exists through the activities of the Fund for Market Regulation, which administers a grain price stabilization program. Under the program, the F.M.R. purchases a certain amount of wheat from growers at a guaranteed price that typically has been higher than market prices.

The F.M.R. reportedly purchased about 800,000 tonnes of 1994-95 crop wheat and has contracted to purchase 500,000 tonnes of the 1995-96 crop at a guaranteed price of 2,700 crowns per tonne, or about U.S.$120. The F.M.R. disposes of this wheat through tenders to the private trade for export.

Throughout 1995, concerns have been expressed about growing surpluses based on a slow export pace. Indications were Czech wheat exports had been hampered by a declining U.S. dollar; import licensing problems with Poland, a key wheat customer; relatively high F.M.R.-set wheat price minimums; and inexperience on the part of some private traders.

Flour milling. All of the Czech Republic's previously state-owned flour mills have been privatized; even more significantly, new mills have proliferated since communism's collapse. Before 1990, Czechoslovakia was home to 63 mills, 45 of them in what is now the Czech Republic. Today, more than 200 flour mills are in operation in the Czech Republic.

Most of the new facilities are of small to medium size; the country's average daily capacity is estimated at 120 tonnes per day. Rye bread is popular in the Czech Republic, and most mills grind both wheat and rye. Mills generally buy grain from producers in their area.

The country's largest milling facility is in Senov in the northern Moravia region. This plant operates two mills with a total daily capacity of 500 tonnes per day for wheat and 160 tonnes per day for rye. The smallest mills, of which there are many, generally have a capacity of 10 tonnes per day.

The level of technology and the age of equipment in the country's mills vary widely. The average yield extraction is estimated at 73% for wheat and 72% for rye, but output and quality vary from mill to mill.

The industry is eager to modernize, and Czech millers have visted Western Europe to inspect plants and collaborate with their peers on milling techniques and issues. The Czech Milling Association sponsors excursions and technical meetings for this purpose.

Upgrading has come slowly for some mills, particularly the former state-run facilities. Major investment has been hampered by the overall economic situation and the need to direct capital resources to pay off loans used to purchase the plants from the state. Czech millers also face relatively high energy and labor costs, as well as high grain prices.

Before 1990, all of Czechoslovakia's mills were state-owned, industrial-type facilities serving state-owned, mass production bakeries. Although industrial bakeries still exist, they, too, have been privatized. In addition, many small private bakeries have opened and now provide fresh goods.

The market economy and improving incomes mean many Czech consumers are no longer satisfied with the mass-produced products of the previous era and are demanding higher quality and more variety. Consequently, private bakeries, both large and small, are placing an increasing emphasis on flour quality and type.

Competition in the milling industry is intense, especially given the sheer number of mills and emerging consumer awareness. Smaller Czech mills have been able to compete effectively by focusing on marketing and customer service, such as providing flour samples on demand and offering attractive payment terms. The large, newly privatized mills never needed to concern themselves with these issues until recently.

Feed industry. Until 1989, compound feed production was controlled by a monopoly company called ZZN, which produced about 5 million tonnes of feed a year. The privatization of Czech agriculture created shareholding companies that evolved from the former chain of ZZN facilities located throughout the country.

These new companies still play the most important role in feed production. But since privatization began, more compound feed is being produced on farm, even though quality is not as high as the commercially produced feed. More than 50% of annual compound feed production is used for pigs, with about 23% going for beef and dairy cattle.

Grains make up a high percentage of feed content, resulting in relatively low feed efficiency and high input costs. In 1992, grains accounted for 77% of feed components; plant brans and meals accounted for 8%; animal origin meals for 3%; and vitamins, forage pellets and other components for 12%. Indications were the content of grains in 1994 had declined as greater efficiencies were sought.

Economic dislocations caused by the transition to a more privatized system affected per capita consumption of some meats. Pork is a traditional meat among Czechs, and consumption in 1992 held relatively steady at 49.5 kg, compared with 49.9 in 1989.

But beef consumption dropped to 13 kg in 1993, compared with 27 kg in 1989. Part of the decline stemmed from a price structure that did not differentiate between meat from dairy or beef cattle. Higher quality meat with the label "Extra Beef" has been introduced for meat from beef cattle of known origin. The Czech Association of Beef Cattle Breeders also has become involved in assuring quality beef.

The government in 1993 provided subsidies for the newly emerging private sector for restructuring of beef production, opening of new and smaller slaughterhouses, diversifying and improving herd quality. Continued economic gains and improved living standards are expected to boost consumption in the future.






(1,000 tonnes)






Coarse grains





Wheat flour only





1994-95 marketing year unless otherwise noted

*1992-93, wheat equivalent

Source: International Grains Council (wheat flour data); U.S. Department of Agriculture (all other)