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"The economic position of cattle, sheep and pigs in the farming systems of Central and Eastern European countries" - E. Erjavec, University of Ljubljana, Domiale, Slovenia


Introduction

Animal production in Central and Eastern European Countries (CEEC) changed dramatically during the last five years. There is no stone still staying unturned after the historical and political changes that have occurred. The differences are most transparent in respect of economic, political and legal conditions of running business and market is already to a some extent the most important factor for allocating resources. Now land, labor and capital have just reached their price. The challenge of time surprised many farmers, the organization of private and state owned farms has met with many problems. Policy is in search of different agricultural models, usually trying to find solutions in the imitation of protection model by the Common Agricultural Policy (CAP) in the European Union (EU). No negligible changes occurred either in international economic and political environment. Most CEEC want to become member of EU. Timing, way and consequences of their likely accession to EU are still points of uncertainty both for Western and new Eastern European partners.

What has happened in animal production structure, in market development and in agricultural policy after 1990, what is likely to happen in milk, cattle, pig and sheep production are key questions that we are trying to answer in this paper. The outlook of the economic position is the background for a short discussion about the likely effects of these differences on the organization and the degree of intensity of animal production. In conclusions, some inconsistencies and dilemmas are emphasized, which from the agricultural economists’ point of view, define to a large extend, the breeding strategies for milk, beef, pig and sheep production in the CEEC.

The main source of statistical data is the "EU-Commission DC VI" and the "Vienna WIFO institute data set". Data of only 10 potential members of EU are presented in this paper (CEFTA and the Baltic countries, Romania and Bulgaria), for which we succeeded in ensuring a minimum criteria of reliability.

Data should be interpreted carefully in particular because of the diversity of sources and of the different methodologies which are being used.

CEEC livestock production in transition

Macroeconomic background and resources

CEEC- 10 represent, from geographic and demographic point of view, an important part of Europe. These countries account approximately for one third of the population and of the EU area. Their structure of agricultural land is better as they have twice as much arable land per capita than the EU members. Their economic importance is still low; on average they achieve 11% of GDP of EU. The Czech Republic and Slovenia as the most developed countries in this region, are currently somewhere on a level with Greece and Portugal (GDP per capita). Crisis of economic transition reached the lowest point in 1993. In 1994 and 1995, new economic growth was observed in most of the CEEC- 10.

Agriculture is much more important in most CEEC than in EU. This is particularly true for Romania and Bulgaria, followed by the Baltic states. Some countries are traditional food exporter, e.g.: Hungary and Bulgaria and to some extent also Poland and Romania.

Table 1. CEEC in comparison with EU (1994)


Population

Total area

Agric. area

Arable area

GDP

GDP p.c.

(106)

(106 ha)

(106 ha)

(% total)

(106 ha)

(% total)

(109 ECU)

(ECU)

(ECU PPP)

Poland

38.5

31.3

18.6

59

14.3

0.37

73.4

1907

4838

Hungary

10.3

9.3

6.1

66

4.7

0.46

32.5

3150

5967

Czech Rep.

10.3

7.9

4.3

54

3.2

0.31

26.7

2586

7507

Slovakia

5.3

4.9

2.4

49

1.5

0.28

8.7

1643

6367

Slovenia

1.9

2.0

0.9

43

0.2

0.13

9.8

5018

7697

CEFTA+

66.4

55.4

32.3

58

24.0

0.36

151.1

2277

5635

Romania

22.7

23.8

14.7

62

9.3

0.41

21.8

961

2941

Bulgaria

8.5

11.1

6.2

55

4.0

0.48

9.4

1110

3754

Balkan

31.2

34.8

20.9

60

13.3

0.43

31.2

1001

3163

Lithuania

3.8

6.5

3.5

54

2.3

0.62

2.3

627

n.a.

Latvia

2.6

6.5

2.5

39

1.7

0.65

2.2

850

na.

Estonia

1.6

4.5

1.4

31

1.0

0.63

1.5

938

n.a.

Baltic- states

7.9

17.5

7.4

43

5.0

0.63

6.0

757

n.a.

CEEC- 10

105.5

107.7

60.6

56

42.3

0.40

188.3

1786

n.a.

EU-15

369.7

323.4

138.1

34

77.1

0.21

5905.1

15927

15879

CEEC/EU

29 %

33 %

44 %


55 %


3 %

11 %


Source: EU Commission DG VI (1995) & Schneider (1995)

The importance of agriculture during transition declined, in particular due to falling prices and to production levels. Employment rate has quite a different pattern: as a "buffer" on the labor market it even increased in some countries (Romania, Bulgaria, also Poland and Slovenia). As a consequence still an important part of labor force is employed in agriculture and with 9,5 million agricultural workers it exceeds agricultural labor force in EU-15 (8,2 million). Productivity of agricultural workers in CEEC-10, measured in terms of GDP per employee, is one third of the average productivity per employee in EU countries. Low productivity is a sign of a still important reservoir of labor force in agriculture. However this situation will tend to evaluate in accordance with development process.

Food in many CEEC still represents the most important part of household expenses (40 - 60% in the Balkanic and Baltic states, 30% in CEFTA); a process which diminishes the range of possibilities for the producers to increase food prices.

Farm structure of CEEC agriculture

Before the process of economic transition began, agricultural land was mainly in the hand of agricultural production cooperatives and of state farms. The only two exceptions were Poland and Slovenia, where traditionally family farms were kept but they were in many respects discriminated against. In all CEEC in general households were with an agricultural production intended for self consumption purposes only.

Table 2. Agriculture in the national economy in the CEEC and EU


Agric. area

Agric. production

Agric. employment

Agric. trade

Food exp.

(106 ha)

(% total)

(109 ECU)

(% GDP)

(000)

(% tot. empl.)

(% tot. exp.)

(% tot. imp.)

(% hh. income)

Poland

18.6

59

4.648

6.3

366 1

25.6

12.2

11.1

30

Hungary

6.1

66

2.068

6.4

392

10.1

21.8

7.4

31

Czech Rep.

4.3

54

0.871

3.3

271

5.6

7.7

9.6

32

Slovakia

2.4

49

0.512

5.8

178

8.4

5.9

9.3

38

Slovenia

0.9

43

0.250

4.9

90

10.7

4.7

8.2

28

CEFTA+

32.3

58

8.349

5.5

4592

22.1




Romania

14.7

62

4.500

20.2

3537

35.2

6.8

9.9

60

Bulgaria

6.2

55

1.131

10.0

694

21.2

20.7

10.6

48

Balkan

20.9

60

5.63 1

18.0

423 1

32.9




Lithuania

3.5

54

0.259

11.0

399

22.4

12.8

10.8

58

Latvia

2.5

39

0.232

10.6

229

18.4



45

Estonia

1.4

31

0.266

10.4

89

8.2

11.0

16.7

39

Baltic states’

7.4

43

0.757

10.7


19.4




CEEC- 10

60.6

56

14.700

7.8

9540

26.7




EU-15

138.1

43

208.800

2.5

8190

5.7

8

9.5

22

Source: EU Commission DG VI (1995) & Schneider (1995)

After the first phase of transition the process of restitution and privatization of land is still going on. Concepts between countries are not comparable, this is shown by the data below. It is obvious that there is a persistent process of formation of trimodal farm structure:

- large enterprises, previous state farms and cooperatives, which are now organized as business firms and modern cooperatives; they are smaller and more efficient than before;

- bigger family farms with the organization of production similar to that of American or Australian farms; crop production and extensive form of animal production prevail;

- small agricultural households and small part time farms, involved in production and in production for self consumption for local markets.

The pace of further changes will depend mostly on the velocity of establishing active land markets, and on the ability to overcome discrepancies in the restitution processes.

Table 3. Farm structure in CEEC-10

Share in total agricultural area (%)


cooperatives

state farms

private farms

pre-transition

current

pre-transition

current

pre-transition

current

Poland

4

4

19

18

77

78

Hungary

80

55

14

7

6

38

Czech Rep.

61

48

38

3

1

49

Slovakia

68

63

26

16

6

13

Slovenia



8

7

92

93

Romania

61

35

14

14

25

51

Bulgaria


41

90

40

10

19

Lithuania


35

91

1

9

64

Latvia


17

96

2

4

81

Estonia


33

96


4

67

Average size (ha)


cooperatives

state farms

private farms

pre-transition

current

pre-transition

current

pre-transition

current

Poland

335

400

3140

2000

6.6

6.7

Hungary

4179

1702

7138

1976

0.3

1.9

Czech Rep.

2561

1430

6261

498

4.0

16.0

Slovakia

2654

1665

5162

2455

0.3

1.0

Slovenia



470

303

3.2

4.1

Romania

2274

170

5001

2002

1.5

1.8

Bulgaria


750

13000

1100

0.4

0.6

Lithuania


450

2773

124

0.5

2.6

Latvia


706

3000

547

0.5

5.8

Estonia


567

3500


0.5

2.1

Source: EU Commission DG VI (1995) & Schneider (1995)

Livestock production in transition

In most CEEC agrisultural production decreased drastically afier 1989. With the exception of Romania and Slovenia, the total agricultural production is about one third to one fourth lower in comparison with the pre-transition period. The decline was most obvious in animal production. An important turn around was observed in 1994 - first in crop production. The causes for these changes are varied, from market breakdowns, declining demand, falling prices, inflation, abolishment of subsidies, inefficient food industry and market channels to growing input prices. Outstanding crisis in animal production is caused by the fact that the consumption of products of animal origin (of meat in particularly) was extremely high compared to average income, in Communist era. Investments were at least partially financed by the State, inputs were subsidized, some farms were too big with low efficiency of labor and in capital utilization. This is particularly true for state owned farms, where changes in economic conditions were most painful. As a consequence, the importance of crop production versus animal production has increased.

Table 4. Gross agricultural production in CEEC-I 0 (real index, 1989= 100)

Animal production


1990

1991

1992

1993

1994

Poland

94.2

94.1

90.2

78.8

81.6

Hungary

99.8

84.2

74.4

66.6

60.0

Czech Rep.

96.6

83.9

77.2

71.4

67.6

Slovakia

96.2

79.9

69.4

62.6

62.6

Slovenia

102.2

105.5

96.4

97.3

96.5

Romania

102.1

98.2

87.9

90.5

91.3

Bulgaria

95.4

77.7

69.3

59.6

48.3

Lithuania

95.6

85.5

69.9

58.9

50.7

Latvia

n.a.

n.a.

n.a.

n.a.

na.

Estonia

92.0

82.8

65.5

52.3

n.a.

Source: EU Commission DG VI (1995) & Schneider (1995)

A decline in animal production is even more apparent if we take into account the number of animals by species. The decline was most evident as regards the number of cattle herds and sheep flocks (40% in average, up to 80% for sheep in Poland), and less obvious the total number of cows (approx. 20%). This process is most painful in Baltic States as they were previously oriented towards the Russian market. In comparison with EU- 15, CEEC keeps a relatively high number of pigs (40% of current number in EU- 15).

Table 5. Evolution of livestock production in CEEC-10 (number of animals in 000)



Cattle

cows

Pigs

Sheep


1989

1994

1989

1994

1989

1994

1989

1994

Poland


10391

7270

4885

3866

18835

17422

4409

891

Hungary


1690

999

568

420

8327

5001

2215

1252

Czech Rep.


3481

2161

1248

830

4685

407 1

399

196

Slovakia


1594

993

568

386

2698

2179

648

411

Slovenia


546

478

243

210

576

591

24

20

CEFTA+


17702

11901

7512

5712

35121

29264

7695

2770

Romania


6416

3597

1704

1500

14351

9262

16210

11499

Bulgaria


1615

750

648

419

4132

2071

9045

4439

Balkan


803 1

4347

2352

1919

18483

11333

25255

15938

Lithuania


2435

1384

850

678

2708

1196

105

40

Latvia


1472

551

543

312

1555

501

197

86

Estonia


819

463

300

227

1099

424

100

50

Baltic states


4726

2398

1693

1217

5359

2121

402

176

CEEC-10


30459

18646

11557

8848

58963

42718

33352

18884


% EU

35

24

32

26

58

39

33

19

EU-15


85845

78747

36009

33617

101841

110937

101439

97753

Source: EU Commission DG VI (1995) & Schneider (1995)

Figure 1. Evolution of livestock production in CEEC-10 (relative indicators)

Average production per animal is in most CEEC lower than in EU-l 5. The highest average level of production is being found in Hungary, Czech Republic, Slovakia and in the Baltic States. Average milk yield per cow is presented in the table below. Similar outputs are common also in previous state farms in Poland and Slovenia. In most countries the average production per animal declined after 1989 due to problems related to input supply, reorganization of farms and as a consequence of the difficult economic situation. It is interesting to note that not only state dairy farms, but also Sloven pig and beef production units achieved a production per animal similar to that in the most developed Western European countries (e.g., average milk yield: 6000 kg milk per cow for a11 farms).

Table 6. Milk yield in CEEC-10 (yield per cow, kg/year)


1989

1994

Poland

3358

3083

Hungary

5043

4762

Czech Rep.

4064

4057

Slovakia

3647

2253

Slovenia

2473

2676

CEFTA+

3595

3275

Romania

1950

2000

Bulgaria

3523

2709

Balkan

2363

2155

Lithuania

3808

2448

Latvia

3637

3003

Estonia

4252

3401

Baltic states

3832

2768

CEEC - 10

3382

2960

EU - 15

4562

5156

Source: EU Commission DG VI (1995) & Schneider (1995)

Agricultural livestock policy goals and measures

After the first very turbulent years, i.e., the period immediately after the reform, more effort to stabilize agriculture was observed in all CEEC. Agricultural intervention measures were different from country to country. Some countries (mostly CEFTA) have gradually built up an intervention system similar to the EU Common Agricultural Policy whereas some others still administrative price and market channel control. CEFTA countries protect first of all their staple commodities (cereals, sugar, milk, beef and pork), but this support is from reaching the level of protectionism observed in the EU or EFTA countries. With a PSE of 35% (Producer Subsidy Equivalent, OECD Protectionism measures) Slovenia has the highest level of protection; other CEFTA countries have a PSE between 10 and 25%.

Table 7. Intervention prices for livestock products in CEFTA countries in 1994


Beef

Pork

Milk

(ECU/t)

(% EC)

(ECU/t)

(% EC)

(ECU/t)

(% EC)

Poland

1110

30

1261


87

28

Hungary

1609

44

1050


201

65

Czech Republic

1566

43



171

55

Slovakia

1546

42



179

58

IEU

3680




310


Source: EU Commission DG VI (1995) & Schneider (1995)

Other CEEC have prices that are below the world level and applying PSE criteria have no or even negative protection. This is quite easy to understand, if one knows that the most important aim of the agricultural policy is the protection of citizens in towns. The state has preserved its right to control the prices and the food industry. Exports of food and agricultural commodities are restricted through taxes or prohibitions measures.

Many CEEC support agriculture through input subsidies. Agricultural support is mostly given in the form of subsidized loans. Clearly, the intervention is limited by low agricultural budgets. In many countries a special problem is the poorly developed land banking system, which cannot begin to operate due to existing discrepancies in land markets and the low profitability of agriculture. Some countries such as the Czech Republic, Slovakia and Slovenia have established special programs for disadvantaged areas.

Prices of agricultural products in CEEC are far below those in EU, with important differences between countries. In Romania, in Bulgaria and to some extent also in the Baltic States, prices are lower than on the world market and, as such, their evolution is below that of long term production costs. Comparatively the highest prices are in Slovenia, where some farm products are even more expensive than in the EU.

In CEFTA countries cereals are cheaper than in the EU, but prices of pork and poultry are at the EU level; it shows the low efficiency level of white meat production in this area. Milk and beef prices in CEFTA countries are, in contrast with pork prices, below world price levels, and it is difficult to cover material costs. Beef is to some extend a by-product of multi-purpose cattle breeds.. Specialized beef breeds in CEEC are scarce.

Table 8. Farm gate prices for livestock products in CEEC- 10, I994


Milk

Beef

Pork

(ECU/t)

(% EC)

(ECU/t)

(% EC)

(ECU/t)

(% EC)

Poland

103

33

1240

40

1320

103

Hungary

220

70

1630

52

1260

98

Czech Rep.

172

54

1850

59

1200

94

Slovakia

164

52

1580

50

1130

88

Slovenia

292

92

2510

80

1710

134

Romania

179

57





Bulgaria

114

36

750

24

680

53

Lithuania

66

21

680

22

1040

81

Latvia

83

26

560

18

980

77

Estonia

83

26

360

12

550

43

EU

316


3130


1280


Source: EU Commission DG VI (1995) & Schneider (1995)

The detailed situation and outlook of Milk, beef and pork market

Starting points

Some trends and scenarios of the expected development for three key animal product markets (milk, beef and pork) - for the period between 1989 and 2000 are being presented here. The possible evolution is outlined by applying the FAO food balance models. This was done by the specialists of DG VI EU-Commission (1995) with the help of domestic experts (including the author of this paper). Models of food balances are made up by using the production and the foreign trade data set, consumption being a dependent variable. Data concerning production and consumption are presented in the tables hereafter, together with, for the sake of analysis, a balance between the two data sets. It shows which country is a net importer or net a exporter of animal commodities. These data could also be used for a simple assessment of meat consumption per capita.

Which were the starting points for an assessment of market(s) development? The authors took into account the following aspects:

- the general economic status and future prognosis,

- the achieved level of reform in agriculture and in up- and down-stream sectors, access to capital and loans, clarification of land ownership,

- levels and structure of inputs used in agriculture and the process of productivity evolution

- the future agricultural and food protectionism, foreign trade measures, direct support, budget possibility, GATT conditions,

- the expected developments on the international agricultural markets

- demographic trends.

Positive trends in the economic development for the CEFTA and Baltic states between 4( and 5%) were projected (lower in Hungary and in Slovakia). For Romania and Bulgaria a slower development was assumed. Real income was expected to raise, and also food demand in parallel with it. The land reform will be completed at the end of the period. Compared with 28 the mid 90’s, agricultural support will not increase strongly: limitations in this respect will be imposed by budget constraints and in connection with the obligations resulting from the GATT agreement. Some countries (CEFTA in particular) will continue to adjust their policy for future membership in EU. Despite some other possible conclusions it implies systematic investments in agricultural infrastructure, including stabilization of up- and down-stream industries. Some positive evolution signals have been already observed. Agricultural producers will improve the utilization of inputs, and this will, in most countries, result in the increase of production. The price gap between the CEEC and the EU will be reduced further. The demand is likely to rise faster than supply.

Milk production

The CEFTA and the Baltic States are traditional net milk exporters. The most important products are butter, milk powder and cheese. Due to the reduction of the number of dairy cows and to falling milk yields, supply is smaller than demand. In the mid nineties the situation stabilized and milk yields started rising again.

Table 10. Milk food balances


Production (000 t)

Domestic use (000 t)

Balance (000 t)

1989

1994

2000

1989

1994

2000

1989

1994

2000

Poland

16404

11920

14000

15741

12320

13825

663

-400

175

Hungary

2862

2000

2670

2806

2060

2448

56

-56

222

Czech Rep.

4991

3197

3014

3570

2589

2764

1421

608

250

Slovakia

2055

820

1276

1446

1068

1166

609

-248

1110

Slovenia

601

562

673

437

486

495

164

76

178

CEFTA+

26913

18499

21633

24000

18522

20699

2913

-23

935

Romania

3323

3000

3100

3329

3019

3150

-6

-19

-50

Bulgaria

2135

1135

1575

2135

1135

1530

0

0

45

Balkan

5458

4135

4675

5464

4154

4680

-6

-19

-5

Lithuania

3235

1660

2209

2300

1247

1611

935

413

598

Latvia

1976

937

1187

1215

969

1148

760

-32

39

Estonia

1277

772

883

950

667

767

327

105

116

Baltic states

6488

3369

4279

4465

2883

3526

2022

486

753

CEEC-10

38859

26003

30587

33929

25560

28905

4930

443

1683

EU-15

127032

120002

19431

119002

113957

112634

8030

6045

6797

Source: EU Commission DG VI (1995) & Schneider (1995)

Milk production is likely to remain one of the most protected sectors in the CEEC. The issue of milk surpluses will not be solved, although, the 1989 level of production is not likely to be reached again. The only exception is probably Slovenia.

Beef

Table 11. Beef food balances


Production (000 t)

Domestic use (000 t)

Balance (000 t)

1989

1994

2000

1989

1994

2000

1989

1994

2000

Poland

637

4.50

550

691

464

593

-54

-14

15.0

Hungary

114

80

80

91

95

128

23

-15

12.5

Czech Rep.

272

184

215

254

165

176

18

19

17.0

Slovakia

147

73

68

79

64

70

68

9

12.7

Slovenia

50

35

57

38

42

47

12

-7

24.0

CEFTA+

1219

822

970

1153

830

1014

67

-8

15.3

Romania

220

266

306

252

271

270

-32

-5

12.0

Bulgaria

123

97

97

138

106

106

-15

-9

12.5

Balkan

343

363

403

390

377

376

-47

-14

12.1

Lithuania

224

120

181

93

82

89

131

38

24.0

Latvia

129

68

7

67

68

66

62

0

26.0

Estonia

75

28

65

40

42

41

35

-14

26.0

Baltic states

428

216

320

199

192

196

228

24

25.1

CEEC-10

1990

1491

1693

1742

1399

1586

248

2

15.8

EU-15

8298

7857

8338

8136

7725

8191

162

132

21.6

Source: EU Commission DG VI (1995) & Schneider (1995)

If the projections for milk production turn out to be correct, then one may expect that due to the multi-purpose nature of cattle production, beef production will also recover from the current low level of total production. Some countries apply systematic crossbreeding with beef breeds. It is also expected that in some countries (Poland and Hungary) the demand will exceed supply; it increase net import. An important point to mention here is the reorientation from animal husbandry into crop production.

The production will increase significantly in Romania and in the Baltic States, but before the year 2000 the production level of 1989 will not be achieved.

Pork production

The CEEC citizens like to consume pork. In Poland, Hungary and in the Czech Republic pork consumption per capita is even higher than in EU. The extremely high consumption level in Hungary does not reflect the real situation, since it includes a high percentage of exported pork products. According to EU experts, the supply in CEFTA countries (particularly in Poland) will stay far behind the demand. This region will remain, for some time a net importer of pork.

Table 12. Pig meat food balances


Production (000 t)

Domestic use (000 t)

Balance (000 t)

1989

1994

2000

1989

1994

2000

1989

1994

2000

Poland

1854

1609

1785

1866

1705

1896

-12

-96

-111

Hungary

1014

600

699

882

598

714

132

2

-15

Czech Rep.

552

465

522

543

480

191

9

-15

10

Slovakia

274

172

186

232

177

76

41

-4

-5

Slovenia

62

48

65

67

73

3389

-5

-25

-11

CEFTA+

3756

2894

3257

3590

3033

715

166

-139

-132

Romania

800

739

765

766

657

280

34

82

50

Bulgaria

412

214

280

409

217

995

3

-3

0

Balkan

1212

953

1045

1175

874

995

37

79

50

Lithuania

250

83

110

149

86

9

101

-3

I1

Latvia

154

54

77

96

66

77

58

-12

0

Estonia

125

37

52

73

31

36

53

6

16

Baltic states

529

174

239

318

183

212

211

-9

27

CEEC-10

5497

402 1

4541

5083

4090

4596

415

-69

-55

EU-15

15238

16010

6569

14676

15029

16069

562

981

500

Source: EU Commission DG VI (1995) & Schneider (1995)

Table 13. Domestic use per capita (kg)


Beef

Pork

1989

1994

2000

1989

1994

2000

Poland

18.2

12.0

15.0

49.1

44.2

48.0

Hungary

8.8

9.2

12.5

85.0

58.2

70.0

Czech Rep.

24.5

16.0

17.0

52.4

46.4

49.2

Slovakia

14.9

12.0

12.7

44.0

33.0

34.7

Slovenia

20.0

21.4

24.0

5.0

37.6

38.5

CEFTA+

18.7

12.9

15.3

57.8

46.5

51.9

Romania

10.9

12.0

12.0

33.0

28.9

31.8

Bulgaria

15.4

12.5

12.5

45.6

25.7

33.8

Balkan

12.5

12.1

12.1

37.4

28.1

32.4

Lithuania

25.0

22.0

24.0

40.0

23.0

27.0

Latvia

25.0

26.5

26.0

36.0

26.0

30.1

Estonia

25.0

26.5

26.0

46.0

20.0

23.0

Baltic states

25.0

24.6

25.1

40.2

23.6

27.4

CEEC-10

18.0

14.3

15.8

52.0

41.5

46.5

EU-15

22.2

20.8

21.6

40. I

40.5

42.4

Source: EU Commission DG VI (1995) & Schneider (1995)

Problems of a further development of livestock production in CEEC, a general overview

It is obvious that due to non-negligible production potential animal production will increase again. Although on the way of recovering, numerous structural problems will reduce its pace.

Among others, the following factors seem to be the most important, i.e.:

- Insufficient access to capital. Despite the huge amount of investments necessary to carry out the production, there is an important deficit in capital for further development. Due to poor economic situation self-financing is not sufficient, budget funds for public support are very limited. Due to low profitability animal production is not attractive to private investors. Unresolved ownership problems only make financing problems more acute..

- Agricultural structural deficits. Agriculture plays the important role of social buffer in some countries in transition. Even if the additional small farms which are established, and part-time farming together with other sources of income contribute to stabilizing social peace in rural areas. This situation complicates further the process of modernization. Rural population is mostly overaged, poorly educated and is not prepared to meet the market challenges.

- Structural deficits in up- and down-stream industries. Livestock production depends strongly on the accompanying industry. Food industry in many countries is in economic crisis, there is deficiency of know-how and a lack of foreign investors. International competitiveness is poor; despite the low input prices CEEC are expected to support export on the world market.

The afore discussed issues above represent a never-ending story in CEEC. Solutions are usually in the "searching" stage, factual changes will likely occur in the long term. These problems will define and create further agricultural development (in particular in the livestock sector), at least for the next five to ten years. Knowledge, management, qualification and capital are dominant constraints for further development of animal production. These are also areas which need more and better defined international support.

By way of conclusions - some comments on future breeding strategies for CEEC

Cheap labor and land together with poor capital possibilities in CEEC do not enable the development of capital intensive animal production systems as it is the case in EU. There is no problem to save on labor and to produce with maximum capital input per animal. There is no money for investments in buildings and equipment, also the quality of human factor in many countries does not allow very intensive capital systems. Farm organization systems favor those which yield the highest (gross) income at given and very limited capital input. Variability of farm structure is an additional factor that justifies differences in farm organization.

Diversification is much higher than in EU. After a period of transition, almost all types of production units can be found in CEEC, from self-sufficient households, small part-time farms, traditional family farms, to modem partnerships, big cooperatives and livestock holdings.

Within any types of these one may find the whole spectrum of intensity, depending in particular on the above mentioned price limitations of production factors which could be defined by the number of animals per production unit or per ha. It is also quite possible that new very large livestock units will emerge, similar to those in USA, Chile, Brazil and Spain (Bichard, 1995). In CEEC these farms might be able to deliver large quantities of high quality beef meat or pork at very competitive prices. However, this is within the realm of pure theoretical discussion, since there is no capital available for necessary investments. It must be stressed here that ecological consciousness in CEEC is not as low as some policy makers in the West would like it to be.

Production factors (land, capital and labor) in CEEC have different costs, and above all price relationships between production factors is different from those in EU. The variability in farm structure is an additional factor to be kept in mind when trying to transfer business and agricultural policy solutions from West to East. Does this mean that breeding strategies in CEEC should be different from those in EU?

From the economic point of view it is necessary to offer the producer animals of appropriate selection or breed, giving him thus the possibility of achieving the desired economic objectives. Due to pronounced variability, requirements are quite different. Specially small breeders in CEEC would need more vigorous animals, less demanding and better adapted to the environment, whether these are cattle, sheep or pigs. This can be achieved with domestic breeds by applying breeding techniques through appropriate fertile dairy or meat breeds. Small family farms or households prefer multi-purpose to specialized ones, as they primarily have to meet "self-sufficiency" objectives and accordingly to supply farm surpluses local markets only with farm surpluses. Highly specialized breeds in less favorable breeding conditions do not give the proper return, which could be expected given their reputation. Exceptions only prove the rule.

It is difficult to give a universal answer to the question concerning the production orientation of "big units". It strongly depends on farm organization and skill of breeders.

When production conditions are satisfied then theory would recommend using specialized breeds. This is supported also by domestic price relationships, favoring milk and pork versus beef and sheep. In this light, it is argued that multi-purpose breeds of cattle have some disadvantages. An important obstacle to expand the production of meat cattle breeds could be found at socio-economic level. These are new systems, the introduction of which might be supported by specific technological solutions; it requires budget support and guaranteed supply of breeding animals ("active market"). Such production should be financially attractive, however, usually it is not the case. Despite other "explanations and promises", it mainly needs huge initial capital investments if the target of good breeding herd is to be met in practice.

Everlasting problem of access to capital! In pig production some big farm systems are quite successful (some farms in Slovenia, Hungary). Breeding strategies for these systems are formulated by imitating modern pig companies in EU, less emphasis being given to meat quality, which however might be adequate for current product demand.

Let us try to answer the question regarding the necessary distinction between breeding strategies in EU and CEEC. Selection breeding requirements of large and medium livestock farm units, which practice both intensive and extensive production, can be reached by emulating breeding strategies comparable to those valid in EU. It is assumed that the difference in demand (including its structure) between EU and CEEC market is not too "high", particularly when considering the likely unification of both markets (only timing is uncertain).

This is true in particular for pig production. The prevailing economic conditions in cattle production lead however to sequential, long term substitution of specialized breeds by multipurpose ones. Is this appropriate also for a small farming structure? It is obvious that this is the problem of a dual structure. My personal opinion is that a solution can only be reached if a careful selection of national breeding strategies is adopted. Where they do not exist, the system should offered much more diversified breeding strategies than it as has been the case till now (i.e., within one species and for a particular country). Due to initial costs for setting up selection work/programs, instead of current uniform selection program (if this is the case, most of the production financial requirements for new program(s) could be partially covered from abroad or from common CEEC programs. We want to emphasize again how important it is to get rid of the illusion that by applying one selection program and using one type of animal, it is possible to meet the requirements of a11 production systems, their related objectives and the skill of breeders in CEEC. It should be pointed out that a strong "economic interaction" exists between genotype and environment which animal breeders aim at abolishing. Perhaps this may be solved only by supporting the pluralism in selection programs.


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