INPROFORUM 2013

Cross-compliance measure applied in the European Union means an obligation for farmers to maintain (used as well as unused) land in good agricultural and environmental condition (GAEC) and to comply with the statutory management requirements (SMR), if they want to receive land grants. Despite the fact that many of the requirements were already implemented in national legislation prior to the introduction of cross-compliance, many farmers had to invest to meet the conditions. Therefore, our paper deals with the influence of the introduction of cross-compliance in the Czech Republic on the costs of agricultural holdings. The aim is to assess the effect control compliance costs on businesses and to model a situation where the application of sanctions for non-compliance.

Firstly the costs of cross-compliance are analyzed on a sample of agricultural holdings of the Farm Accountancy Data Network in 2009. Farms are categorized by economic size defined on the basis of gross margin. For each size group of agricultural holdings the ratio of direct payments that farms get for compliance with standards is compared to the one-time costs, which in the model situation is 1 % of the total cost. Case study on farms - two commercial companies, one cooperative and one natural person - shows the differences in how the various actors cope with the new requirements. Generally, the companies are in better situation. They have lower absolute costs of implementing cross-compliance in practice. Considering the ration of sanctions in relation to the costs we may conclude that it would probably be better to increase the penalties in order to force the farmers to observe the regulations.