Impact of Integration and Globalization on Business Risk and loans in Slovak Agriculture

Slovak University of Agriculture in Nitra, Faculty of Economics and Management, Department of Finance, Tr. A Hlinku 2, 949 76 Nitra, Slovakia

Abstract

The paper evaluates the effects of integration and globalization on individual farms in Slovakia after EU accession in 2004. The decrease in employment in agriculture is a result of technological progress, changes in individual family preferences and low income in agriculture in comparison to other sectors of economy. In the production commodities with low labor input dominate. Cereals, oilseeds and industrial crops dominate the agriculture production in Slovakia. Large farms benefit in form of economy of scale and agricultural output of farms remains low in Slovakia. The paper compares the risk of crop and animal production based in individual farm data using Markowitz portfolio theory. The crop production is more risky due to higher effects of weather condition compared to animal production. The second part of the paper evaluates the changes on access to credit and finance gap of farms in Slovakia. Based on individual interviews with representatives of demand and supply of loans the paper concludes that large the Common agricultural policy is playing a dominant role in access to credit. Banks consider the CAP subsidies to be a stable income factor and good collateral for loans. The loan market is dominated by short term loans and the majority of the market offers are coming from 4 commercial banks. The finance gap exists towards small farmers and farmers with animal production and special crops.