CAP IMPROVES LIVES OF LITHUANIAN FARMERS BUT NOT

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SIPDIS

SIPDIS

WARSAW FOR FAS:KSNIPES

E.O. 12958: N/A
TAGS: EAGR ECON PGOV LH
SUBJECT: CAP IMPROVES LIVES OF LITHUANIAN FARMERS BUT NOT
WITHOUT CHALLENGES



1. Begin summary: Statistics about the Common Agricultural
Policy (CAP) are readily available; however it is difficult
to determine its direct impact on Lithuanian farmers with
numbers alone. We recently visited several farms to get an
understanding of the CAP,s effects in Lithuania. CAP funds
are positively changing the look and operation of Lithuanian
farms. At the same time, there are several downsides to
applying for and receiving the funds available. End summary.

Background
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2. Little is known about the direct impact CAP payments have
on the average Lithuanian farmer. In a June 22nd meeting
with Laimonas Ciakas, Director of the EU Affairs and
International Relations Department of the Ministry of
Agriculture, Ciakas noted that Lithuanian farmers receive aid
in one of three ways: through direct payments, market
regulation, and rural development funds. From 2004 to 2006
Lithuanian farmers received over 1.6 billion Euros from the
EU and other aid programs. According to Ciakas, this funding
will increase dramatically. At the time of Lithuania,s
accession to the EU, Lithuanian farmers started receiving
only twenty-five percent the amount of direct payments that
farmers from the EU-15 received. The payments Lithuanian
farmers currently receive are up to forty percent of the
EU-15 amount. The amount of direct payments will
theoretically equal the level of the older EU members by 2013.

Benefits of the CAP
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3. The CAP has improved the quality of life for Lithuanian
farmers. With rural development funds, old Soviet-era
structures are being renovated or replaced in favor of newer,
more modern buildings. Farms are expanding their operations
and modernizing the equipment they use including irrigation
and anti-frost systems for crops, more efficient milking
methods at dairy farms, and new tractors. One farmer we
observed who receives CAP funding had enough disposable
income to expand and renovate his residence. Another farmer
commented that the recent direct payments were enough to
purchase a new and much-needed automobile. A third farmer
can now afford to put the direct payments aside, with the
intent of using them to help his children pursue higher
education.


4. Expansion of markets and elimination of certain tariffs
associated with EU entry have also benefited Lithuanian
farmers. They are now able to import more efficient
equipment and cheaper seeds for agriculture for much lower
costs. Lithuanian farmers now have access to more markets
for their berries, fruits, vegetables and poultry than before
accession. This availability of new markets provides
justification for the farmers to expand and improve the
efficiency of their farms, using CAP funds.


5. Lithuanians have found that there are a variety of ways to
receive additional direct payments under the CAP. Because of
the EU's emphasis on environmental conservation, organic
farming is becoming especially popular. One organic farmer
receives an annual payment of approximately 2600 Euros for
keeping his nineteen hectare farm annually certified as
organic. Another receives sixty percent more money in direct
payments than the average Lithuanian farmer because he is
under the age of forty. Training funded by the EU is another
financial benefit.

Challenges associated with cap use in Lithuania
-------------- --


6. Farm modernization thanks to EU funding is not taking
place without some challenges. One of our interlocutors,
whose company recently received CAP funds, noted that
restrictions are placed on the use of the money. Farmers are
required to purchase new equipment, rather than used. They
must also buy the equipment from fellow EU members. This
blueberry farmer stated that it would have been cheaper for
his company to buy used equipment or imported equipment from
outside the EU rather than accepting the CAP aid, which
equaled only fifteen percent of the total cost.
Unfortunately, his company was committed to the aid before he
realized this fact. We heard similar complaints by other
farmers who had to purchase the latest technology in order to
receive CAP funds.


7. One of the largest problems faced by small farmers seeking

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CAP subsidies is the paperwork process. One told us, "I
don,t know how a person without a college education could do
the paperwork." This same individual helped her neighbors
fill out their direct payment paperwork for the last couple
of years. However she had to discontinue this help because
of the excessive amount of time required to complete the CAP
benefit application forms. After the forms are complete, it
is not uncommon to receive numerous rejections before final
approval. Accounting discrepancies tended to be the most
common problem with the rejected paperwork, according to the
farmers we interviewed.


8. One Lithuanian farmer informed us that it is no longer
worth trying to raise cows for meat because it can now be
imported so much cheaper from other places, specifically
Poland, as a result of the open market policies of CAP. The
same farmer mentioned that he has noticed more competition
for dairy products from farms in Latvia. Another farmer said
that his company, known for offering a variety of flowering
plants, has been completely forced out of the rose business
by competitors from other EU countries who send their
products into Lithuania.


9. Multiple farmers noted that it was hard to find aid and
advice from government sources. One poultry farmer we spoke
to claimed that the favoritism and politics within the GOL
affected the ability to use CAP allocated funds within the
designated time. Inspections are also a challenge. Several
farmers noted that inspectors showed up at inopportune times
without prior notice for inspections and interviews, and then
required the farmers to be available at that specific time.
One farmer commented that even though farmers can now get
more aid than previously available, it was negated by the
fact that manufacturing companies have taken advantage of the
increase in foreign dollars by raising their prices on
farming equipment and services.

Improving upon deficiencies
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10. The application of the CAP in Lithuania,s agricultural
process is progressing. Not all farmers feel the paperwork
is impossible. One farmer stated that the paperwork is now
something one person can take care of given enough time.
Ciakas concurs with this opinion. He said the paperwork
issue is only a temporary inconvenience. He added that the
paperwork was initially hard for farmers because it was
something new to them, but that the farmers, experience with
the paperwork and improvements within the bureaucratic
process are turning the application process into a non-issue.
Ciakas also said that there are now farm advisories being
set up across the country that are easily accessible to
farmers.

Comment
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11. The CAP is not the salvation of all Lithuanian farmers.
However, it has made a significant difference for some.
Despite all of the complaints we heard about the negative
aspects of the CAP process, the vast majority of those we
interviewed said they would go through the process again to
receive the aid. This is a testament of the success of CAP
in the farmers' eyes. The CAP is improving their livelihood
and standard of living. Farming in Lithuania is a more
attractive occupation now than at any time since independence
from the Soviet Union. As modifications and adjustments are
made to the CAP over the coming years and farmers become more
accustomed to the process, agriculture and rural life in
Lithuania will continue to improve.
LEADER