Investors are buying more of eastern Europe's farmland, turning it into instruments of speculation and letting the owners profit from public subsidies. Smaller farmers are getting pushed out.
The amount of farmland being used by investors solely as a profit source is a pressing issue, according to the European Parliament's Committee on Agriculture and Rural Development.
"Land became a cheap investment opportunity because of the 2008 financial crisis,” said MEP Vladimir Urutchev, Bulgaria's committee representative. The low price of farmland in the EU's former communist countries caused a rush to invest, and subsidies as part of the EU's common agricultural policy (CAP) further accelerated the process. "CAP favors major operators, which industrializes agriculture en masse,” he added.
EU subsidies provide a direct payment of 150 to 190 euros ($160 to $202) per hectare. Small farmers are put at a disadvantage.
Land as lucrative investment
Major investors and speculators take revenue out of the countries while paying little to no taxes in them. Environmental protection is an afterthought and the livelihoods of smaller farmers are put at risk.
"Major investors run entire financial networks. That's how a few companies own nearly two million hectares of land in Bulgaria,” said a property agent who requested anonymity. "That is almost half of all the farmland in the country.” Subsidies can total in the millions, Urutchev said.
CAP reform in 2013 was meant to limit direct payments, ensuring a fairer distribution of subsidies and providing more support for sustainable land development. Little has changed in reality. As of 2015, most of the 25 largest landowners prior to the reform were receiving the highest subsidies, according to Bulgarian statistics. Nor are major investors burdened by loan payments: They receive so much in state assistance, they do not need to borrow to buy.
Small farmers under pressure
It is a different picture for smaller farmers. "We are increasingly pushed out of and eliminated from the market,” said Stefan Petrov, a farmer from northeastern Bulgaria. "We can't keep up with the major operators and there is little available land left.”
Land has gotten more expensive in recent years, largely due to speculation. More and more land is in the hands of fewer and fewer owners. The problem reaches beyond Bulgaria, with as much as 50 percent of EU farmland controlled by three percent of agribusiness. "It's a trend that needs to be reversed,” Urutchev said.
Romania is at particular risk, with more than 65,000 hectares of its farmland owned by a single operator. Thirty percent of the country's land is in foreign hands, said Romania's President Klaus Iohannis. He wants to see that reduced, although measures are already in place to limit foreign investment.
Eastern Europe tries pushing back
Former Soviet countries are seeking more protectionist policies, which the EU discourages with fines and penalties, viewing it anti-competitive.
"The EU needs to be more generous with farmland as far as domestic rules and competition are concerned,” said Maria Heubuch, a Green member of the Agriculture and Rural Development Committee. "We can't apply the same standard to land as just any other commodity.”
Heubuch sees the EU as responsible for devising reliable guidelines for the land market in member states.
Calls for transparency
The committee published recommendations at the end of March, calling on member states to make it easier for small and mid-sized operators to enter the market. More sustainable agriculture was also among the key points. A cap on land acquisition would counter the current trend of more land in fewer hands, Heubuch said.
Above all else, she has called for greater transparency during transfer of land ownership, recalling Börsenstars KTG Agrar, a German-registered enterprise and one of the largest owners of land across the EU. The company went insolvent last year and was acquired by a new investor without any input from affected communities. The type of transaction "damages farming and all of Europe,” Heubuch said.