Slovakia’s farmers eye opportunities for growth
Slovakia’s agricultural sector plays a signifcant role in the country – but there is more to do
20/07/2023
Agriculture plays a hugely important role in Slovakia’s economy. Though its share of GDP is around 3%, it is vital to food sufciency, food security and rural development. The country has around 70,000 farmers and the top 20% of these manage 80% of the country’s agricultural land.
This means the average farm size is 8000 hectares – in the top three in the EU. “In Slovakia, it’s not uncommon to fnd farms of around 8000 hectares,” says Martin Hubinsky, country segment manager, agriculture and food industry, VUB. “We have 1,500 clients with almost €600 million in exposure and market share of around 25%.”
However, he adds, “our market share is stronger in the fnancing of subsidies – primary and European Union projects – where we have a 36% market share. So every third loan on the market in this kind of activity is from VUB.” Cereal production is strong in Slovakia and the country is a net exporter. However, with the EU’s help to Ukraine (a large cereal exporter), commodity prices have dropped. “We are net exporters of cereal, but our producers are currently exporting for less,” says Hubinsky. “The sector will need the support not just of the European institutions, but also of the banks.”
"We are net exporters of cereal, but our producers are currently exporting for less. The sector will need the support not just of the European institutions, but also of the banks."
Martin Hubinsky, country segment manager, agriculture and food industry, VUB
Supply-chain and ESG priorities reshaping the bank-client relationship
Agricultural companies are coming to the bank with questions around the support of common investments [which are usually covered by state governments or European sources].
“Companies are looking for a partner with a 360-degree approach, who can cover not just investments, but also leasing lines as well as project fnancing,” says Hubinsky. “They’re looking for a partner who is part of the community, someone who understands the agriculture business, who has a strong international network and who understands that climate change is already here and is able to support ESG [environmental, social and governance] projects.”
VUB is helping fnance investments supported by several banks, including investment in storage capacity to enlarge the customer base for the vegetables industry and for climate-change actions such as fnancing irrigation systems. “There are opportunities for Slovak vegetable producers to export to the V4 countries [Poland, Hungary, Slovakia and the Czech Republic], as well as to the rest of Europe.” New technologies are emerging in the sector. “The competition on the common European market is high,” says Hubinsky, “but we are also competing as a food market, so new technologies such as drones will be on the table in the near future.”
"Companies are looking for a partner who is part of the community, someone who understands the agriculture business, who has a strong international network."
Martin Hubinsky, country segment manager, agriculture and food industry, VUB
The green transition
Slovakian producers have been dependent on energy from Russia, so investing in the green transition is a good opportunity to reduce dependency, cut costs and be more efcient on the European market. Farmers are embracing green transformation and seeing this as an opportunity to move from a traditional, linear “take, make and dispose” model to a more circular way of working, keeping resources in the cycle for longer.
This way of working, says Hubinsky, brings additional profts, reduces pollution and helps improve risk management. “Shifting to a circular economy is a strategic priority for post-pandemic recovery.” To this end, the bank is already fnancing projects relating to renewable energy sources. “Food production has very high energy consumption, so this presents opportunities for cost-cutting and improving value for the producer.”
Hope on the horizon
Inflation is narrowing and is expected to decrease over the rest of 2023, based on lower energy and agricultural commodities’ prices and a favourable base rate. Moreover, “Slovakia’s climate and soil conditions are good, so there are opportunities for farmers to grow. Sufciency is not high enough to meet demand and there is high demand from neighbouring countries such as the Czech Republic, Hungary and Poland.”
Co-operation between countries and banks is essential for the future. Says Hubinsky, “Our southern neighbours from Hungary are very good in oil production, the Italian food industry is great. All these co-operations are key for future growth.”
