Generation change in agrarian sector drawing near, says OTP

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As todayʼs agricultural producers are growing older, a generational change should commence in the foreseeable future, and the state should aim at supporting potential young farmers, say experts at OTP Agrár, the agricultural arm of OTP Bank.

A press release sent to the Budapest Business Journal notes that the majority of those who gained agricultural property with the fall of communism are now in the 70-75 age range. OTP Agrár says that, based on its earlier research, 70% have no plans regarding succession, while the remaining 30% have some idea - either vague or concrete - about what should happen.

In the latter case, most consider a change in ownership carried out inside their family beneficial, but in 28% of all cases, the owners have no direct "heir." Further risks include the designated successor not wanting to work in agriculture and being unprepared for the task, OTP observes.

Additionally, a current owner handing over an agricultural project to a successor while remaining a decision-maker might further complicate the succession, as this can result in questions of responsibility, notes OTP.

The bankʼs experts say that agricultural businesses that change owner through a purchase deal are the most successful, and that it would be beneficial if either the succession process or sale were only possible by considering the agricultural business as a complete unit, with the previous owner retaining no decision-making function.

While the majority of young people are open to new ideas, notes the press release, they lack the necessary business knowledge or professional experience; even so, it is exactly this generation that may be able to bring in modern knowledge to an enterprise, and to more easily handle a transfer of up-to-date information and skills. This, OTP notes, is important for those who finance the sector, since credit institutions can establish partnerships with young people that will run for the long term.

OTP Agrár says that politicians should help young farmers gain a more significant role and improve their qualifications. One way would be to support young farmers in securing land, becoming more educated, and improving their farms. The succession process could be facilitated by establishing special legal constructs and the introduction of new, long-term loans, it adds.

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