Support hits too close to home

Photo: Urmas Luik

It only took Martin Repinski and Tarmo Tamm a few weeks as rural affairs ministers to change a regulation of swine flu support to accommodate the interests of connected companies. Pig farmer and Center Party member Urmas Laht, who paved the way for the change, and companies associated with his ally Teet Soorm made hundreds of thousands of euros.

October 19, 2016. A curious company meets in the building of the Chamber of Agriculture and Commerce in Kadriorg: dairy farmers on one side of the table and pig farmers on the other. On the table lie millions of euros – albeit metaphorical ones.

Farmers have assembled in the capital on the orders of rural affairs minister Urmas Kruuse (Reform) to figure out how to divide €8.08 in last-minute agricultural support from the EU the government will match.

Farmers know that both sides sorely need the money. Dairy producers – of whom there are more – have suffered in the throes of low buying-in prices and the disappearance of the Russian market for some time. Pig farmers are wrestling with swine flu restrictions.

Horse trading commences

A memorandum addressed to Kruuse includes an agreement: dairy farmers could get 80 percent of the support and pig farmers 20 percent. Among the undersigned are pig farmers Urmas Laht (62) and Teet Soorm (48).

Laht is a local politician who has been close to the top of organizations representing pig farmers for years. Laht does not get along with Kruuse – witnesses claim Laht has openly called Kruuse stupid in matters pertaining to pig farming.

Laht makes a political move in April of 2016 when he founds the Estonian Pig Farmers Union with Teet Soorm and Olle Horm and becomes its head. The aim – to have an edge in talks with politicians. Soorm was the ideal partner. He was CEO of HKScan Estonia and AS Rakvere Farmid and partner of leading Center Party member Kadri Simson (which he still is).

Concerns are voiced at the signing of the farmers’ memorandum: “Will the ministry manage to forward the decision to Brussels in time?” Support principles must be submitted by November 30, 2016. “We have time,” Laht and Soorm are overheard talking among themselves.

The fall of Reform’s government was two weeks away. Others who were present probably had no idea the agreed-upon division of 80:20 would soon come under serious lobby fire.

Kruuse and Laht disagree on how to distribute the pig farmers’ 20 percent. Laht proposes that all farmers in the toughest swine flu restriction zone (zone III) are paid twice as much as those outside of it per sow. That would benefit Laht’s farms and those of Teet Soorm that find themselves in zone III for the second consecutive year.

Kruuse is opposed. He knows that the “second year fellows” have already been paid support once. Laht received a total of €215,000 and Soorm’s Rakvere Farmid around €700,000 in 2015. Doing that again would not be fair to the newcomers.

Kruuse decides that only farmers whose farms were placed in zone III in 2016 will receive €27.24 per animal. The rest – including Laht and Soorm will receive €13.62 per sow and €8 per pig. The decision was made in the agriculture and rural affairs development council on October 24 and remained in effect until Kruuse had to vacate his office in the middle of November.

New minister, new rules

“That is when peculiar things started happening,” says one of Postimees’ around a dozen sources for this story. Most are reluctant to see their name in print as they have to keep working with Laht. “As soon as Repinski became rural affairs minister, Laht wanted 22 percent for pig farmers and to repeal the 80:20 rule,” they claim.

This is confirmed by another pig farmer who says Laht became a ministry insider as soon as Repinski became minister. “He just went to the ministry when he needed to change the figures. It was Laht’s solo act. No one else had that reach. The regulation was changed virtually overnight and that was that.”

What really happened? Documents show that support for farmers who were in zone III for the second year virtually doubled during Repinski’s three-week term. They now qualified for €22.52 instead of a measly €13.62 or €8 – for every animal, not just sows. Postimees’ sources claim Laht asked for more but Repinski realized ambitions were growing out of hand.

The money came from the Center Party’s new coalition agreement that gave pig farmers another €400,000. The lion’s share of that money ended up in Laht and Soorm’s zone.

Entering the regulation into force fell upon Repinski’s successor Tarmo Tamm who signed it on January 16, 2017. As peculiar as it sounds, the new minister hired Laht as a ministry adviser three days later.

Calculations by Postimees’ sources and data from the Agricultural Registers and Information Board (PRIA) reveal that Laht’s lobbying paid off. Laht’s company Markilo was paid €181,000 instead of €79,000. Soorm’s Rakvere Farmid gained even more: €290,000 instead of €120,000. The bigger coefficient benefited another 20 pig farmers.

“Many old zone III members do not criticize Laht as he has given them a piece of his mind: men, I’m the reason you got it all and that’s the end of it! And looking back now, that’s just how it is,” one of the pig farmers said.

However, the amendment had a dark side. Because applicants numbered too many, PRIA reduced the support sums for all zones. In other words: everyone received less support than the original regulation had pledged. The 80:20 division was also warped so that pig farmers received 21.2 percent of the money in the end.

One of the so-called new zone III entrepreneurs whom Laht’s maneuver left worse off is West Viru county pig farmer Ermo Sepp. He lost roughly €14,000 compared to Kruuse’s initial plan.

Sepp admits the situation seems unfair. “Those who had spent years in the third zone had had time to adjust. The newcomers were definitely having a more difficult time financially as they had to reorganize,” he says.

Support could have been bigger

Urmas Laht says that he does not see how his actions have been underhanded. He said that the entire zone III should have been paid the same. “I expressed my position, which is still my conviction, that it was unfair to give companies who had been in the third zone the previous year less support. We had a poll, and most pig farmers agreed with this position,” he claims.

Laht says that he did not create more favorable conditions for his own companies when negotiating with ministers who were also his fellow party members. “It is not an advantageous position when the entire sector is in the toilet!”

Teet Soorm remembers events only vaguely. “It is theoretically possible we fought for it if you say so,” he admits but adds that he had absolutely no idea the government would fall.

He does not perceive anything wrong with the participants’ conduct: “If the company did receive a little more in support, it should be happy – Teet Soorm worked hard for it.”

Former minister Repinski says that there was no collusion as ministry officials would never have stood for such blatant favoritism. “I believe the idea (to change the regulation – ed.) was the right one. However, I have not kept an eye on who got what,” he says.

Minister of Rural Affairs Tarmo Tamm told Postimees in a written reply that even though companies had been supported a year prior, they were still subject to trade restrictions and needed support also in 2016.

Tamm did not agree that Urmas Laht had successfully lobbied for more money. “It cannot be claimed that a single person shapes the form of regulations.”

Does former minister Kruuse believe Laht and Soorm had their own interests? “200 percent! I don’t even have to think about it. I know how they lobbied,” Kruuse said.

Officials of the rural affairs ministry Postimees consulted explained that they calculate the financial situation and need for support of pig farmers based on the FADN agricultural accounting database. Even though the ministry cannot see the price at which a farmer sells meat, officials can see the average buying-in price. The latter is then compared to average cost of producing pork.

Officials said that they learned of the dire situation farmers were in. Laht, Soorm, and others were paid compensation of €22.52 per animal, even though it should have only covered 40-45 percent of cost overrun. In other words: producers were left to deal with the remaining loss, and no one swam in support money.

Looking at the financials of support recipients, one cannot find losses. Urmas Laht’s OÜ Markilo closed 2016 with a profit of €109,000 of which the owner took out €25,000 in dividends. Rakvere Farmid, still run by Teet Soorm at the time, made a profit of €1.27 million. Saimre Seakasvatus that is owned in part by Soorm’s father Ain Soorm turned a profit of €129,104.