On Thursday, the government approved the organization of a public auction to find a new user for the agricultural land currently utilized by milk, meat and cereals producer Tartu Agro. The state owns a total of 57 properties in the area, which will be leased for agricultural purposes at a market-based price for a period of 12 years.

While Minister of Agriculture Piret Hartman (SDE) said as recently as June that the land would be put up for auction in four parts, Tartu Agro CEO Andres Härm protested the plan, saying that this would dismantle the agricultural producer's land use model.

Hartman met with representatives of Tartu Agro last Monday, and while the government still decided to auction off the land currently leased by the company on Thursday, the decision no longer includes information about offering the land in four parts, and according to the Ministry of Agriculture, it is still unclear how many parcels the land will be divided into for the auction.

Although the auction conditions are equal for all participants, the State Assets Act does provide the current tenant, Tartu Agro, with a certain advantage: if Tartu Agro participates in the auction but does not win, they have the right to lease the land at the auction's final price, provided they notify of their intent within five days.

CEO: Putting the land up for auction in pieces the end of Tartu Agro

Andres Härm, head of Tartu Agro, sees the situation as black or white and said that putting the land up for auction in several pieces would destroy the company.

"You have to understand this place. Our people have lived and worked here for generations, building a support network," Härm said. "If the land is taken away from Tartu Agro, their life's work will be destroyed. We have top specialists working with our machinery and in our farms – they are not easily replaceable. This is the destruction and devastation of everyday life. It would be a crime if it ends up this way," he added.

He said that farming has its own rules and peculiarities, and that Tartu Agro's combined production logic requires comprehensive land use.

Avo Samarüütel, head of dairy producer OÜ Männiku Piim, said that auctioning off Tartu Agro's lands will likely attract interested parties as everyone needs land, while it is difficult for him to say what the government should do.

"In the past, a decision was made, and now 25 years have passed. There must have been some plan regarding Tartu Agro," Samarüütel said. "To sell and divide it up today... There's livestock farming involved, and since the land is relatively attractive, I fear that some of this farmland might not remain in the hands of farmers. It's difficult to manage and plan for the future when wealthy buyers might come in just to purchase the land – the situation is actually extremely complicated."

The land used by Tartu Agro is not far from the city of Tartu and could attract real estate developers and other prospective buyers with long-term plans not tied to agriculture.

Samarüütel said that the land is valuable and that Tartu Agro has done a good job of improving it and adding value over the years.

Tarmo Timmi, head of the Jaagumäe Farm in Võru County, said that Tartu Agro's lands could interest nearby producers, while productions costs would get out of hand for anyone not based near Tartu. He added that he does not support dividing up the land.

According to Timmi, agricultural production forms a whole and dismantling parts of it might render the business plan unsustainable. "Production volumes are calculated based on existing fields and things might not work out if you lose some of them."

Tartu Agro's lease agreement and its colorful circumstances

Tartu Agro's predecessor was the Tartu Experimental, Model and State Farm, which operated during the Soviet era and owned the land now up for auction in the early 1990s. Despite the active return of land to rightful owners during that period, this particular land was not returned. At the time, the minister of agriculture was Aavo Mölder, a member of the People's Union, who later became the owner of Tartu Agro.

In 1999, newly appointed Minister of Agriculture Ivari Padar (SDE) decided to keep 3,000 hectares of land in state ownership, in addition to the 90 hectares desired by his predecessor, Andres Varik of the Coalition Party. Under Padar's decision, the state leased the land to Tartu Agro for 10,000 kroons (approximately €639) per year, with a 25-year lease agreement. At the time, the Estonian Farmers' Union stated that this rental price was nearly 30 times below market value.

The land was subsequently used to form the state farm Tartu Agro, which was privatized by its then-leaders. In a 2005 audit, the National Audit Office found that the Ministry of Agriculture had leased the property under terms unfavorable to the state, citing the Tartu Agro case among others.

The audit noted that although the ministry justified the symbolic rent with the obligation included in the contract requiring the tenant to cover all costs associated with maintaining and improving the land – including investing in upgrading land improvement systems, plant protection and more – the rent was not aligned with the tenant's ordinary business activities and did not convincingly show that the state would benefit from the transaction.

The National Audit Office stated that none of the tenant's obligations as outlined in the contract would significantly or permanently increase the land's value, which could be considered an improvement of the real estate. The audit also pointed out that the tenant was already required to maintain the property at their own expense and make necessary improvements for ordinary upkeep. Additionally, the company could apply for state subsidies for the maintenance and renewal of land improvement systems, as well as for liming the land.

Since 2005, the rent was increased to 80,000 kroons (approximately €5,113) per year.

Helir-Valdor Seeder (Isamaa), who served as minister of agriculture from 2007 to 2014, convened a commission to investigate the Tartu Agro land lease situation. The commission recommended, if possible, to revoke the 1999 order that kept the land in state ownership. In 2014, when Padar became minister of agriculture again, he promised that the ministry would conduct a legal analysis to determine whether this was possible.

In the same year, the European Commission received a complaint that the below-market lease agreement with Tartu Agro might constitute illegal state aid, as since Estonia joined the European Union in 2004, it has been required to adhere to EU competition rules. Estonia maintained that no illegal state aid had been provided.

In 2017, the European Commission launched a formal investigation and concluded in early 2020 that Tartu Agro had received incompatible state aid and must repay €1.2 million to the state.

Tartu Agro then appealed to the European Court of Justice, demanding that the EU General Court annul the Commission's state aid decision in its entirety. In 2022, Tartu Agro won the case in the EU General Court. The court found that the European Commission had unfairly simplified the situation in its decisions and had based its conclusions on inaccurate calculations.

Last year, Tartu Agro had a turnover of €10.56 million, marking an increase of over 10 percent compared to the previous year. Despite this growth, the company, which employs 117 people, recorded a loss of nearly €559,000. In 2022, however, Tartu Agro earned a profit of €2.6 million.

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