Commission Staff Working Paper Impact Assessment Common Agricultural Policy towards 2020 Annex 1: Situation and prospects for EU agriculture and rural areas

Commission Staff Working Paper Impact Assessment Common Agricultural Policy towards 2020 Annex 1: Situation and prospects for EU agriculture and rural areas - Hoofdinhoud

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COUNCIL OFBrussels, 18 October 2011

THE EUROPEAN UNION

15640/11 ADD 1

AGRI 701 AGRIFIN 94 AGRIORG 184 CODEC 1701 AGRISTR 61

COVER NOTE

from:

Secretary-General of the European Commission, signed by Mr Jordi AYET PUIGARNAU, Director

date of receipt: 17 October 2011

to: Mr Uwe CORSEPIUS, Secretary-General of the Council of the European Union

No. Cion doc.: SEC(2011) 1153 final

Subject: Commission Staff Working Paper Impact Assessment Common Agricultural Policy towards 2020 Annex 1: Situation and prospects for EU agriculture and rural areas

Delegations will find attached Annex 1 to the Impact Assessment on the Common Agricultural Policy towards 2020.

EUROPEAN COMMISSION

Brussels, 12.10.2011 SEC(2011) 1153 final

COMMISSION STAFF WORKING PAPER

IMPACT ASSESSMENT

Common Agricultural Policy towards 2020

ANNEX 1

{COM(2011) 625 final} {COM(2011) 626 final} {COM(2011) 627 final} {COM(2011) 628 final} {COM(2011) 629 final} {COM(2011) 630 final} {COM(2011) 631 final}

{SEC(2011) 1154 final}

Annex 1: Situation and prospects for EU agriculture

and rural areas

Table of content

LIST OF GRAPHS............................................................................................................ 4

LIST OF MAPS................................................................................................................... 7

LIST OF ACRONYMS AND ABBREVIATIONS ............................................................ 8 [[note: 1.]]OVERVIEW OF THE COMMON AGRICULTURAL POLICY (CAP) .................. 9

1.1. Historical development of the CAP................................................................... 9

1.2. Effectiveness and efficiency of policy instruments......................................... 11

1.3. Level and composition of budgetary support .................................................. 11 [[note: 2.]]SITUATION FOR EU AGRICULTURE AND RURAL AREAS ........................... 12

2.1. Role of agriculture in the economy and in the environment ........................... 12

2.1.1. Role of agriculture and food industry in the economy ...................... 12

2.1.2. Role of agriculture and forestry for the environment ........................ 15

2.2. Structural changes ........................................................................................... 18

2.2.1. Agricultural holdings and labour force.............................................. 18

2.2.2. Agricultural area ................................................................................ 19

2.2.3. Size and distribution of farms............................................................ 19

2.2.4. Distribution of production factors ..................................................... 22

2.2.5. Labour force ...................................................................................... 23

2.3. Agriculture and food trade............................................................................... 27

2.4. Income development ....................................................................................... 29

[[note: 4.]]CONCLUSIONS ....................................................................................................... 42

ANNEXES ........................................................................................................................ 44

A.1 Economic information on the agricultural sector ............................................ 44

A.2 Structural information (*)................................................................................ 45

A.3 Information on rural areas ............................................................................... 51

A.4 Medium-term perspectives for agricultural markets ....................................... 61

List of tables

Table 1 Importance of Agriculture in total GVA ........................................................ 44

Table 2 Share of employment in the primary sector (NACE A_B: agriculture, hunting,

forestry and fishing). 2008............................................................................. 52

Table 3 Share of the GVA in the primary sector (NACE A_B: agriculture, hunting,

forestry and fishing). 2008............................................................................ 54

Table 4 Income per inhabitant (index of EU-27 =100) 2008 ................................... 57 2

Table 5 Population density (inhabitants/km

) by type of area 2008......................... 59

List of graphs

Graph 1 The path of CAP expenditure 1980 2009 (in 2007 constant prices) ........... 11

Graph 2 Contribution of the agri-food and forest sectors to the economy: share in total

GVA, 2008 (*).......................................................................................................... 13

Graph 10 Importance of semi-subsistence farms (with households consuming more

than half of their production) in the EU-12 - 2007................................................... 22

Graph 11 Annual rate of variation of the UAA by category of area farm size in the EU

1995-2007.............................................................................................................. 22

Graph 12 Distribution of family and non-family labour force working regularly in

agriculture according to the working time in agriculture in the EU - 2007 ............. 23

Graph 13 Distribution of holdings and of labour force by class of labour force per

holding in the EU 2007.......................................................................................... 24

Graph 14 Distribution of managers of family farms according to the existence of

gainful activities other than agriculture in the EU - 2007 ........................................ 24

Graph 15 Distribution of holdings with another gainful activity than agriculture by

economic farm size (ESU) in the EU-27 2007 ...................................................... 25

Graph 16 Performance of managers of less than 45 years old and of managers of more

than 55 years old in the EU-27 - 2007...................................................................... 25

Graph 17 Evolution of female farm holders (as % of total farm holders) in the EU -

2003-2007................................................................................................................. 27

Graph 18 Structure of EU agriculture and food trade ................................................... 27

Graph 19 EU-27 main agriculture and food exports, average 2008-2010 ( billion) ... 28

Graph 20 EU-27 main agriculture and food imports, average 2008-2010 ( billion) ... 29

Graph 22 Development of agricultural factor income in the EU-12 and the EU-15,

2000-2010 (billion )................................................................................................ 30

Graph 21 Development of agricultural factor income per annual work unit (AWU) in

the EU-27 (2000=100).............................................................................................. 30

Graph 30 Educational Attainment: % of adults (25-64) with medium and high

educational attainment and % of adults (25-64) participating in education and

training by type of region. 2009 ............................................................................... 35

Graph 31 Net Migration by type of region in . 2007 ................................................ 36

Graph 32 Trends in income by Member State............................................................... 40

Graph 33 Trend in income by type of farming.............................................................. 41

Graph 34 Distribution of farms in the EU between Member States, 2007.................... 45

Graph 35 Distribution of agricultural workforce in the EU between Member States,

[[note: 2007 ....................................................................................................................... 45]]

Graph 36 Distribution of the UAA in the EU between Member States, 2007 .............. 45

Graph 37 Annual rate of change (%) in the number of farms in the EU-15 ................ 46

Graph 38 Annual rate of change (%) in the agricultural workforce in the EU-15 ....... 46

Graph 39 Annual rate of change (%) in the UAA in the EU-15 .................................. 46

Graph 40 Share of non-used agricultural area in the total area of the farms in EU 2007

....................................................................................................................... 47

Graph 41 Total variation of area by type of utilisation (as % of total area of the farm) in

EU - 1995-2007 ........................................................................................................ 47

Graph 42 Change (in %) of the area by main groups of production in EU-15 1995-

[[note: 2007 ....................................................................................................................... 47]]

Graph 43 Distribution of the factors of production by farm size in area in EU-27 2007

....................................................................................................................... 48

Graph 51 Trend in income by economic size ................................................................ 68

List of maps

Map 1 Importance of primary sector in employment ............................................... 53

Map 2 Importance of the primary sector in GVA..................................................... 55

Map 3 Employment in the food industry .................................................................. 56

Map 4 Economic development: GDP per capita at regional level............................ 58

Map 5 Age structure (*)............................................................................................ 60

List of acronyms and abbreviations

AWU Annual working units

CAP Common Agricultural Policy

cwe Carcass weight equivalent

DG AGRI Directorate-General for Agriculture and Rural Development

EEA European Environmental Agency

ESU European Size Unit

EU European Union

EU-27 European Union after the enlargement on January, 1st 2007

EU-25 European Union after the enlargement on May, 1st 2004

EU-10 Member States that joined the European Union on May, 1st 2004

EU-2 Bulgaria and Romania

EU-12 All Member States that have joined the EU since May, 1st 2004

EU-15 Member States of the European Union before May, 1st 2004

Eurostat Statistical Office of the European Communities

FADN Farm Accountancy Data Network

FNVA Farm Net Value Added

FSS Farm Structure Survey

GDP Gross Domestic Product

GVA Gross Value Added

ha Hectare

1. OVERVIEW OF THE COMMON AGRICULTURAL POLICY (CAP)

The CAP has undergone fundamental reforms over time to respond to changing economic conditions as well as to evolving societal expectations and demands. Policy drivers and challenges of today are not only related to agriculture per se , but also extend to the wider institutional and economic setting within which the policy evolves.

EU agriculture is facing an ever wider range of challenges that the CAP has to address,

including:

· Increased globalisation with greater integration of national economies into the world

economy and thus greater inter-dependencies and more competitive pressure on agriculture. The impact of the economic crisis on agriculture is a notable example.

· Increased price volatility for agricultural products, which is strongly linked to

developments in other commodity and energy markets.

· Increasing environmental pressures on agriculture and rural areas, in particular

relating to the effects of climate change, water availability and quality, and the need to halt biodiversity loss.

· Food security issues. A growing world population and changing consumption patterns

put a strain on global resources to supply adequate amounts of food. Recent developments have raised concerns related to food security, particularly concerning the impact of climate change on supply variation, and thereby on the availability of food.

1.1. Historical development of the CAP

The CAP has its roots in Western Europe of the 1950s, where societies had suffered from years of war, and where agriculture had been crippled and food supplies could not be guaranteed. The CAP aimed at improving productivity in the food chain, ensuring a fair standard of living for the agricultural community, stabilising markets and ensuring the availability of food supplies to EU consumers at reasonable prices. Incentives to produce were provided through a system of high support prices to farmers, combined with border protection and export support. Financial assistance was also granted for the restructuring of farming, for example by aiding farm investment, aiming to ensure that farms developed in size and in management and technological skills so that they could adapt to the economic and social climate of the day.

introduction of direct payments for a few key agricultural sectors. It also introduced a comprehensive rural development policy as a second pillar of the CAP which encouraged many rural initiatives while also helping farmers to diversify, to improve their product marketing and to otherwise restructure their businesses.

Agenda 2000 explicitly established economic, social, and environmental goals within a reformulated set of objectives for the CAP consistent with the requirements of the Amsterdam Treaty. This had the aim of giving concrete form to a European Model of Agriculture and preserving the diversity of farming systems spread throughout Europe, including in regions with specific problems, in the years ahead. These objectives involved better market orientation and increased competitiveness, food safety and quality, stabilisation of agricultural incomes, integration of environmental concerns into agricultural policy, developing the vitality of rural areas, simplification and strengthened decentralisation.

The regular and consistent adjustment of the CAP to pressures from European society and its evolving economy was again illustrated by the new set of reforms initiated in 2003 and continued in 2008/09 with the Health Check, which aimed at enhancing the competitiveness of the farm sector, promoting a market-oriented, sustainable agriculture and strengthening rural development policy.

Income support has now become almost fully decoupled from production activity, thus allowing EU farmers to make their economic decisions on the basis of market signals. In addition, income support is linked to the respect of standards on environment, food safety and quality and animal welfare that society requests and that EU Member States have implemented through cross-compliance.

The rural development policy for the 2007-2013 programming period focuses on three core objectives, namely improving the competitiveness of the farming and forestry sectors, improving the environment and the countryside through support for land management, and improving the quality of life in rural areas and encouraging the diversification of the rural economy.

Figure 1 Historical development of the CAP

1.2. Effectiveness and efficiency of policy instruments

The most recent wave of policy reform has considerably improved the performance of the EU's agricultural policy. It now provides better value for money by supporting and targeting more accurately what taxpayers, citizens and consumers have demanded:

More market orientation, and thus increased competitiveness;

Direct support to producers which helps to keep farming in place and to deliver public

goods concerning the environment, food safety, food quality and animal welfare which are not compensated for by market mechanisms;

More incentives to improve standards and promote sustainability in our rural areas.

The fundamental shift in emphasis from price support to income support, and from product to producer support (together with a broader range of rural development policy instruments) has allowed market forces to play a greater role in guiding the allocation of resources, resulting in lower market and trade distortions.

The implementation of the single payment scheme constitutes a major improvement in terms of the degree of decoupling. OECD research

1 has shown that such measures have

considerably smaller potential production impacts than the price support measures or area payments they have replaced. This has significantly improved the effectiveness and efficiency of the CAP in providing income support.

1.3. Level and composition of budgetary support

These changes in the policy mix together with the introduction of the mechanisms of modulation and financial discipline (in order to keep agricultural expenditure under the financial ceilings set in the financial perspectives for 2007-2013) have significantly changed the level and composition of the financial support to the agricultural sector and rural areas. They have also made the CAP expenditure more stable and predictable.

Graph 1 The path of CAP expenditure 1980 2009 (in 2007 constant prices)

billion % GDP

700,7%

Most of the CAP budget is now spent on decoupled payments and direct aids, while market and export support (that used to constitute the bulk of the CAP expenditure) captured only 9% of the CAP budget in the period 2007-2009. Support under rural development has also steadily increased, representing 19% of the total CAP budget in 2007-2009.

Whereas the CAP used to represent a very significant proportion of EU budget expenditure in its early years of existence, its share of the total EU budget has dramatically fallen in line with the growth of EU activities in other policy areas, stricter budgetary discipline and a series of reforms.

The CAP currently absorbs around 41% of the EU budget (as compared to over 60% in 1989). Whereas 0.5% of the EU GDP was spent in the beginning of the 2000s on supporting EU farmers and rural areas, that figure stands at 0.45% in 2009 and is expected to fall further by 2013.

2. SITUATION FOR EU AGRICULTURE AND RURAL AREAS

2.1. Role of agriculture in the economy and in the environment

2.1.1. Role of agriculture and food industry in the economy

The combined agricultural and food sector accounted for 16.8 mio jobs (7.6% of total employment) and for 3.5% of total gross value added (GVA) in the EU-27 in 2009 (most of the food sector activity depends upon the production of the primary sector).

There are, however, significant variations across Member States. The agri-food sector is relatively more important in the EU-12, in particular for employment in the primary

sector in rural areas. -

The primary sector

With 12.1 mio persons employed in 2009 in the EU-27, the primary sector (agriculture, hunting and forestry) represents 5.4% of the total employment for the EU-27, ranging from 1% in the United Kingdom to around 28% in Romania, 20% in Bulgaria and 13%

in Poland.

value-added. In the period 2001-2009, the number of jobs decreased by 2.8 mio (or -2.3% per year), with the highest rates observed in Lithuania (-7% per year), Poland and Romania (both -6%). The value added decreased by 20 billion between 2000 and 2009. The relative volume increase during the period 2000-2009 was +0. 7% per year, ranging from -4.6% in Denmark to +12% in Slovakia.

Graph 2 Contribution of the agri-food and forest sectors to the economy: share in total GVA, 2008 (*)

% TOTAL GVA

Z52

CD K

D E

E EI E

G R

E S

F RI T

C Y

L VL T

L U

H UT

MN L

A T

P L

P T

R OS I

S KF I

S E

U K2 7

E U

E U1

Food IndustryAgricultureWood, pulp and paper industriesForestry

Source: EUROSTAT, Economic Accounts

(*)

-

No data available for BG
-

The data of IE and ES refer to 2006; AT refer to 2007; UK and PL refer to 2005

-The data of wood, pulp and paper industries and forestry in UK are not available.

Graph 3 Importance of the primary sector in the total GVA and employment 2001- 2009.

% TOTAL GVA

% TOTAL EMPL

725

At EU-27 level, agriculture and forestry occupy 47% and 30% of the territory, respectively. These levels differ greatly among Member States, forest being the dominant land cover in Nordic (Estonia, Finland, Sweden) and mountainous (Slovenia, Austria) Member States. At EU-27 level, the share of agricultural area in the territory is proportionally lower in rural areas (40%) than in urban areas (53%) due to the importance of forests in many rural regions. Between 1990 and 2000, urbanization has led to the loss of agricultural land especially in the major centres of population. This shift is partly offset by a conversion of forest and semi-natural land to agriculture.

At Member State level, conversion of forest and semi-natural marginal land to agriculture appears to be taking place in Spain and Greece, while there are clear patterns of land abandonment or withdrawal of farming in marginal areas elsewhere in the EU.

5 Such

trends can be observed in many of the mountainous regions of the EU, and in Hungary, Slovakia, Portugal and Italy, as well as in some parts of Germany, where arable land has been transformed to forest through the process of natural regeneration.

Forests play a major role not only for the environment but also for the economy of some Member States and rural areas. With around 129 mio ha, the forest available for wood supply represents 72% of the total forest area for the EU-27 (this share of productive forest is much lower in Mediterranean Member States).

In 2009 forestry and logging represented only 0.2% of the total GVA at EU-27 level, though the contribution of the forest sector as a whole (i.e. including wood, pulp and paper industries) represented 0.6% of total GVA. It can be quite important at Member State level.

6 This is the case in Finland and Sweden (3.9% and 2.1% of total GVA

respectively) and to a lesser extent in Estonia, Austria, Czech Republic and Slovakia (around 1% of total GVA). However, the GVA share of the forest sector as a whole decreased between 2000 and 2009 in most Member States, especially in Sweden and Finland, whereas this ratio remained stable in the Czech Republic, Estonia, Latvia, Lithuania and Romania, following a shift of production and investments from Western to Central and Eastern Europe. The number of employees of the forestry sector decreased over the period 2000-2009 except in Latvia, Sweden and Finland.

In terms of value added, the largest activity is the manufacture of bread, sugar, confectionary and other food products (36% of the total sectoral value added), followed by beverages and meat processing (17.3% and 15.3% respectively) and by dairy products (around 9%).

A number of EU regions are highly specialised in the food industry in terms of employment with at least 5% of total employment: La Rioja and Navarra in Spain, Bretagne and Pays de la Loire in France, Dél-Alföld and Észak-Alföld in Hungary, Açores in Portugal or Wielkopolskie in Poland.

Whereas the employment on farms decreased significantly over the last few years, the average annual decrease in the food industry was 0.8% over the period 2000-2009. Employment in the food industry even grew in some Member States (Greece, Spain and Poland) with annual increase over 5% in several regions.

2.1.2. Role of agriculture and forestry for the environment

As highlighted above, in 2006 agriculture and forestry represent together 77% of land cover in the EU-27, ranging from 55% in Malta to 93% in Poland.

10 Agriculture and

forestry therefore continue to have a significant impact on the environment and to play a major role in maintaining natural resources and cultural landscapes as a precondition for other human activities in rural areas. Different types of agricultural practices and land use have an effect on natural resources, notably biodiversity, water and soil, and climate

change. -

Biodiversity

The link between certain types of farming and 'natural values' is widely acknowledged and complex at the same time. In some cases, agriculture is associated with valuable habitats with an high level of biodiversity. It is estimated that high nature value farmland covers more than 20% of the agricultural area in most Member States (even more than 30% in some of them).

11 More generally, 16% of the utilised agricultural area (UAA) in

the EU-27 is located in mountainous areas, where agriculture contributes to maintaining biodiversity.

The implementation of Natura 200014 represents a significant contribution to the

preservation of biodiversity. It is estimated that the designated sites approximately cover 10% of the agricultural area of the EU-27 and more than 15% in six Member States (Bulgaria, Greece, Spain, Portugal, Slovenia, Slovakia).

15 24% of the total forest area

belongs to Natura 2000 sites, this share being higher than 40% in several Member States.

However, a decline in the population of farmland birds, largely attributed to intensive farming, can be observed in many Member States, although the situation seems to go towards a stabilisation at EU level from 1996 onwards..

16 -

Water Quality

Water quality is influenced by several human activities, yet agriculture plays an important role and can have significant impacts for some of its features. Although the concentration of nitrates in surface water has decreased over the last years in most Member States, significant surpluses of nutrients (+83 kg/ha for Nitrogen and +10 kg/ha for Phosphorus at EU-15 level and higher

for example in Belgium, Denmark, Germany,

Luxembourg, Netherlands for both Nitrogen and Phosphorus and Italy, Portugal, United

Kingdom for Phosphorus)17 reveal that farming practices still remain too intensive in

some parts of the EU. The pressure from agriculture on water use is also critical in some regions as the share of irrigated area is higher than 20% of the agricultural area in several Member States.

Forests can contribute to the protection of water: at EU-27 level, 11% of the forests and other wooded land area is managed so as to protect water and soil, this figure reaching 20% or more in four Member States (Belgium, Germany, Poland, Romania).

19 However,

this management does not cover all the EU-27. -

Soil erosion

Soil erosion is increasing in Europe. As precise estimates are not available at EU-level, owing to the lack of comparable data, it is difficult to assess the total area of the EU affected by erosion. The EEA estimated in 1995 that 115 million ha, or 12% of Europe's total land area, were affected by water erosion and that 42 million ha were affected by wind erosion, of which 2% were severely affected.

It is also estimated that water erosion in the Mediterranean region, which is particularly prone to this phenomenon, could result in the loss of 20-40 t/ha of soil after a single cloudburst, and in extreme cases the soil loss could be over 100 t/ha.

Moreover, according to the PESERA model which provides the only Europe-wide estimates of water erosion that are based on a harmonised approach and standard data sets, soil loss by running water can amount to more than 2 tons/ha/year in some Member States, especially in the Mediterranean countries.

22 -

Organic Agriculture

An increasing part of agricultural area is now devoted to organic production, with an estimated 7.6 mio ha in 2008, i.e. 4.3% of UAA in the EU-27. In the period 2000-2008, the average annual rate of growth was 6.7% in the EU-15 and 20.0% in the EU-12. Even if in some Member States the agricultural area under organic farming is still much lower than the EU average, it is close to or higher than 9% of the total UAA in the following five Member States: Austria (15.5%), Sweden (10.9%), Estonia (10.9%), the Czech Republic (9.0%) and Latvia (8.9%).

In 2008, it is estimated that there were about 197 000 holdings involved in organic agriculture in the EU-27, i.e. 1.4% of all EU-27 holdings (0.6% in the EU-12 and 2.9% in the EU-15).

Consumer demand for organic food grows at a fast pace in the largest EU markets, yet the organic sector did not represent more than 2% of total food expenses in the EU-15 in 2007. In the EU-12 organic food consumption stands at lower levels.

23 -

Climate change

With 471 mio tonnes of CO

2 equivalents, agriculture produced 9.6% of the EU emissions

of greenhouse gases in 2008. However, with an average annual decrease of 0.7% between 2000 and 2008 - linked to improved production methods and diminishing cattle numbers - greenhouse gas emissions from agriculture have been decreasing at a quicker pace than those from other sectors of the economy.

2.2. Structural changes

The structure of the agricultural sector shows a wide diversity across Member States/regions and sub-sectors, owing to the national specificities regarding agricultural history, climatic and natural conditions and the institutional framework (notably for the land, labour and capital markets). This diversity, which is reflected in the size, type and socio-economic performance of agricultural holdings, has been further reinforced by the successive enlargements of the EU. Bringing together more than 8 mio farmers, the patterns and drivers of structural change in the EU-12 differ in nature and intensity from those of the EU-15.

Productivity gains largely supported by technological progress (e.g. mechanisation, development in crop and animal genetics) as well as the overall economic pressures have driven a considerable structural adjustment over the last decades. Yet, the CAP has certainly contributed to cushion this long-term process, thus allowing the maintenance of structural diversity in the agricultural sector of the EU and the slowdown of labour outflow from the farm sector.

2.2.1. Agricultural holdings and labour force

In 2007 in the EU-27 there were 13.7 million agricultural holdings (5.6 in the EU-15, more than 8 in the EU-12). The number of agricultural holdings is decreasing at an annual rate of 2.2% both in the EU-15 and in the EU-12. Romania (3.9 million holdings), Poland (2.4 mio) and Italy (1.7 mio) are the Member States with the largest numbers of farms, with Romania alone representing 29% of all holdings in the EU-27. Similarly to the number of holdings, the agricultural labour force fell by around 2.0% per year between 1995 and 2007 in the EU-15. It now stands at 11.7 mio AWU for the EU-27, of which less than 1 mio correspond to non-regular workers.

Graph 4 Evolution of the number of agricultural holdings and of the labour force (AWU) in the EU - 1995-2007

Millions of holdingsMillions of annual working units

1717

2.2.2. Agricultural area

By contrast, the UAA, which amounted to 172 mio ha for the EU-27 in 2007, has remained relatively stable over the last decade, with only a slight decline (-0.3% per year between 1995 and 2007) in the EU-15. However, although the majority of farms are located in the EU-12, more than 70% of the UAA is located in the EU-15.

Graph 5 Evolution of UAA in the EU - 1995-2007

Mio of hectares

200

180

160

140

120

100

199519972000200320052007

EU-15; -0,3%/yearEU-27; -0.04%/yearEU-12; 0,6%/year

Source: Eurostat, Farm Structure Survey, 1995-2007

In terms of activities, the area devoted to arable crops and olive plantations increased over the years while permanent grassland and vineyards decreased, but changes in land use composition were globally limited. In 2007, 68% of the agricultural area of the EU- 27 was used for arable crops, 25% for permanent grassland and 7% for permanent crops, the share of arable crops being significantly higher in the EU-12 than in the EU-15 (76% and 64% respectively).

Graph 6 Development of the average physical farm size in the EU - 1995-2007

average UAA / farm (ha)

20 EU-15; 22

EU-27; 12,6

10 EU-10; 8,6

BG+RO; 3,8

199519972000200320052007

Source: Eurostat, Farm Structure Survey, 1995-2007

The average farm size varies from more than 50 ha in five Member States (Czech Republic, Denmark, Luxembourg, the United Kingdom and France) to less than 5 ha in four others (Malta, Romania, Cyprus and Greece). Differences are even larger when considering the economic size of the farms (potential GVA), which takes into account the potential economic productivity of the area used.

Graph 7 Average physical and economic farm size in Member States - 2007

(EU-27 = 100)

1 000

900

800

700

Graph 8 Distribution of holdings by size class in hectares of UAA in the EU-15 1995-2007

6 80%

70%

60%

g s

50%

g s

o l di n

i n

o3 o l d

40%

n sf

i l l i o%

m30%

20%

10%

-

0%

< 10 ha10 < 50 ha50 < 100 ha>=100 ha< 10 ha10 < 50 ha50 < 100 ha>=100 ha

19952007

Source: Eurostat, Farm Structure Survey, 1995 and 2007

In 2007, in 17 Member States 50% of the holdings had less than 10 ha and there were still 6.4 mio farms in the EU with a (potential) GVA of less than 1 200 per year, employing 23% of the total labour force but covering only 7% of the UAA.

Graph 9 Importance of holdings of very small size (less than 1 European Size Unit = 1 200 of potential GVA) in the EU 2007

EU-27: 47% of holdings - 23% of labour force - 7% of agricultural area

80%

Semi-subsistence farms (where the farm household consumes more than half of the farm production) still exist all over the EU (45% of the EU-27 holdings) but represent a critical challenge in several EU-12 Member States: in nearly half of them they represent at least 70% of the holdings, half of the total agricultural labour force and 20% of the UAA and of the potential GVA.

Graph 10 Importance of semi-subsistence farms (with households consuming more than half of their production) in the EU-12 - 2007

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

SKHUROLVBGSILTEECYPLMTCZ

HoldingsLabour forceUtilised agricultural areaPotential Gross Value Added

Source: Eurostat, Farm Structure Survey, 2007

2.2.4. Distribution of production factors

The distribution of land and labour input across farms reflects the size structure: in 2007 around 77% of the agricultural area was concentrated in 11% of farms with a size of 20 ha or more. Furthermore, the structural adjustment of the area and the labour force occurs at a very slow pace as the area farmed by the largest farms (with 100 ha or more) increased only by 1.3% per year in the EU-15 between 1995 and 2007.

1.5%

1.3%

1.0%

0.5%

0.0%

-0.2%-0.2%

-0.5%-0.4%

-0.6%

-0.7%

-1.0%

-1.1%

-1.5%

-2.0%-1.9%

-2.0%

-2.1%-2.1%

-2.3%

-2.5%-2.3%

-2.7%

-3.0%

<22 - <55 - <1010 - <2020 - <3030 -<5050 - <100=>100

EU-15 (without DE) 1995-2007EU-27 2003-2007

Source: Eurostat, Farm Structure Survey, 1995-2007

2.2.5. Labour force

With more than 80% of the labour force coming from the farm holders' family, EU agriculture is still largely based on family farms. Workers employed regularly make up 12% of the labour force. However, a very large share of the workers is not occupied full- time in agriculture: around 33% of the family and regular workers in the EU-27 are working less than half time in agriculture and only 37% of them have full time jobs.

Graph 12 Distribution of family and non-family labour force working regularly in agriculture according to the working time in agriculture in the EU - 2007

100%

90%

25%< 50% of a full working

Graph 13 Distribution of holdings and of labour force by class of labour force per holding in the EU 2007

40%

Holdings; 36%

35%

30%

28%

26%

25%

22%

20%

20%19%

16%

15%

10%

10%9%

Labour force; 6%

0.3%

< 0.5 AWU0.5 - < 1 AWU1 - < 2 AWU2 - < 3 AWU3 - < 10 AWU>= 10 AWU

Source: Eurostat, Farm Structure Survey, 2007

On the other hand, due to the increase in labour productivity, the average labour force requirement per farm remains rather stable at around 1 AWU despite the increase of the average farm size, and more labour intensive activities such as horticulture and dairying which exhibited increasing employment per farm in the last years.

In 2007, only 15% of the managers of family farms of the EU-27 had a working time in agriculture equivalent to a full-time job - this proportion being higher when looking at the EU-15 (25%) and lower when looking at the EU-12 (9%) - although 63 % of family farm managers continue to have no other gainful activity than agriculture.

Graph 14 Distribution of managers of family farms according to the existence of gainful activities other than agriculture in the EU - 2007

100%

Graph 15 Distribution of holdings with another gainful activity than agriculture by economic farm size (ESU) in the EU-27 2007

30%

25%

20%

15%

10%

Less than 1From 1 to lessFrom 2 to lessFrom 4 to lessFrom 8 to lessFrom 16 toFrom 40 toFrom 100 to

than 2than 4than 8than 16less than 40less than 100less than 250

HoldingsUtilised agricultural areaPotential Gross Value Added

Source: Eurostat, Farm Structure Survey, 2007

Most of the production of family farms is therefore produced by managers with no other gainful activity than agriculture. Those family farm managers who do have another gainful activity tend to farm smaller farms with lower economic potential.

The presence of other gainful activities on family farms is more frequent when looking not only at the farmer but also at his/her spouse (52% of whom had other gainful activities in 2007 in the EU-27) and has grown from 32% to 49% between 1995 and 2007 in the EU-15. This increase reflects the diversification of income sources on European farms and probably also the overall trend observed in the rest of society towards a greater participation of women in the labour market.

The agricultural labour force is relatively aged, with more than 55% of all managers older than 55 years. This is particularly pronounced in Bulgaria and Romania but also in the old Member States where the number of "young" managers has diminished over time. However, younger managers tend to perform better than the EU average, with 46% more area and 57% more economic potential for 21% more labour force.

180

< 45 years old

160157

146

140

130

121121

120

Average EU farm = 100

100

80> 55 years old74

6267

Economic sizeUtilisedLabour forceESU / AWUha / AWU

(ESU)agricultural area(AWU)

(ha)

Source: Eurostat, Farm Structure Survey, 2007

Women represent 42% of all agricultural workers, their percentage being higher in the EU-12 (47%) compared to the EU-15 (38%). The share of female farm holders increased from 26.8% to 28.7% of total farm holders in the EU-27 between 2003 and 2007 (also this percentage is higher in the EU-12 compared to the EU-15).

Graph 17 Evolution of female farm holders (as % of total farm holders) in the EU - 2003-2007

35%

EU-12

30%

EU-27

EU-15

25%

20%

200320052007

Source: Eurostat, Farm Structure Survey, 2003-2007

2.3. Agriculture and food trade

The EU holds a significant weight in international agriculture and food trade28. With

average annual imports of 83 billion in 2008-2010, the EU is by far the largest importer, although its share in world imports has decreased from 21% in 2007 to 19% in 2009. Exports have reached an annual average of about 82 billion in 2008-2010, placing the EU at a par with the USA with a share of around 18% of world exports.

Graph 18 Structure of EU agriculture and food trade

Source: COMEXT

100,0001.5

EU agri-food trade has experienced a sustained growth in the last ten years, with average annual growth rates at 3.7% for imports and 5.1% for exports. Growth was particularly dynamic in the period 2005-2008.

In 2009 trade was profoundly affected by the economic crisis. EU imports contracted faster than exports so that the EU trade deficit decreased substantially from a record 7 billion in 2008 to just 2.5 billion in 2009.

The EU's trade balance continued to improve in 2010 to the extent that it switched from being a net importer with a trade deficit of 2.5 billion in 2009 to a net exporter, for the first time since 2006, with an agricultural trade surplus of over 6 billion. The surplus is largely due to growth in the value of exports after the contraction of trade in 2009 linked to economic crisis and the drop in commodity prices.

Graph 19 EU-27 main agriculture and food exports, average 2008-2010 ( billion)

Infant food

Spirits prep.1,313

1,657 Animal feed prep

1,303

Cigarettes Solid milk and cream

1,7161,283 Total Agri

Cheese Sparkling wine Exports:

1,957 1,224 82,162

Frozen PigmeatChocolate

1,970 Selected 1,143

products

in the pie:

Beer Wine 32,914

2,064 4,593 (40.1%)

Whiskies

2,686

Wheat

Food prep. 3,445

3,221

Odoriferous substances

3,339

(2.8 billion). Together, these top five products account for one-fourth of the overall value of EU imports in 2008-2010, the most important ones being shown in graph 20.

Graph 20 EU-27 main agriculture and food imports, average 2008-2010 ( billion)

TobaccoFood prep.Raw sugarMaizeFresh grapes

1,5461,0401,0221,003996

Poultry meat

Wine862Palm oil

1,849847

Crude palm oilBovine meat

2,195841

BananasTotal Agri

2,846

Soybean mealImports:

6,40283,282

Cocoa beansSelected

2,989products

in the pie:

34,143

Soya beansCoffee(41%)

4,4855,220

Source: COMEXT average 2008-2010 in million Euros

The USA remains a key partner, both on the import and export sides. Despite decreases since 2006, the USA still absorbed 15% of EU exports in 2010. Notwithstanding a steep fall of 21% in 2009, Russia is still the second most important market for the EU with a share of over 10% in 2010. On the import side, Brazil is the most important trade partner with a share of 14% of EU imports in 2010. The EU remains the biggest importer of agricultural products from developing countries, importing 59 billion worth of goods in 2008-2010. This is far ahead of the US, Japan, Canada, Australia and New Zealand put together.

Graph 21 Development of agricultural factor income in the EU-12 and the EU-15, 2000-2010 (billion )

EU-12 EU-15

30140

25130

120

110 Real (2005 prices)

Nominal

100

20002001200220032004200520062007200820092010

Source: Eurostat -- Economic Accounts for Agriculture -- Elaboration DG AGRI

Over the last decade, agricultural income per annual work unit in the EU-27 increased in both nominal and real terms (Graph 21). On average, however, the increase in real terms has been quite modest (1.5 % per year) and the development of real income remains volatile. After an increase of 15 % between 2000 and 2004, agricultural income dropped by 10 % in 2005 as a consequence of a strong contraction in the larger EU-15 Member States. Over 2006 and 2007, income increased by a total of 15 %, due to soaring commodity prices, before dropping sharply after 2008 with the end of the price bubble and the beginning of the economic recession. This brought down real income in the EU- 27 close to the level of the year 2000. Early estimates indicate a 12.2% increase in real agricultural income per annual work unit for 2010 (still slightly below 2008 levels), as output prices recovered after the very low levels of the previous year.

Graph 22 Development of agricultural factor income per annual work unit (AWU)

in the EU-27 (2000=100)

160

150

Given that the value added generated by the agricultural sector has been decreasing steadily in the EU, the evolution of the agricultural income per annual working unit (AWU) depends heavily on the increase of labour productivity made possible by the sharp decline in the number of farmers. The strong gains in factor productivity of the farm sector that allowed an important expansion of the volume of production outpaced the slow development of an inelastic demand for agricultural and food products, generating a regular and steep decline in real prices until the price increase of 2007/2008. The gradual shift from market price support to direct income support started in 1993 allowed to support and stabilise the agricultural income due to higher income transfer efficiency. Direct payments accounted for 27% of agricultural income in the period 2006- 2008 at the EU-27 level, total subsidies amounted to close to 40% of agricultural income.

Graph 23 Entrepreneurial income in agriculture/self-employed AWU as % of wages

in the total economy/AWU

100%

90%

80%

EU-15

70%

60%

EU-27

50%

40%

30%

EU-12

20%

10%

200020012002200320042005200620072008

Source: Eurostat Economic Accounts for Agriculture Elaboration DG AGRI

Yet the income per worker in the agricultural sector is significantly below the income in the rest of the economy. In 2008 the average agricultural income in the EU-27 was equal to 58 % of the average wage in the total economy. In the EU-15 the income gap has widened over time. The ratio decreased from 70 % in the year 2000 to 60 % in 2008. In the EU-12 the gap is even more pronounced but has declined over time. The ratio increased from less than 20 % in 2000 to more than 30 % in 2008.

Though economic activity tends to concentrate in urban areas, rural areas generated 49%

of the total GVA and provided 56% of the overall employment in 2008, these shares being higher in the EU-12.

30 However, compared to predominantly urban areas, rural

areas tend to lag behind for a number of socio-economic indicators: income per capita, employment rate, human capital, activity of women and young people, development of the tertiary sector as well as other aspects linked to the quality of life.

Graph 24 Importance of rural areas (% territory, population, GVA and employment). 2008 (*)

100%

9.2

90%

80%40.9

70%34.351.143.9

60%

50%

40%35.5

34.5

30%32.0

56.6

20%

10%23.6

16.921.6

% Territory% Population% GVA% Employment

Predominantly RuralIntermediate RegionsPredominantly Urban

Source: Eurostat, Regional Accounts (*) New definition of rural areas (see Annex A.3)

2.5.2. Population density and age structure

Most rural areas are characterised by low population densities: at EU-27 level, population density varies from 48 inhabitants per km² in predominantly rural areas to 516 inhabi- tants per km² in predominantly urban areas. This range is even larger when comparing

regions: it ranges from 2 inhabitants per km² in French "Guyane" and Finnish "Lappi"

to 21024 inhabitants per km² in Paris. In most Member States, population density in rural areas did not evolve significantly between 2000 and 2008, whereas it was quite dynamic in the urban areas of some Member States.

Graph 25 Population Density (inhabitants per km2) and Age Structure by type of

region. 2008 (*)

60080

70 66 67 68

500

40050

30040

200

20 18 17

16 16

10010

0% LESS 15 YEARS OLD % 15 TO 64 YEARS OLD% MORE THAN 65

EU-27 EU-15 EU-12 YEARS OLD

Predominantly RuralIntermediate RegionsPredominantly Urban Predominantly RuralIntermediate RegionsPredominantly Urban

Source: Eurostat, Regional Accounts (*) New definition of rural areas (see Annex A.3)

2.5.3. Socio-economic aspects

Although many rural areas are now driven by urban economies as in-migration has occurred around metropolitan centres, the primary sector still represents 9% of the employment and 3% of the value added in the rural areas of the EU-27. This situation is even more marked in the EU-12, with the corresponding shares standing at 19% and 6% respectively, and especially in the EU-12: for 27% of them the contribution of the primary sector to total GVA is higher than 10%, and for almost 40% of them the share in employment of the primary sector is higher than 20%.

Nevertheless, most of the economic activity in rural areas depends on the service sector. This trend is likely to increase in the coming years as, between 2002 and 2008, the relative importance of the primary sector in the economy of the rural areas in the EU-27 decreased by 1.9 percentage points in terms of employment and by 0.8 percentage points

in terms of value added.

100%100%

This is a consequence of the diversification of the economy of rural areas to sectors other than agriculture. The average annual increases of both employment and added value in the non-agricultural sector for all the rural regions stood at around 1.3% (2002-2008) and 2.6% (2004-2008) per year respectively. As a result, in 2008, 86% of employment and 96% of value added in predominantly rural areas of the EU-27 came from the non- agricultural sectors. Among these, tourism is one of the key opportunities in terms of potential growth for rural areas. With nearly three quarters of bed places in the EU-27 located in rural areas, this sector already plays a major role in the rural economy.

Graph 27 GDP in parity purchasing standard (PPS) per capita by type of region 2008. EU-27 average: 100. (*)

140

124 127

120 114

100 99 99

EU-27 EU-15 EU-12

Predominantly RuralIntermediate RegionsPredominantly Urban

Source: Eurostat, Regional Accounts (*) New definition of rural areas (see Annex A.3)

GDP per capita is higher in urban than in rural areas. At EU-27 level, the income per inhabitant in rural areas represents 83% of the EU average, ranging from 97% in the EU- 15 to 48% in the EU-12. The gap between predominantly rural and predominantly urban areas is accentuated in the new Member States. However, while the relative income per inhabitant in rural areas of the EU remained globally unchanged between 2001 and 2008, it has improved in rural areas of the new Member States (predominantly rural areas of the EU-12 moved from 35% to 43% of the EU average, while intermediate regions moved from 43% to 54%). Even though rural regions in the EU-12 are growing faster than the EU-27 average, they are growing more slowly than urban areas of the EU-12;

consequently, the rural-urban gap in the EU-12 has increased over the last years.

Source: Eurostat, Regional Accounts and Labour Force Survey. Excluding Ireland.

(*) New definition of rural areas (see Annex A.3)

The employment rate in the EU-27, calculated as a share of the population of 15 to 64 years old, is lower in predominantly rural than in other areas (63% in predominantly rural areas against 67% for all areas in 2008). However, while the employment rate in the EU-15 has generally increased at the same pace in rural and urban areas since 2003, it has increased more slowly or even decreased in the rural areas of the EU-12.

The unemployment rate, calculated as a percentage of the active population, is close to 9% for the three types of regions across the EU-27, ranging from 6% in Denmark to 18%

in Spain and Latvia. In the EU-12, unemployment is highest in predominantly rural regions, whereas in the EU-15 the differences between different types of regions are very small. What it is common for all types of regions is that after the general decrease over the period 2005-2008, the unemployment rate has now considerably increased again.

Graph 29 Unemployment rate (%) by type of region (2009) and evolution (2005- 2009) (*)

10.0

8.9 9.4 9.3

8.7 9.0 8.8 9.0 8.5 10

9.0

8.0

7.0 6.6 9

6.0

5.0 8

4.0

3.0 7

2.0

1.0

-

20052006200720082009

Predominantly RuralIntermediate RegionsPredominantly UrbanPredominantly RuralIntermediate RegionsPredominantly Urban

EU27EU15EU12

Source: Eurostat, Regional Accounts and Labour Force Survey (*) New definition of rural areas (see Annex A.3)

Human potential is a key factor for the development of rural areas. In 2009, 74% of adults in the EU-27 reached a medium or high education level.

There are however large variations among Member States (from 28% to 91%), with notably a higher level of education in the new Member States than in the EU-15. In most countries the level of education is lower in rural areas than in urban areas.

Life-long learning is a good instrument to improve the skills of workers and favours economic development. It is already largely applied in Denmark and Finland where more than 20% of adults participated in training in 2009. However, it is less used and progressing more slowly in rural areas, particularly in the EU-12.

2.5.4. Quality of life

Rural areas also tend to lag behind in other quality of life indicators. The net migration rate is a good measure of the global attractiveness of an area. It is lower in predominantly rural areas than in predominantly urban areas (+2 and +4.0 respectively for the EU- 27 in 2007) and even negative for the predominantly rural areas of the EU-12.

34 This

pattern varies among Member States and other factors, such as more favourable climatic conditions, can play a major role in the decision of people to move to another place.

Graph 31 Net Migration by type of region in . 2007 (*)

6.0

5.0 4.8 4.7

4.0 4.0

4.0 3.8 3.8

3.0

1.9

2.0 1.7

1.0

-1.3

EU-27 EU-15 EU-12

-1.0

-2.0

Predominantly RuralIntermediate RegionsPredominantly Urban

13.4% and 20.8% respectively in predominantly rural and predominantly urban regions

of the EU-27.

3. MEDIUM-TERM PERSPECTIVES FOR EU AGRICULTURE AND RURAL AREAS

Future economic viability of EU agriculture depends heavily on future developments in EU and world markets. This section provides an overview of the most recent medium- term prospects for agricultural markets and their impact on agricultural income.

The outlook for EU agricultural markets remains subject to a number of uncertainties regarding future market developments as well as the macroeconomic and policy settings. They concern in particular the drivers of demand and supply of agricultural commodities, the linkage between agriculture and energy markets and the path of economic recovery. Climate change will continue to influence the market outlook, with unpredictable weather patterns increasing the likelihood of supply fluctuations. Other factors such as future changes in agricultural and trade policies as well as the outcome of the current Doha Development Round of trade negotiations, bilateral/regional trade discussions and the policies on renewable energy could also have far reaching implications for the future pattern of EU agricultural markets.

The medium-term outlook for EU agriculture depicts a mixed picture with regard to commodity market developments. While the expected demand growth resulting from economic recovery and the biofuel mandates should support production expansion, EU output is likely to remain below its full potential as long as the expected increase in input costs limits the profitability of production. In addition, crop yields are expected to grow at a slow pace, continuing the decline in the rate of growth observed during the previous decade.

An appreciation of the EUR could further weaken the competitiveness of EU exports on world markets, leading to a loss in world market share at a time when global demand is growing at a relatively fast pace.

On the other hand, commodity markets are expected to remain balanced during the outlook period, without the need for market intervention, (only the SMP market will remain sensitive to global supply-demand developments in the short term). Prospects for agricultural income remain positive, displaying a modest growth rate at the EU level, mainly driven by the decline in labour input which is expected to continue.

medium term, supported by numerous factors such as the growth in global food demand, the development of the biofuel sector and the long-term decline in food crop productivity growth.

3.1. EU agricultural markets

3.1.1. Arable crops

The medium-term prospects for the EU cereal markets depict a relatively positive picture with tight market conditions, low stock levels and prices remaining above long term averages. Supply growth is expected to result mostly from very moderate yield growth (just above 0.5% per year on average) with some reallocation between crops in a stable cereal area. The domestic use of cereals in the EU is expected to increase, most notably due to the growth in the emerging bioethanol and biomass industry in the wake of the initiatives taken by Member States in the framework of the 2008 Renewable Energy Directive (RED).

The medium-term prospects for the EU oilseed markets depict a positive picture with strong demand and high oilseed oil prices. Supply growth is expected to result mostly from moderate yield growth and to a lesser extent from a slightly expanding oilseed area, with some reallocation between crops. The expected increase in domestic use of oilseeds in the EU would also be driven by the growth in the emerging biodiesel and biomass industry following the initiatives taken by Member States in the framework of the RED. The trade balance is not expected to improve over the medium term as additional imports are required to meet the biofuel targets.

3.1.2. Meat

Total meat production is expected to recover in the near term from the decline suffered in the wake of the economic crisis, but longer term growth prospects remain modest at an annual rate of 0.3% on average.

Aggregate meat production is expected to reach 44.4 mio t in 2020, exceeding the 2009 level by 4%. The situation differs between ruminants and non-ruminants, as beef/veal and sheep/goat meat production would drop by 7% and 11%, respectively, while pig and poultry meat production would expand by 7% each. The potential growth in non- ruminant meat production would remain constrained by the expected increase in production costs.

3.1.3. Milk and dairy products

Milk production is expected to return to an increasing path, driven by a fairly optimistic demand outlook based on improved macroeconomic prospects. The rate of increase will be rather moderate, with EU-27 milk production in 2020 projected to exceed the 2009 level by less than 4%. Milk deliveries would increase at a slightly higher rate (of almost 5%), the difference being due to the gradually declining on-farm consumption in the EU-12. The abolition of quotas is expected to lead to a very modest reaction of EU-27 milk deliveries at the end of the quota regime in 2015.

The outlook appears favourable for higher value added dairy commodities, driven by growing demand for cheese and fresh dairy products. Production of fresh dairy products (including drinking milk, cream, yoghurts, etc.) is projected to increase by about 8% (from 2009 to 2020) and cheese output is depicted to grow by about 10%. Prospects for cheese exports are favourable despite the strengthening EUR, with the EU maintaining a steady share of more than 30% in global cheese exports.

Whole milk powder production is expected to fall only marginally below its 2009 level and EU exports are projected to remain firm over the medium term, driven by strong global demand. Nevertheless, the EU is expected to lose market share of global exports, declining to 21% in 2020 (from 24% in 2009).

The outlook depicts continued market stability for butter, conditional on firm domestic demand around the level of 2 million t. The projected increase in production for 2015 (year of quota abolition) would lead to a temporary increase in EU exports.

Skimmed milk powder (SMP) export perspectives are less favourable, given the assumed strengthening of the EUR and strong supply from other exporters. As EU demand prospects are also fairly weak, the outlook for price growth is rather constrained over most of the projection period. However, supply pressure on the market would be mitigated by reduced EU production.

All in all, and despite the relatively favourable outlook and apparent short- and long term market stability for SMP, the nearer-term prospects remain sensitive to global supply- demand developments and the market's ability to absorb the release of intervention stocks.

At the level of individual Member States37 income projections differ depending on

various elements, namely composition of agricultural production, average cost structure and assumed gains in labour productivity.

Graph 32 Trends in income by Member State*

Trend 2020/2013 in FNVA/AWU

w ith fixed structures and gains in labour productivity as in the recent years

(nominal terms)

0%10%20%30%40%50%60%

Belgium23%

Bulgaria53%

Cyprus55%

Czech Republic40%

Denmark16%

Germany17%

Greece19%

Spain18%

Estonia44%

France17%

Hungary37%

Ireland14%

Italy23%

Lithuania45%

Luxembourg19%

Latvia41%

Malta (*)50%

Netherlands (*)31%

Austria17%

Poland50%

vegetables and flowers in Cyprus and Malta, lower costs and high gains in labour productivity.

Lower levels of improvements are expected in the EU-15 countries. The highest increase (+31%) would be in the Netherlands due to the high share of vegetables and flowers in output. The lowest income increases are observed for Finland, Sweden, Ireland and the United Kingdom, which can be explained by the higher share of products with unfavourable price trends, higher costs, and lower gains in labour productivity.

Farms specialised in horticulture are expected to register an outstanding performance, with an increase in income by 40% between 2013 and 2020 due to the assumed good evolution in prices for vegetables and flowers. Field crop farms

38 would also improve

their economic performance but at a relatively lower rate (+18%) because of a limited increase in the production of cereals (+2%).

The income trend would also be positive for farms specialised in the production of wine, other permanent crops and milk, but to a lesser extent. They are likely to benefit from higher prices of their main outputs (i.e. quality wine, fruits, and milk products) as well as improved yields (i.e. dairy farms). On the other hand, pig and poultry farms would register a negative trend (-4%), because prices for pig meat and poultry meat are projected to stay stable and even decrease for eggs, whereas costs would increase.

Graph 33 Trend in income by type of farming

Trend 2020/2013 in FNVA/AWU

w ith fixed structures and gains in labour productivity as in the recent years (nominal terms)

-10%-5%0%5%10%15%20%25%30%35%40%45%

(1) Fieldcrops18%

(2) Horticulture40%

(3) Wine25%

*

Income expressed in Farm net value added (FNVA) per Agricultural working unit (AWU).

The economic size of farms does not seem to influence income trends, although projections are slightly more positive for the smallest farms

39.

This is because almost

90% of the smallest farms are located in the EU-12, where gains in labour productivity are higher. The smallest farms are located in Romania (54%), Poland (20%) and Bulgaria (7%), countries with the highest expected income improvements.

The majority of the biggest farms are located in France (27%), Germany (15%) and Italy (13%), countries where expected income improvements are not very high. However, most of the biggest farms are wine farms. That should explain the slightly higher income increase compared to the intermediate economic size classes (see graph 56 in Annex 4).

4. CONCLUSIONS

Over the last decades, EU agriculture and the agri-food sector as a whole has shown great resilience and adaptability to a rapidly changing technological, economic and social environment. Structural adjustment took place within a supportive policy setting which smoothened the pace of this long-term process. Whereas the agri-food sector still represents an important component of the EU economy, the potential of agriculture for the provision of public goods in the field of the environment is increasingly recognised. Farming has contributed over the centuries to creating and maintaining a variety of valuable semi-natural habitats and continues to shape the majority of the EU's landscapes today.

The present analysis displays a very large variety of farm structures in the EU-27. Two broad types of situations emerge: out of the 13.7 million farm holdings, 47% are of very small size and account for 23% of the labour force and 7% of the agricultural area. On the other side of the spectrum, 11% of the farms with a size of above 20 ha account for 77% of the agricultural area. This is a situation that is likely to persist in the medium term given the current trends of structural adjustment.

The agricultural sector continues to lag behind the rest of the economy in terms of income. The gap between agricultural and non-agricultural income has widened in the EU-15 in the last decade (from about 70% to 60% of average wages). In the EU-12, the gap has narrowed, mainly due to the introduction of the CAP, yet it still stands at about 30% of average wages. The year 2009 has been particularly unfavourable for agricultural income, bringing levels back to 2000 in the EU-27 (and 1994 for the EU-15) due to unfavourable input and output price levels and the economic crisis. The increase in agricultural income recorded in 2010 in the EU-15 does not reverse the long term declining trend in real sector income, which fell by 18% since 2000. The agricultural income in the EU-12 remains considerably lower than in the EU-15 but is increasing.

The EU agricultural and food sector, which displays a wide diversity across Member States and sectors, has mainly developed in rural areas. Rural areas represent some 91%

of the EU territory and 56% of the total EU population. These areas tend to lag behind the predominantly urban areas as regards a number of socio-economic indicators.

Although the development of rural areas is likely to become increasingly driven by factors outside agriculture, they face particular challenges as regards economic and social sustainability. This is particularly true for areas which are remote, depopulated or strongly dependent on farming. However, these areas have significant potential to meet the growing demand for food and for the provision of rural amenities. They serve as a reservoir of natural resources and highly valued landscapes, which make them attractive for tourism and as a place to live and work. The presence of a competitive and dynamic agri-food supply chain will remain a precondition to realising these potentials of rural areas in the EU.

ANNEXES

A.1 Economic information on the agricultural sector

Table 1 Importance of Agriculture in total GVA

2007200820092010

CTRYGVA in

agriculture% of Total GVAGVA in

agriculture% of Total GVA

BE2 638.00 0.88 2 074.00 0.67 2 047.00 0.67 2 205.00 0.70

BG1 547.50 5.98 2 040.20 6.91 1 450.40 4.83 1 631.30 5.26

CZ2 819.60 2.46 3 386.90 2.54 2 794.10 2.27 n.a.n.a.

DK2 267.70 1.18 1 946.80 0.98 1 753.90 0.92 2 522.50 1.25

DE20 940.00 0.96 19 960.00 0.90 17 310.00 0.81 19 480.00 0.87

EE439.40 3.17 396.10 2.77 309.30 2.58 441.40 3.48

IE2 380.70 1.43 2 083.70 1.30 1 421.20 0.98 1 365.50 0.98

GR6 877.40 3.44 6 574.50 3.14 6 620.00 3.14 6 626.60 3.26

ES27 201.00 2.88 26 494.00 2.66 25 955.00 2.65 26 062.00 2.68

FR37 476.00 2.21 35 738.00 2.04 30 010.50 1.74 n.a.n.a.

IT28 480.60 2.06 28 517.10 2.02 25 885.60 1.89 26 369.50 1.90

CY309.00 2.18 346.10 2.26 346.10 2.27 364.80 2.32

LV667.90 3.58 629.40 3.05 550.40 3.29 666.10 4.14

LT1 009.00 3.94 1 075.50 3.72 802.20 3.36 859.20 3.51

LU134.90 0.40 127.90 0.36 103.30 0.30 113.60 0.30

HU3 425.30 3.97 3 856.70 4.25 2 605.00 3.31 2 895.30 3.49

MT112.90 2.39 94.70 1.83 103.90 2.05 102.80 1.89

NL10 548.00 2.08 9 566.00 1.81 8 798.00 1.73 10 307.00 1.95

AT4 332.50 1.76 4 386.60 1.71 3 794.10 1.53 3 961.00 1.54

PL11 775.00 4.33 11 872.70 3.73 10 054.80 3.64 11 035.90 3.54

PT3 583.30 2.45 3 595.20 2.41 3 625.90 2.44 3 678.10 2.43

RO7 193.40 6.51 9 266.90 7.44 7 484.80 7.09 7 295.10 6.74

SI760.70 2.51 823.00 2.51 756.00 2.45 757.40 2.41

SK2 007.50 4.06 2 466.30 4.21 2 256.30 3.94 2 313.70 3.84

FI4 723.00 3.01 4 641.00 2.87 4 033.00 2.71 4 531.00 2.89

SE5 078.50 1.71 5 182.50 1.77 4 486.70 1.77 5 661.90 1.88

UK12 607.80 0.69 12 755.60 0.78 10 139.90 0.72 11 207.20 0.74

EU27 201 324.30 1.82 199 903.50 1.79 175 492.80 1.66 190 019.40 1.73

EU15 169 257.10 1.65 163 649.10 1.59 145 979.60 1.49 158 526.50 1.56

A.2 Structural information (*)

Graph 34 Distribution of farms in the EU between Member States, 2007

100%

United KingdomOthers (<1%)

90%

2.2%5.9%

Romania

BG+RO

28.7%Bulgaria

3.6%80%

Germany

2.7%70%

Greece

6.3%60%

EU-10

50%

Spain

7.6%40%

France30%

Poland3.8%

17.5%

Lithuania20%EU-15

Hungary1.7%

4.6%

Austria10%

ItalyPortugal1.2%

12.3%2.0%

Graph 35 Distribution of agricultural workforce in the EU between Member States, 2007

Romania100%

18.9%

United Kingdom

2.9% Others (<1%)90%

BG+RO

5.2%80%

Bulgaria

Poland4.2%70%

19.4%Czech Republic

1.2%EU-10

60%

Germany

5.2%

50%

Ireland

1.3%

Greece40%

4.9%

30%

Italy

EU-15

11.1%

Spain20%

Austria8.3%

1.4%

PortugalFrance10%

Graph 37 Annual rate of change (%) in the number of farms in the EU-15 (*)

UKELITSEIENLATESDEFRLUFIBEDKPT

0.5

0.2

-0.5

-1.0

-1.5

-1.4

-1.6

-2.0-1.8

-2.5-2.3

-2.4

-2.6

-3.0-2.8-2.8

-3.0

-3.5-3.2-3.2

-3.3

-4.0

-4.1

-4.5

Graph 38 Annual rate of change (%) in the agricultural workforce in the EU-15 (*)

ESGRATNLUKBEITSEFRDKDELUIEFIPT

-1.0

-1.0-1.0

-1.1

-2.0-1.8

-1.9

-2.1

-2.2

-2.4

-2.6

-3.0

-3.0-3.0-3.0

-3.0

-4.0

-5.0-4.8

-5.2

-6.0

Graph 40 Share of non-used agricultural area in the total area of the farms in EU 2007

25%

20%

15%

16.3%

14.4%14.4%

14.4%

10%

10.4%

5.5%5.7%6.4%

5.2%

2.7%

EU-27EU-15EU-12EU-10BG+RO

Unutilised land or other areasWooded land

Graph 41 Total variation of area by type of utilisation (as % of total area of the farm) in EU - 1995-2007

1995-20072003-2007

EU-15EU-27EU-25EU-15EU-10BG+ROEU-12

0%5%

-1%

-2.4%

-2%

-0.6%

-3%1%

-4%-1.9%

-1%

-5%

-2%

-3%

-6%

Utilised agricultural areaWooded landUnutilised land or other areas

Graph 43 Distribution of the factors of production by farm size in area in EU-27 2007

50%

45%

40%

35%

30%

25%

20%

15%

10%

Less than 2From 2 to lessFrom 5 to lessFrom 10 toFrom 20 toFrom 30 toFrom 50 to100 or more

than 5than 10less than 20less than 30less than 50less than 100

HoldingsLabour forceUtilised Agricultural AreaPotential Gross Value Added

Graph 44 Distribution of the factors of production by type of farm in EU-27 2007

35%

30%

25%

20%

15%

10%

Specialist fieldSpecialistSpecialistSpecialistSpecialistMixed cropping Mixed livestockMixed crops-

cropshorticulturepermanentgrazinggranivoresholdingslivestock

cropslivestock

HoldingsUtilised agricultural area (ha)Economic size (ESU)Labour force (AWU)

Graph 46 Distribution of the (family and non-family) labour force working regularly in agriculture according to working time in agriculture in the EU 2007

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

ZLITTLI572

B E

D K

CL U

NIEF

U K

D E

AE S

E E

S E

S KI T

MGT

BPPC Y

L VR

GH USL TO

R-

2- 1

UUU

EEE

100% of a full working time50% - < 100% of a full working time< 50% of a full working time

Graph 47 Development of the distributions of holdings and of labour force by category of level of labour force per holding in EU-15 2000-2007

50%

45%

40%

Labour force 2000

35%

30%Labour force 2007

Holdings 2000

25%

Holdings 2007

20%

15%

10%

< 0.5 AWU0.5 - < 1 AWU1 - < 2 AWU2 - < 3 AWU3 - < 10 AWU>= 10 AWU

Graph 49 Average farm of managers younger than 45 years in EU-27 2007 (All farms of EU-27 = 100)

all EU farms = 100

180

Economic size (ESU)

157Utilised agricultural area

160(ha) 146

140ESU / AWU

Labour force (AWU)130

ha / AWU

121121

120

100

Graph 50 Distribution of holdings with non-agricultural gainful activities by category of economic farm size and share of holdings with non- agricultural gainful activities within the categories of economic farm size

in EU-27 2007

30%29%

25%

22%

20%

16%

15%14%15%

13%14%

13%

11%

9%9%10%

10%8%

6%6%

A.3 Information on rural areas

A revised urban-rural typology

The new typology builds on a simple two-step approach to identify population in urban areas:

-

a population density threshold (300 inhabitants per km2) applied to grid cells of 1 km2;
-

a minimum size threshold (5 000 inhabitants) applied to grouped grid cells above the density threshold

The population living in rural areas is the population living outside the urban areas identified through the method described above.

To determine the population size, the grid cells are grouped based on contiguity (including the diagonals); see below. If the central square is above the density threshold, it will be grouped with each of the other surrounding eight cells that exceed the density threshold.

The approach based on the 1 km2 population grid classifies 68% of the EU-27 population as living in urban areas and 32% as living in rural areas. This share is 5 percentage points higher than under the original OECD definition. However, the share of population in rural LAU2s (defined as MAU2s with at least 50% of the residents living in rural areas) is 28%, i.e. very similar to that of the OECD. This classification will be further refined in the future.

2. Originele weergave

Open document als PDF

3. Meer informatie

		12 okt '11	COM(2011)625 - Voorschriften voor rechtstreekse betalingen aan landbouwers in het kader van de steunregelingen van het gemeenschappelijk landbouwbeleid
		12 okt '11	COM(2011)626 - Gemeenschappelijke marktordening voor landbouwproducten ("Integrale-GMO-verordening")
		12 okt '11	COM(2011)627 - Steun voor plattelandsontwikkeling uit het Europees Landbouwfonds voor Plattelandsontwikkeling (ELFPO)
		12 okt '11	COM(2011)628 - Financiering, het beheer en de monitoring van het gemeenschappelijk landbouwbeleid
		12 okt '11	COM(2011)629 - Maatregelen inzake de vaststelling van steun en restituties in het kader van de gemeenschappelijke marktordening voor landbouwproducten
		12 okt '11	COM(2011)630 - Wijziging van Verordening 73/2009 wat de toepassing van de rechtstreekse betalingen aan landbouwers voor 2013 betreft
		12 okt '11	COM(2011)631 - Wijziging van Verordening 1234/2007 wat de regeling op de bedrijfstoeslagregeling en de steun voor wijnbouwers betreft
		22 sep '06	COM(2006)231 - Thematische strategie voor bodembescherming [SEC(2006)620] [SEC(2006)1165]