EU farm economics 2012ec.europa.eu/agriculture/rica/pdf/EU_farm_economics_2012.pdf(MS), i.e. at least 90 % of the total Standard Gross Margin1 (SGM) and 90 % of Utilised Agricultural

EU farm economics 2012

based on FADN data

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1

EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR AGRICULTURE AND RURAL DEVELOPMENT Directorate L. Economic analysis, perspectives and evaluations L.3. Microeconomic analysis of EU agricultural holdings

Brussels, May 2013

EU FARM ECONOMICS OVERVIEW

FADN 2009

EXECUTIVE SUMMARY

This report provides an overview of key economic developments in the European agricultural

sector based on the latest data available in the Farm Accountancy Data Network (FADN),

which are from 2009. The main finding is that declines in average farm income over the past

two years (2008 and 2009) wiped out virtually all of the gains achieved between 2004 and

2007 in both EU-15 and EU-10. Moreover, higher macroeconomic volatility has reversed the

incipient convergence process between old and new Member States to the point that no

tangible convergence in nominal farm income was observed over the period 2004-2009.

Finally, without the slightly higher amount of public support, as measured by the sum of EU

and national subsidies, the above-mentioned contraction in farm income would have been

even more pronounced.

Income developments

EU-27 average farm income declined sharply in 2009, due mainly to a sizeable drop in

agricultural output prices. Based on the FADN data, average farm net value added per

annual work unit (FNVA/AWU) contracted by around 17 %, from € 16 700 in 2008 to € 13 900

in 2009. This decline was entirely driven by the fall in FNVA, as AWU increased only

marginally, and was primarily driven by a substantial drop in agricultural output prices (in

particular in the crop, milk and meat sectors), reflecting both supply and demand

developments in a difficult global economic environment. Looking at an alternative measure

of farm income, remuneration per family work unit (i.e. income available after remuneration

of all the external production factors — labour, land and capital — and adjusted for the

opportunity cost of capital), stood at around € 7 350 in 2009, down from € 12 250 in the

previous year.

This decline masks substantial differences across Member States/regions and types of

farming. Based on FNVA/AWU, farms in Denmark, the Netherlands, the UK and Belgium

enjoyed, on average, the highest income in 2009, while those in Slovakia, Romania and

Bulgaria were at the opposite side of the spectrum. Lombardy (Italy) was the region with the

highest average income per farm within the EU. Regarding the income differences by type of

farming, granivore, wine and horticulture holdings registered, on average, the highest

FNVA/AWU. On the other hand, other permanent crops and mixed farm incomes remained

well below the average. Income declined across all types of farming in 2009, with the notable

exception of granivore farms, whose FNVA/AWU increased by around 20 % compared to

2008 as feed prices dropped in roughly equal proportions. Finally, at individual farm level,

the income situation remains highly varied, even when differences in farm structure are taken

into account.

2

Looking at the distribution of FNVA/AWU at farm level, the EU-10 and EU-2 average

income per worker remained significantly below the EU-15 level. More than 95 % of

farms in both EU-10 and EU-2 had an income which was below the average FNVA per AWU

observed in EU-15. The EU-10 average income per worker stood at around € 5 700, yet more

than 50 % of holdings had an income per worker of less than € 2 700 (median income).

In EU-2, half of the farms had an FNVA per AWU of less than € 2 100.

Role of direct payments

Direct payments helped to smooth the variability in EU farms’ income. In EU-27, the

average share of direct payments in total farm revenue rose from 12.1 % in 2008 to 13.5 % in

2009 as total farm receipts dropped considerably, while the level of public support increased

slightly. This share varies considerably across both Member States, with the Irish farms being

proportionately most dependent on subsidies (which represent nearly 25 % of total farm

revenues). The share of direct payments in revenue also differs substantially across types of

farming, with the highest shares observed in grazing livestock and field crops farms (above

20 %). On the other hand, subsidies account for only a very limited part of total revenue in

wine and horticulture holdings (less than 2.5 %).

Farm structure

Structure of European farms varies markedly in several ways:

Financial configuration. The average farm size in terms of asset value, based on the 2009 data, was highest in Denmark and the Netherlands (€ 2 400 000 and € 1 950 000

respectively), reflecting very high land prices and the importance of sectors which

typically necessitate considerable investments (such as milk, granivore and horticulture).

By contrast, farms in Bulgaria and Romania displayed the lowest values of total assets

(below € 50 000) as they tend to be smaller and oriented towards less capital-intensive

types of farming. In addition, the general price level in EU-2 remains well below the EU-

27 average.

Labour input. The average number of workers employed per farm stood at 1.6 AWU at EU-27 level in 2009. However, it varied significantly across Member States, ranging

from 15.5 AWU in Slovakia to 1.1 AWU in Ireland. The average number of workers per

farm in horticulture (the sector with the highest labour input) was approximately 2.5

times larger than in permanent crops other than wine holdings (the sector with the lowest

labour input). Family labour accounted for 77 % of the total labour force in EU-27 and

thus represented the most prevalent form of labour in all but five Member States

(Slovakia, the Czech Republic, Hungary, Bulgaria and Estonia). The average hourly wage

of farm workers stood at € 6.34 in EU-27 during 2009, up 6.3 % from a year earlier. This

nominal wage increase more than compensated for the general increase in price level

(EU-27 HICP inflation stood at 1.0 % in 2009).

Land use. — The average EU farm size was 32 ha in 2009, little changed from a year earlier. However, it displayed considerable variability across Member States, ranging

from 575 ha per farm in Slovakia to 4 ha per farm in Malta. Rented land accounted for

53 % of the total agricultural area at EU-27 level in 2009. Land rents were particularly

high (above € 700 per ha) in the Netherlands and Canarias (Spain), while they remained

below € 30 per ha in the Baltic countries. They also differed markedly across types of

farming: the level of rent per hectare in horticulture and the wine sector was 8 to 9 times

higher than the price paid by grazing livestock farms. At EU-27 level, however, land

rents have changed little since 2007 at € 143 per ha.

3

The Farm Accountancy Data Network (FADN) is a European system of sample surveys

that are run each year and collect structural and accountancy data relating to the farms; their

aim is to monitor the income and business activities of agricultural holdings and to evaluate

the impacts of the Common Agricultural Policy (CAP).

The scope of the FADN survey covers only farms whose size exceeds a minimum threshold

so as to cover the most relevant part of the agricultural activity of each EU Member State

(MS), i.e. at least 90 % of the total Standard Gross Margin1 (SGM) and 90 % of Utilised

Agricultural Area covered in the Farm Structure Survey (FSS, EUROSTAT). For 2009, the

sample consists of approximately 80 000 holdings in EU-27, which represent nearly

5.0 million farms (36 %) out of a total of 13.7 million farms included in the FSS.

The rules applied seek to provide representative data for three criteria: region, economic size

and type of farming. The FADN is the only harmonised source of micro-economic data,

which means that the accounting principles are the same in all EU Member States.

The most recent FADN data available for this report are for the 2009 accounting year due to

time lags stemming from complex data collection, control and processing.

For further information see: http://ec.europa.eu/agriculture/rica/index.cfm.

1 The Standard Gross Margin (SGM) is the difference between the standardised monetary value of gross

production and the standardised monetary value of certain special costs. This difference is calculated for the

various crop and animal characteristics (per hectare or per animal) at the level of the survey district for each

Member State and given in euro. By multiplying the areas or the number of animals by the corresponding

SGM and then adding these totals together, the total SGM of the holding is obtained. By adding the total

SGM of all holdings of a Member State, the total Member State SGM is obtained. The concept of SGM is

used to calculate the economic size and the type of farming in the FADN and in the Farm Structure Survey

(FSS) organised by EUROSTAT.

http://ec.europa.eu/agriculture/rica/index.cfm

4

CONTENTS

1. ECONOMIC SITUATION OF FARMS..................................................................... 5

1.1. Farm income ...................................................................................................... 5

1.2. Distribution of income .................................................................................... 13

1.3. Income components ......................................................................................... 18

1.4. Return on assets ............................................................................................... 20

2. IMPORTANCE OF DIRECT PAYMENTS FOR FARM INCOME ....................... 22

2.1. Share of direct payments in total revenue ....................................................... 22

2.2. Share of direct payments in FNVA ................................................................. 23

3. FARM STRUCTURE ............................................................................................... 26

3.1. Financial structure ........................................................................................... 26

3.1.1. Total asset value ................................................................................ 26

3.1.2. Total liabilities ................................................................................... 28

3.1.3. Development of farm net worth ........................................................ 29

3.1.4. Solvency ............................................................................................ 30

3.1.5. Current and fixed assets .................................................................... 32

3.2. Labour ............................................................................................................. 34

3.2.1. Labour force ...................................................................................... 35

3.2.2. Remuneration of farm workers.......................................................... 37

3.3. Land ................................................................................................................. 39

3.3.1. Farm size ........................................................................................... 39

3.3.2. Importance of rented land ................................................................. 40

3.3.3. Level of land rents ............................................................................. 41

5

1. ECONOMIC SITUATION OF FARMS

This chapter reviews the economic situation of farms across EU Member States, focusing

predominantly on the level, development and distribution of farm income. It also discusses

the various farm income components and the return farmers receive on their investment.

1.1. Farm income

For the purpose of this report, the income of agricultural holdings is measured by means of

the farm net value added and the remuneration of family labour.

Farm net value added (FNVA) is equal to gross farm income minus costs of depreciation. It

is used to remunerate the fixed factors of production (work, land and capital), whether they

are external or family factors. As a result, agricultural holdings can be compared regardless

of the family/non-family nature of the factors of production employed.

FNVA = output + Pillar I and Pillar II payments + VAT balance -intermediate consumption -

farm taxes (income taxes are not included) - depreciation.

The value is given per annual work unit (AWU) in order to take into account the differences

in the scale of farms and to obtain a better measure of the productivity of the agricultural

workforce.

Remuneration of family labour: In the agricultural sector the bulk of the work force does not

receive a salary but has to be remunerated from the farms’ income. As the FNVA is required

to finance not only family labour but all production factors, another income estimator — the

remuneration of family labour — is estimated as follows:

Remuneration of family labour = FNVA + balance of subsidies and taxes - wages paid - paid

rent - estimate of the costs for own land - estimate of the costs for own capital.

The value is given by family labour unit (FWU). Only farms with unpaid labour (which in

most cases means family members) are included in the calculation.

Results by Member State

The FNVA continued to show significant variability across EU Member States in 2009: it

ranged between € 100 600 in the Netherlands and € 5 800 in Romania, with the EU-27 average

standing at around € 22 700 (see Figure 1.1).

While the main advantage of FNVA as an indicator for measuring income developments lies

in its relative simplicity, it fails to account for differences in farm size, type of farming or

structural decline in the labour force in agriculture. To do so, FNVA is typically expressed per

AWU, which is nothing less than a measure of partial labour productivity. Viewed from this

angle, the general picture of sizeable income variability within the EU remains unaffected,

though the ranking of MS changes somewhat (Figure 1.2). Denmark, the Netherlands and the

UK registered the highest FNVA per AWU of € 42 100, 35 800 and 32 700 respectively. This

is more than two or, in the case of Denmark, even three times the value of the average FNVA

per AWU for the EU-27 (€ 13900), reflecting the predominance of highly productive

granivore production, specialist horticulture and milk sectors within the agricultural sector in

these three economies. At the other end of the spectrum, Bulgaria, Romania and Slovakia

displayed the lowest FNVA per AWU (€ 3 800, 3650 and 1 600 respectively) as their

agriculture has remained largely oriented towards less productive types of farming, namely

mixed farming and other permanent crops. Note also that within EU-15, FNVA per AWU was

below the EU-27 average only in Greece and Portugal — two MS that are characterised by a

large number of small farms.

6

Figure1.1: Farm net value added by Member State in 2009

(average per farm in €)

Source: DG AGRI EU-FADN.

An alternative measure of agricultural holdings’ income, namely the remuneration of family

labour expressed per family work unit, sheds a significantly different light on farm income

distribution within the EU in 2009. Denmark, the MS with the highest FNVA per AWU,

actually displayed the lowest remuneration of family labour per FWU within EU-27

(- € 44 300), caused by the large amount of interest paid by Danish farmers and the high level

of wages. The MS with the highest remuneration for family labour per FWU were the UK

(€ 23 000), Belgium and Italy (€ 20 000 each). At EU-27 level, the average farm income stood

at € 7 300 in 2009.

Figure 1.2: FNVA per AWU and remuneration of family labour per FWU by Member

State in 2009



0

15,000

30,000

45,000

60,000

75,000

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105,000

NL

CZ

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BE

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DE

FR

LU IT FI

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FNVA EU27 FNVA

-50,000

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PL SI

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FNVA/AWU Remuneration of family labour/FWU

EU27 FNVA/AWU EU27 Remuneration of family income/FWU

7

Results by EU groups

EU-15 agricultural holdings’ income, whether measured by FNVA per AWU or the

remuneration of family labour per FWU, declined in 2009 for the second consecutive year to

€ 21 000 and € 11 000 respectively on the back of a sizeable drop in agricultural output prices.

These two consecutive years of declines actually wiped out most of the revenue gains

achieved over the period 1999-2007 and were primarily driven by decreases in FNVA / the

remuneration of family labour, as AWUs / FWUs had remained fairly stable. Farm income

developments in EU-10 closely mirrored the general pattern observed in EU-15, with the

2009 FNVA per AWU and the remuneration of family labour per FWU decreasing to € 5 700

and € 3 400 respectively. It is worth pointing out that without the increase in (net) subsidies in

both EU-15 and EU-10, the negative income developments observed in 2008-2009 would had

been even more pronounced. Regarding the convergence of revenues between EU-10 and EU-

15 (based on FNVA per AWU), farm income in EU-10 was growing at a faster pace than in

EU-15 over the period 2004-2007, though the level of income was actually diverging in

absolute terms between the two groups of MS. The opposite happened during 2008 and 2009:

agricultural holdings’ income registered larger falls in relative terms in EU-10 than in EU-15,

yet the gap in the levels of income actually narrowed slightly. To sum up, based on the

available FADN data over the period 2004-2009, no tangible convergence in nominal farm

income was observed between EU-10 and EU-15. Finally, contrary to the general trend

observed in EU-25, EU-2 farm income rose by roughly 50 % between 2007 and 2009 to stand

at € 3 700 (FNVA per AWU) and € 2 400 (the remuneration of family labour per FWU).

Figure 1.3: Long-term developments in FNVA per AWU and remuneration of family

labour per FWU



Regional differences

Map 1.1 shows the regional differences in FNVA per AWU within EU-27 in 2009. Based on

this indicator, the agricultural holdings with the highest incomes were mainly located in

Denmark, Belgium, the Netherlands, northern Germany, northern France, northern Italy, the

UK (England and Wales) and northern Spain (Castilla-León). On the other hand, regions with

very low farm incomes (i.e. below € 10 000 per year) were mostly, but not exclusively,

0

5,000

10,000

15,000

20,000

25,000

30,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU27 FNVA/AWU EU27 Remuneration of family labour/FWU



8

situated in EU-10 MS. However, Portugal (Norte e Centro), Greece (Ipiros-Peloponissos-

NissiIoniou) and Italy (Abruzzo) also registered very low average farm incomes.

Map 1.1: FNVA per AWU by FADN region in2009


When measured by the remuneration of family labour per FWU, the differences in 2009

income between EU-15 and EU-12 appear to be less pronounced (see Map 1.2). Northern

Italy, alongside north-eastern Germany, England, two Spanish regions (Castilla-León and

Comunidad Valenciana) and southern Belgium (Wallonia), registered the highest income per

unit of family labour. While income levels tend to be lower in eastern and southern Europe,

many western European countries/regions (e.g. Denmark, southern Sweden, the Netherlands,

Ireland, France, Austria and southern Germany) also displayed very low remuneration of

family labour per FWU, reflecting higher wages and land rents.

9

Map 1.2: Remuneration of family labour per FWU by FADN region in 2009


Results by type of farming

Figure 1.4 depicts large discrepancies in FNVA per farm across different types of farming. In

particular, average farm income was approximately four times larger in the horticulture sector

than in the mixed crops and livestock sector. One possible explanation for the relatively low

income of mixed farms is that many of them are typically very small and mainly located in

EU-10, where income levels tend to be generally lower. On the other hand, horticulture

holdings appear to be more frequent in EU-15.

When measured by FNVA per AWU, the general picture of income distribution by type of

farming remains little changed (see Figure 1.5). The granivore, wine and horticulture sectors

continued to display above--average incomes, while permanent crops other than wine and

mixed farms’ income remained below the average. Note that FNVA per AWU declined for all

types of farming in 2009 compared to 2008 levels, except for granivore farms, which

registered an almost 20 % increase in income as feed prices dropped in roughly equal

proportions. The remuneration for family labour per FWU, which by definition remains below

FNVA per AWU, does not significantly alter the picture of relative productivity differences

across various types of farming of different types of holdings (with granivores, horticulture

and wine holdings remaining at the top of the spectrum, and mixed farms at the bottom).

10

Figure 1.4: FNVA per farm in EU-27 by type of farming in 2009



Figure 1.5: FNVA per AWU by type of farming in 2009



Results by organisational farm and EU group

From the organisational point of view, holdings in the FADN are divided into three groups:

(1) family farms, where the profits cover the unpaid labour and own capital of the holder and

the holder’s family; (2) partnerships, where the profits cover the production factors brought

into the holding by a number of partners (at least half of whom participate in the work of the

farm as unpaid labour); and (3) other holdings with no unpaid labour or which are not

included in the other two groups (e.g. legal persons).

The results show that non-family farms generated, on average, higher FNVA than family

farms, with income disparities particularly visible in EU-10 and, to a lesser degree, in EU-15

and EU-2. The observed disparities both across and within the three groups of MS mainly

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Horticulture Granivores Wine Milk Grazinglivestock

Fieldcrops Otherpermanent

crops

Mixed (cropsand livestock)

FNVA EU27 FNVA

0

5,000

10,000

15,000

20,000

25,000

30,000

Granivores Wine Horticulture Milk Grazinglivestock


crops



EU27 Remuneration of family income/FWU EU27 Remuneration of family income/FWU

11

reflect differences in farm size. While holdings classified as ‘other’ displayed the largest

FNVA within each group of MS, income of these large commercial farms in EU-10

significantly exceeded the FNVA created by the corresponding group of holdings in EU-15

and EU-2 (€ 168 000 as compared to € 116 000 and € 23 000 respectively). On the other hand,

EU-15 partnerships and especially family farms had, on average, significantly higher incomes

that their counterparts in new Member States.

Figure 1.6: FNVA per farm by EU group and organisational form in 2009



0

20,000

40,000

60,000

80,000

100,000

120,000

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Fam

ily farm

s

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rtners

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er

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rtners

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ily farm

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rtners

hip

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er

Tota

l

EU15 EU10 EU2 EU27

12

When FNVA is weighted by AWU, the conclusion that non-family farms tend to display

higher incomes than family farms remains valid across different EU groups (see Figure 1.7).

The FNVA per worker (a measure of partial labour productivity) is greater in EU-15 than in

EU-10 or EU-2, irrespective of the organisational type of farm — a phenomenon that can be

explained partially by the larger labour force employed by holdings in the new Member

States.

Figure 1.7: FNVA per AWU and remuneration of family labour per FWU by EU group

and organisational form



0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Fam

ily farm

s

Pa

rtners

hip

s

Oth

er

Tota

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ily farm

s

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rtners

hip

s

Oth

er

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ily farm

s

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rtners

hip

s

Oth

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Fam

ily farm

s

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rtners

hip

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Oth

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Tota

l

EU15 EU10 EU2 EU27


13

1.2. Distribution of income

As depicted by ‘box-plots’2 in Figure 1.8, agricultural incomes vary considerably across

farms. The general pattern is that a large proportion of farms display a relatively low income

level per worker, while a small proportion of holdings record a very high income level per

worker.

For instance, the average EU-15 FNVA per AWU stood at around € 21 000 in 2009. However,

10 % of the farms had an income per worker of more than € 42 800, while half of the farms

recorded FNVA per AWU below € 12 400.

In line with past regularities, the EU-10 and EU-2 average income per worker remained

significantly below the EU-15 level. Alternatively, more than 95 % of farms in both EU-10

and EU-2 had an income which was below the average FNVA per AWU observed in EU-15.

While FNVA per AWU is also unevenly distributed in the new MS, the degree of income

disparity was less pronounced compared to EU-15. The EU-10 average income per worker

stood at around € 5 700, though more than 50 % of holdings had an income per worker of less

than € 2 700. In EU-2, half of the farms returned FNVA per AWU of less than € 2 100.

Figure 1.8: Distribution of FNVA per AWU by EU groups in 2009



Figure 1.9 (see next page) shows developments in income distribution for the EU as a whole

over the period 1999-2009. Until 2003, income discrepancies in EU-15 were gradually rising

along with the average farm income. However, the average level of income dropped markedly

and income discrepancies narrowed somewhat following the 2004 enlargement. The structural

impact of the 2007 accession of Romania and Bulgaria is less visible in the data owing to

their lower relative weight with respect to the size of the EU at that time and a favourable

general income situation during that year. Finally, the impact of a sizeable drop in agricultural

output prices is clearly visible in the 2009 data, as evidenced by a strong decline in the

2 In the box plots the inter quartile range (range between 25 % of farms and 75 % of farms) is indicated by the

yellow box; the limits of 10 % of farms and 90 % of farms corresponds to the end of lines (whiskers); the

median (50 % of farms) is the line crossing the yellow boxes, and the mean corresponds to the ‘+’ sign.

14

average income level and a less uneven, though still highly asymmetrical, income

distribution.

Figure 1.9: Distribution of FNVA per AWU by year



Figure 1.10: Distribution of FNVA per AWU by type of farming in EU-15 in 2009



Figure1.10 illustrates the distribution of income by type of farming in 2009. In general terms,

income distribution remains highly asymmetrical within each of the eight sectors typically

distinguished in the FADN (i.e. a small proportion of farms with a very high income and a

large proportion of farms with low incomes3). The degree of these income discrepancies

3 While the high-income farms substantially raise the average income level, they have only limited impact on

the median level of income (within a given sample, a single outlier will actually distort the average but will

have no impact on the median).

Legend:

1 = Field crops

2 = Horticulture

3 = Wine

4= Other permanent crops

5= Milk

6= Other grazing livestock

7= Granivores

8= Mixed

15

greatly varies across different types of farming. As in the previous years, the most pronounced

differences between the mean and median values of income are observed for granivores

farms. Though, the distribution of income is also highly uneven within the milk, field-crop

and mixed sectors (i.e. sectors with a large interquartile range for FNVA per AWU).

The trend in the distribution of income over time varies from sector to sector. As shown in

Figure 1.11, the distribution of income for specialised dairy farms widened progressively until

2007. Since then, the degree of income asymmetries has diminished along with the reductions

in mean and median income levels. These developments were predominantly driven by

increasing input prices in 2008 and declines in milk prices in 2009.

Figure 1.11: Distribution of FNVA per AWU of dairy farms in EU-15 by year



Figure 1.12: Distribution of FNVA per AWU of field crop farms in EU-15 by year



16

As shown by Figure 1.12, the average income of specialised field-crop farms followed overall

a very gradual upward trend between 1999 and 2009. This long-run tendency masks in

particular large changes in income distribution in 2007, which were triggered by spikes in

cereals prices.

In the case of farms specialised in granivore production, the degree of income asymmetries as

well as the mean and median levels of income fluctuated substantially over time, mainly

reflecting large swings in output prices (Figure1.13). Income fell to a particularly low level in

2007 as the dampening effect of extremely high feed prices more than outweighed the

favourable impact of higher output prices. Overall, the income distribution tends to widen in

years characterised by high income. This suggests that some farms can benefit more from the

favourable situation than others, probably due to economies of scale.

Figure 1.13: Distribution of FNVA per AWU of granivore farms in EU-15 by year



Figure1.14 (see next page) illustrates the distribution of income (FNVA) among the labour

force (AWU) in EU-27 in 2009 by means of a Lorenz curve.4 As the 2009 income of a large

share of the farm labour force was negative, so too is the cumulated share of income up to a

certain point.

The Lorenz curve shows that income is unevenly distributed among the labour force:5 80 % of

the labour force generated approximately 35 % of income of the whole agricultural sector. The

remaining 20 % thus realised 65 % of FNVA. Finally, note that FNVA per AWU was negative

for about 32 % of total AWU employed in EU agriculture.

4 In order to draw the Lorenz curve, the income estimates are sorted in ascending order. Each observation is

weighted according to the weighting factor of the farm and the number of workers employed.

5 If income were equally distributed within the labour force, the Lorenz curve would become a straight line

linking the origin to the top right corner in the Figure.

17

Figure 1.14: Lorenz curve of the distribution of FNVA in EU-27 in 2009


An alternative measure of the statistical dispersion of income is the Gini index,6 which can be

between 0 and 1. The coefficient of 0 expresses perfect equality of income among the labour

force, while the coefficient of 1 reflects maximum inequality (with one work unit capturing

the entire income of the sector).

Table 1.1 shows that the income concentration in EU-15 is typically lower than in EU-10 or

EU-2, with the latter group displaying the highest income concentration (unequal

distribution). Though comparisons between groups should be made with caution, the observed

differences partly reflect disparities in the structure of the farm sector. For instance, the

sample includes very small farms in EU-10 and EU-2, which are mostly excluded in EU-15.

Looking at the development of the coefficient over time within each EU group, income

concentration has changed little in EU-15 since 1999. In EU-10, the income disparities had

been narrowing following EU accession (due, in part, to increasing CAP support) though the

initial declines were almost completely reversed over the last two years under review. Finally,

farm income inequalities in EU-2 have continued to narrow since EU accession in 2007.

Table 1.1: Development of the Gini coefficient of FNVA per AWU by EU groups


6 The Gini coefficient is usually based on the Lorenz curve. It can be thought of as the ratio of the area that

lies between the line of equality and the Lorenz curve over the total area below the line of equality.

-20

0

20

40

60

80

100

0 10 20 30 40 50 60 70 80 90 100Cu

mu

late

d s

ha

re o

f to

tal F

NV

A[%

]

Share of AWU[%]

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU15 0.540 0.525 0.520 0.496 0.517 0.516 0.520 0.521 0.524 0.529 0.544

EU10 0.636 0.621 0.589 0.574 0.620 0.633

EU2 0.725 0.695 0.687

18

1.3. Income components

Results by EU groups

Figure 1.15 illustrates the composition of farm receipts and expenses by EU groups in 2009. It

shows that an average farm operated at a loss (after the remuneration of own factors)

irrespective of the EU group considered.

On the revenue side, the average receipts per farm in EU-27 stood at € 66 600, out of which

total output and public support7 represented € 55 900 (84 %) and € 10 700 (16 %) respectively.

These aggregated figures mask large differences, both in absolute and relative terms, among

the EU groups: the average farm revenue in EU-2 was roughly 2.5 / 6 times lower than in EU-

10 and EU-15 respectively. In relative terms, subsidies accounted for more than 21 % of

average farm revenue in EU-10 as compared to roughly 15 % in both EU-15 and EU-2.

Figure 1.15: Income components per farm by EU groups in 2009



On the cost side, average farm expenses totalled € 73 600 in EU-27. While this aggregated

figure again reflects highly contrasting price levels among the EU groups, the cost structure as

such has been found to be broadly similar within the EU. Intermediate consumption

represented approximately 50 % of the total expenses. Depreciation and expenses for external

factors8 accounted for approximately 10 % each. The remainder is accounted for by the

(estimated) opportunity costs of own factors (family labour, own land and own capital). It is

worth noting that, in relative terms, the opportunity costs for own family labour were highest

in EU-2, for own land in EU-15 and for own capital in EU-10. This reflects, among other

things, differences in farm size, type of farming and the relative prices of input factors across

the EU groups.

7 Public support is the sum of net current and investment subsidies. It includes EU coupled and decoupled

payments, less favoured area (LFA) payments, rural development payments and national aid.

8 Expenses for external factors include wages, rent and interest paid.

0

20,000

40,000

60,000

80,000

100,000

120,000

Receipts Expenses Receipts Expenses Receipts Expenses Receipts Expenses

EU27 EU15 EU10 EU2

Total output Public support Total intermed. Consumption

Depreciation Total external factors Own factors

19


In 2009, granivore farms not only generated the largest output of all farm types in EU-27

(€ 194 000) but were also the only type operating at a profit after the remuneration of own

factors of production, as shown by Figure 1.16. On the other end of the spectrum, permanent

crops other than wine holdings returned the lowest output, namely € 28 000. The highest

average loss per farm was recorded by specialised dairy farms (€ -14 400) though, in relative

terms, mixed crops and livestock farms were the most affected, with the average loss

representing almost 16 % of the total revenues.

As to the average direct payments per holding, grazing-livestock farms benefitted from most

subsidies (€ 17 650), followed by specialised dairy and field crops farms (€ 17 500 and

€ 13 000 respectively). On the other hand, the horticulture sector received, on average, the

least public support (€ 2 000).These discrepancies in subsidies across sectors still reflects the

past features of the CAP, which provided support in particular for the production of cattle and

field crops: in many MS, decoupled direct payments per hectare have remained linked to the

historical level of support received by farms.

Figure 1.16: Income components per farm by type of farming in 2009


Source: DG AGRI EU- FADN.

Note. Receipts (Rec), Expenses (Exp).

The cost structure varies markedly among sectors, reflecting differences in farm size,

technological processes and input prices. Granivore farms (typically large in size with

technological processes involving a high turnover of animals) had the highest costs for

intermediate consumption (due to feed costs), both in absolute and in relative terms (€ 136 300

or nearly 70 % of the total expenses). On the other side of the coin, intermediate consumption

totalled, on average, € 10 000 (or represented less than 30 % of the total cost) for other

permanent crop farms. Interestingly, depreciation costs were, in relative terms, broadly

constant across sectors, accounting for around 11 % of total expenses. The share of external

factors (wages, rent and interest paid) in total costs was particularly high in the horticulture

and wine sectors (somewhat above 20 %) due mainly to for the high cost of external labour.

On the other hand, other grazing livestock and granivore farms were the type of farms with

the lowest share of expenditure on external factors (around 8 %). In absolute terms,

horticulture holdings returned the largest external factors costs (€ 37 000), while other grazing

livestock and other permanent crops farms spent the least (both less than € 6 000). Finally, the

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

Rec Exp Rec Exp Rec Exp Rec Exp Rec Exp Rec Exp Rec Exp Rec Exp Rec Exp

Fieldcrops Horticulture Wine Otherpermanent

crops

Milk Grazinglivestock

Granivores Mixed (cropsand livestock)

Total Groups

Total output Public support Total intermed. consumpt. Depreciation Total external factors Own factors

20

estimated costs of own production factors (family labour, own land and own capital), as a

share of total costs, were highest in permanent crop other than wine farms (above 40 %) and

lowest in granivore farms and horticulture holdings (around 15 %).

1.4. Return on assets

Return on assets (ROA) measures the

effectiveness of a company’s assets in

generating revenue. It is defined as the ratio

of net income over total assets, with net

income being defined as the sum of FNVA

and net subsidies less wage costs, rent paid

and the opportunity costs for own labour.


As shown by Figure 1.17, the ROA of an average EU-27 farm declined sharply to 0.4 % in

2009, down from 1.8 % a year earlier. Holdings in the Baltic countries, Hungary, Romania

and Bulgaria typically tend to display the largest ROAs, mainly due to relatively low levels of

opportunity costs and asset values. On the other hand, 13 Member States registered a negative

ROA in 2009 (as compared to six in the previous year), with Slovakia and Sweden having the

lowest ROA in the EU (see Annex 8 for more details).

Figure 1.17: Rate of return on assets by MS in 2008 and 2009




The ROA varied considerably across different farm types (see Figure 1.18). Granivore,

horticulture and wine farms have continued to display above-the-average levels of ROA. In

particular, the ROA of granivore holdings (4.9 %) was nearly 12 times greater than the

average for the whole agricultural sector in EU-27 (0.4 %). Other permanent crops, and mixed

crops and livestock holdings were the only two types of farms that registered negative a ROA

in 2009 (-0.1 % and -0.9 % respectively).

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

LT

BG

HU

RO EL

BE IT EE

ES

UK

AT

DE

PT

LV

CZ

CY

LU

PL

NL IE DK

MT

FR SI

FI

SE

SK

2008 2009 2009 Average EU27

ROA=

FNVA

+ Balance of subsidies and taxes

- Wages paid

- Paid rent

- Opportunity costs for family labour

Total assets

21

Figure 1.18: ROA in EU-27 by type of farming in 2009



Trend by EU group

As shown by Figure 1.19, ROA also displayed marked fluctuations not only among the EU

groups but also over time for a given group, especially during the latest years included in the

sample, reflecting higher volatility of macroeconomic fundamentals as well as weather-related

factors (e.g. a drought in Bulgaria and Romania during 2007). A tentative upward trend could

be distinguished in the case of ROA developments in EU-15 before turbulent economic

conditions considerably compressed the return in 2009. Note also that ROA in all EU groups

has remained at relatively low levels compared to other sectors of the economy.

Figure 1.19: Development of the ROA by EU groups



-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Granivores Horticulture Wine Milk Grazinglivestock


crops


ROA 2009 Average EU-27

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU27 EU15 EU10 EU2 Linear (EU15)

22

2. IMPORTANCE OF DIRECT PAYMENTS FOR FARM INCOME

This chapter analyses the impact of direct payments (DP) on the income situation of European

farmers. Two concepts of income are considered in turn, namely farm revenue and FNVA.

2.1. Share of direct payments in total revenue


The share of DP in total revenue (output plus net current and investment subsidies) in EU-27

rose from 12.1 % in 2008 to 13.5 % in 2009 as total farm receipts dropped substantially, while

the level of public support increased slightly. This share varies widely among Member States,

with Irish farms’ total receipts being proportionately most dependent on subsidies (which

represent nearly 25 % of total revenue). The importance of crops such as tobacco, grain maize

and cotton, which used to be strongly supported before decoupling, is the main explanatory

factor behind the high share of DP in total revenue observed in Greece. In Finland, the large

share of public support in total receipts mainly reflects substantial national payments, which

are granted in addition to EU direct payments. Finally, DP account for the lowest share of

total revenue in the Netherlands (close to 4 %), where sectors with a lower share of DP in total

revenue, such as horticulture, pig and poultry production, represent a significant proportion of

total agricultural output.

Figure 2.1: Share of public support in total receipts by MS in 2009


Source: DG AGRI EU-FADN


As already indicated, the share of DP in revenue varies markedly across types of farming,

reflecting mainly differences in average farm size. In addition, in EU-15, the historical model

of the CAP was characterised by asymmetrical direct support across sectors — an element

which has been gradually smoothed following the 2004 reform. Figure 2.2 (see next page)

shows that public support accounts for the highest share of total revenue in grazing livestock

(26 %) and field crops farms (22 %). On the other hand, subsidies represent only a very

limited part of total revenue in the wine and horticulture sectors (2 % and 1 % respectively).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

IE EL

SK FI

LV

LT

BG

CZ

HU

FR

SE

ES

PT

PL

EE

UK

DE

LU

RO SI

AT

DK

BE

CY IT

MT

NL

%Public support on receipts %Output on receipts EU27% of public support

23

Figure 2.2: Share of direct payments in total receipts by type of farming in 2009



2.2. Share of direct payments in FNVA

The role direct payments play in sustaining farm revenue becomes even more apparent when

we look at their share in FNVA — a concept which measures net farm income, i.e. after

deduction of costs (see Annex 2). Consequently, changes in direct payments will, all other

things being equal, have a much larger impact on FNVA than total farm revenue.


In 2009, DP accounted on average for nearly 40 % of FNVA in EU-27, up from 33 % in 2008

(Figure 2.3). This steep increase is due largely to a sizeable drop in FNVA in difficult

economic conditions. In particular, the share of DP in FNVA rose sharply to 444 % in

Slovakia in 2009 (up from 69 % a year earlier), following a 25 % increase in the amount of net

subsidies in combination with a more than 80 % drop in FNVA (caused mainly by a sharp

contraction in both crops and livestock production). On the other hand, direct payments

represented only 15 % of FNVA in the Netherlands, reflecting the orientation of the Dutch

sector towards (highly profitable and) less subsidised sectors, such as horticulture and pig and

poultry production. Finally, Map 2.1 illustrates the regional differences in the share of DP in

FNVA. The latter was lowest in Hamburg (1 %), followed by Liguria and Trentino (2 % and

4 % respectively).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Grazinglivestock

Fieldcrops Mixed (cropsand

livestock)

Milk Otherpermanent

crops

Granivores Wine Horticulture

%Public support on receipts %Output on receipts Total Groups % of public support

24

Figure 2.3: Share of direct payments in FNVA by MS in 2009



Map 2.1: Share of direct payments in FNVA by FADN region in 2009


0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

400.00%

450.00%

500.00%

SK FI

SE IE LV

CZ

EE

FR

HU

LU LT

DE

UK SI

DK

BG PL

EL

AT

PT

ES

RO

BE

CY

MT IT NL

% Public support in FNVA EU 27

25


The share of direct payments in agricultural income also fluctuates markedly with the type of

farming (Figure 2.4). In particular, public subsidies represent a substantial part of FNVA in

field crops, mixed farming, grazing livestock and specialised dairy farms as a result of

historical orientations of the CAP. On the other hand, direct payments play only a limited role

in sustaining income within the wine and horticulture sectors.

Figure 2.4: Share of direct payments in FNVA by farm type in EU-27, 2009



0%

10%

20%

30%

40%

50%

60%

70%

Fieldcrops Mixed (cropsand

livestock)

Grazinglivestock

Milk Otherpermanent

crops

Granivores Wine Horticulture

%Public support inFNVA EU 27

26

3. FARM STRUCTURE

3.1. Financial structure

This chapter analyses the financial structure of agricultural holdings within the EU by

reference to two main dimensions (country and type of farming) and by means of a number of

financial indicators derived from farms’ balance sheets.

3.1.1. Total asset value

Total assets are the property of the agricultural holding and are calculated as the sum of

current and fixed assets. Current assets in the FADN include non-breeding livestock, stock of

agricultural products and other circulating capital, holdings of agricultural shares, and

amounts receivable in the short term or cash balances in hand or in the bank. Fixed assets are

agricultural land, permanent crops, farm and other buildings, forest capital, machinery and

equipment, and breeding livestock.

Long-term developments by EU group

Figure 3.1 shows that the value of total assets (TA) has been following an upward trend in

both EU-15 and EU-10. In the former, the average value of total assets rose by more than

50 % over the period 1999-2009, while in the latter it increased by nearly 80 % between 2004

and 2009.

Figure 3.1: Long-term developments in the value of total assets (TA) and liabilities (TL)




As shown by Figure3.2, the total value of assets of an average EU-27 farm stood at

approximately € 288 300 in 2009. However, this average masks sizeable variations across

Member States on the back of differences in the structure of national agricultural sectors.

Danish and Dutch farms held, on average, the most assets (around € 2 400000 and € 1 945 000

respectively), reflecting very high land prices as well as the importance of types of farming

which typically necessitate considerable investments, such as milk, granivore or horticulture

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU15 TA EU15 TL EU10 TA EU10 TL

27

production. By contrast, farms in Bulgaria and Romania had the lowest total assets (under

€ 50 000) as they are, on average, relatively smaller and predominantly oriented towards less

capital-intensive types of farming. Moreover, these low total assets have also partly reflected

the lower general price level in EU-2.

Figure 3.2: Average total asset value per farm by MS in 2009




Dairy and granivore farms have typically held the highest total assets — roughly three times

the assets of other permanent crops farms, which posted the lowest value. These disparities

are due, among other things, to differences in the typical degree of production process capital

intensity across sectors.

Figure 3.3: Average total asset value by type of farming in EU-27in 2009



0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

DK

NL

UK

LU IE SK

CZ

DE

SE

BE

AT FI

FR IT

MT

ES

EE SI

CY

HU

PL

LT

LV

PT

EL

BG

RO

Total assets EU27 Total assets

0

100,000

200,000

300,000

400,000

500,000

600,000

Milk Granivores Horticulture Grazinglivestock

Wine Fieldcrops Mixed (cropsand livestock)

Otherpermanent

crops

Total assets EU27 Total assets

28

3.1.2. Total liabilities

In EU-27, total liabilities have, on average, accounted for a small proportion of farms’

funding sources. In this respect, it is worth pointing out that while the 2004 and 2007

enlargements have affected the average level of total liabilities per farm, the impact has been

substantially smaller than on total assets per farm.


In line with the general trend for total asset values (see Figure 3.1), total liabilities have also

edged up, albeit at a slower pace, in both EU-15and EU-10.

In EU-27, average liabilities per agricultural holding rose to € 44 000 in 2009, up from

€ 43 250 in the previous year. As illustrated by Figure 3.4, both the total amount and

composition of liabilities show wide variations across Member States. In absolute terms, the

Danish and Dutch farms had, on average, the greatest total liabilities within the EU. By

contrast, total liabilities per farm remained very low in many Mediterranean Member States,

which could, prima facie, reflect difficulties farmers have in accessing credit markets in these

countries. However, these very low observed levels could also result from different

accounting practices, where liabilities are typically included in farmers’ private rather than

farm accounts.

Agricultural holdings relied most on short-term loans to finance their activities in Hungary,

Portugal, Slovakia, the UK and Lithuania (with short-term loans accounting, on average, for

around half of total liabilities). By contrast, medium- and long-term loans represented more

than 90 % of total liabilities in Belgium, Italy, Slovenia, Cyprus, Denmark and Finland.

Figure 3.4: Composition of liabilities per farm by MS in 2009




As shown by Figure 3.5, granivore, horticulture and specialised dairy farms had, on average,

the highest total liabilities (€ 139 500, € 117 700 and € 101 500 respectively), which in fact

mirrored the high total asset values observed in these farm types. Permanent crops other than

wine holdings recorded the lowest liabilities in 2009 (€ 6 700). Regarding the composition of

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

DK

NL

SE

CZ

LU

BE

SK

DE

FR

UK FI

EE

AT

HU

LV IE

MT

LT

BG PL

ES IT

CY SI

PT

RO EL

EU

27

Long & medium-term loans Short-term loans

29

liabilities, wine holdings relied most on short-term loans to finance their activities, while the

specialised dairy farms did so least (these loans accounted for around 45 % and 15 % of total

liabilities respectively).

Figure 3.5: Composition of liabilities per farm in EU-27 by type of farming in 2009



3.1.3. Development of farm net worth


Farm net worth is defined as the difference between total assets and total liabilities at the end

of the accounting year. In 2009, the average farm net worth stood at approximately € 244 000

in EU-27 (+0.7 % compared to 2008). The average net worth per agricultural holding was

highest in the Netherlands, the UK and Denmark (Figure 3.6), reflecting the importance of the

granivore and milk sectors, which are characterised by above-average net worth per farm

(Figure 3.7 on the next page). The lowest values were registered by Romanian and Bulgarian

farms.

Figure 3.6: Farm net worth per farm by EU group and MS in 2005 and 2009



0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Granivores Horticulture Milk Mixed(crops andlivestock)

Wine Fieldcrops Grazinglivestock

Otherpermanent

crops

Total

Long & medium-term loans Short-term loans

0

125,000

250,000

375,000

500,000

625,000

750,000

875,000

1,000,000

1,125,000

1,250,000

NL

UK

DK

LU IE SK

DE

CZ

SE

BE

AT IT ES

MT FI

FR SI

CY

EE

PL

HU LT

PT

EL

LV

BG

RO

2008 2009 EU27 2009

30

Figure 3.7: Farm net worth per farm in EU-27 by type of farming in 2009



3.1.4. Solvency

In the present analysis, solvency is measured by the liabilities-to-assets ratio. This gives an

indication of a farm’s ability to meet its obligations in the long term (or its capacity to repay

liabilities if all of the assets were sold). The results should be interpreted with caution as a

high liabilities-to-assets ratio is not necessarily a sign of a financially vulnerable position. In

fact, a high ratio could also be an indication of a farm’s economic viability (i.e. its ability to

access outside financing), though there is certainly a threshold beyond which indebtedness

will compromise a farm’s financial health.

A high liabilities-to-assets ratio typically reflects heavy recourse to outside financing (i.e.

taking out loans). While the higher leverage (the amount of debt used to finance assets) helps

a farm to invest and typically increase its profitability, it comes at greater risk as leveraging

magnifies both gains (when investment generates the expected return) and losses (when

investment moves against the investor9).

As for other farm financial indicators, the liabilities-to-assets ratio varies substantially across

Member States and in some cases even within Member States, as shown by Map 3.1 (see next

page). Farms in Denmark, France and the Netherlands had the highest liabilities-to-assets

ratio (at 52 %, 39 % and 38 % respectively). The lowest average solvency levels were

observed in many Mediterranean Member States (below 3 %). As has already been indicated,

these very low levels of indebtedness, and by extension of solvency, could stem from the fact

that in these Member States liabilities are typically not included in the farm accounts but in

the private accounts of farmers.

9 For example, due to unfavourable weather conditions or outbreaks of animal diseases.

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Milk Granivores Grazinglivestock

Wine Fieldcrops Horticulture Mixed (cropsand livestock)

Otherpermanent

crops

2009 EU27 2009

31

As depicted by Figure 3.8, the level of solvency also varies markedly across farm types, with

horticulture, granivore and specialised dairy farms recording the highest liabilities-to-assets

ratios, though the latter remained overall at relatively restrained levels (below 50 %, which

means that most farms’ assets were financed through equity).

Map 3.1: Average liabilities-to-assets ratio per farm by FADN region in 2009


Figure 3.8: Farm solvency in EU-27 by type of farming in 2009



0%

5%

10%

15%

20%

25%

30%

35%

40%

Horticulture Granivores Milk Mixed (cropsand livestock)

Fieldcrops Wine Grazinglivestock

Otherpermanent

crops

2009 EU27 2009

32

3.1.5. Current and fixed assets


Fixed assets10

account for the largest proportion of total assets in all Member States (see

Figure 3.9). In particular, the total farm assets in Greece, Ireland and Slovenia consist almost

exclusively of fixed assets (around 95 %).

Figure 3.9: Composition of assets by MS in 2009



Figure 3.10: Composition of fixed assets by MS in 2009



The composition of fixed assets across MS depends, on the structure of the agricultural sector.

As shown by Figure 3.10, ‘land, permanent crops and quotas’ were the largest component in

10 Fixed assets include agricultural land, farm and other buildings, forest capital, machinery and equipment and

breeding livestock.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EL IE SI

MT

PL

UK IT NL

DK

BE

PT

CY

DE FI

LU

RO

EE

AT

SE

CZ

LT

LV

ES

HU

BG

FR

SK

EU

27

EU

15

EU

10

EU

2

Fixed assets Current assets

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

IE UK

ES

CY

DK IT NL

EL

DE

PT

PL SI

SE

LU

BE

MT FI

HU

BG LV

RO

FR

AT

LT

EE

CZ

SK

EU

27

Land, perma. Crops & quotas Buildings Machinery Breeding livestock

33

most Member States in 2009. In particular, this category made up more than 80 % of fixed

assets in Ireland, the United Kingdom and Spain. On the other hand, ‘buildings’ were of

major importance in Austria, the Czech Republic, Romania and Slovakia (in the range 45 % to

50 %). ‘Machinery’ accounted for the largest share of fixed assets in Lithuania (more than

50 %). Finally, ‘breeding livestock’ was the smallest component of fixed assets in all Member

States (its share ranged from 15 % in France to 1.5 % in Denmark).

It should be stressed at this juncture, though, that accounting practices vary markedly across

Member States. For instance, quotas are not marketable in some countries (e.g. France), in

which case they are not recorded as a separate asset of a farm, although their value is partly

included in the land value. Consequently, the value of the ‘land, permanent crops and quotas’

component is underestimated compared to countries with marketable quotas (e.g. the

Netherlands). There are also differences in the recording of data relative to land. For example,

in France, farmers in some cases establish holdings that rent land to their members, in which

case the value of the land is not included in the total assets of these holdings. This accounting

practice thus increases the relative share of other assets.


As illustrated by Figure 3.11, fixed assets accounted overall for 82 % of total assets in 2009.

This share showed some variability among the different types of farming, ranging from 87 %

in specialised dairy farms to 70 % in wine holdings.

Figure 3.11: Composition of assets by type of farming in 2009



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Milk Grazinglivestock

Fieldcrops Mixed (cropsand livestock)

Otherpermanent

crops

Horticulture Granivores Wine Total Groups

Fixed assets Current assets

34

Regarding the composition of fixed assets, Figure 3.12 shows that ‘land, permanent crops and

quotas’ was the largest component in all farm types, though the share varied from more than

80 % in ‘other permanent crops’ farms to about 50 % in granivore farms. On the other hand,

the latter had the largest share of ‘buildings’ (35 %) and the former the lowest (10 %).

Horticulture holdings recorded the largest share of ‘machinery’ in fixed assets (about 17 %),

virtually twice as much as on ‘other permanent crops’ farms, which was at the other end of

the spectrum. Finally, ‘breeding livestock’ accounted for the highest share of total assets in

grazing livestock and dairy farms (somewhat below 10 %).

Figure 3.12: Composition of fixed assets by type of farming in 2009



3.2. Labour

This section analyses the structure of the labour force employed by EU farms, focusing on the

average labour employed per farm, the composition of the labour force and the wages paid.

The results show that the share of non-family labour in the total workforce is gradually

increasing in EU-15, reflecting structural changes and increasing farm sizes. While in EU-10

this share appears to be at comparable levels to EU-15, there is significantly higher variability

across Member States due to the predominance of very large farms in many eastern European

countries, which are often organised as legal entities.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Otherpermanent

crops

Fieldcrops Wine Grazinglivestock

Milk Mixed (cropsand livestock)

Horticulture Granivores Total Groups

Land, perma. Crops & quotas Buildings Machinery Breeding livestock

35

3.2.1. Labour force


The labour input of holdings stood at 1.6 AWU in 2009, virtually unchanged from a year

earlier. As shown by Figure 3.13, it varied considerably across countries, ranging from 15.5

AWU in Slovakia to 1.1 AWU in Ireland. Besides Slovakia, Czech farms also returned a

significantly higher labour input compared to the remaining Member States (7.3 AWU),

reflecting the predominance of very large non-family agricultural holdings.

Figure 3.13: Labour input per farm (in AWU) by MS in 2009




Figure 3.14 shows that labour input by type of farming was fairly close to the average

1.6 AWU per farm in all sectors apart from horticulture (with twice as much labour input).

Figure 3.14: Labour input per farm (in AWU) by type of farming in EU-27 in 2009



0

2

4

6

8

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12

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16

SK

CZ

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BG

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EL IE

Labour/farm EU 27 Average

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Horticulture Granivores Milk Wine Mixed (cropsand livestock)

Grazinglivestock


crops

Labour/farm Total Groups

36


Traditionally a large part of the labour force employed in agriculture is family labour. Family

labour as a share of total labour is decreasing over time, though it still represents the prevalent

form of labour in most Member States with the exception of Slovakia, the Czech Republic,

Hungary, Bulgaria and Estonia. As Figure 3.15 shows, the share of paid labour in the total

labour force in these five countries was higher than 50 % — sometimes significantly so.

Figure 3.15: Share of working hours of paid and unpaid labour by MS in 2009




As shown by Figure 3.16, the share of paid labour is highest in horticulture and wine

holdings, reflecting the typical recourse to seasonal workers. The share of paid labour is

typically lowest in grazing livestock and dairy farms.

Figure 3.16: Share of working hours of paid and unpaid labour in EU-27by type of

farming in 2009



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SI

IE AT

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EU

27

Share of unpaid labour (family labour hours) Share of paid labour

0%

10%

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40%

50%

60%

70%

80%

90%

100%

Grazinglivestock

Milk Mixed (cropsand

livestock)


crops

Granivores Wine Horticulture Total Groups

Share of unpaid labour (family labour hours) Share of paid labour

37

3.2.2. Remuneration of farm workers

Results by EU group

As shown by Figure 3.17, the nominal hourly wage followed an upward trend in both EU-15

and EU-10. In EU-15, the average nominal hourly wage rose by 37 % between 1999 and

2009, from € 6.89 to € 9.42. In EU-10, it stood at € 3.38 in 2009, up from € 2.17 in 2004 (an

increase of some 56 %). Conversely, the average EU-2 hourly wage oscillated in nominal

terms around € 1.25 over the period 2007-2009. The average nominal hourly wage declined in

2009 only in EU-10 (by around 6.3 %), while it registered moderate increases in both EU-15

and EU-2 (+1.6 % and +2.6 % respectively). Finally, the average EU-27 nominal hourly wage

stood at € 6.34 in 2009, compared to € 5.97 in 2008 and € 5.61 in 2007, i.e. an increase of

about 13.1 % over this period. Note that changes in the nominal wage more than made up for

price increases over the corresponding period, so that the real hourly wage rose by around 8 %

between 2007 and 2009 (EU-27 HICP inflation stood at around 4.7 % over this period).

Figure 3.17: Long-term developments in average nominal wages




As Figure 3.18 shows (see next page), the average hourly nominal wage differs widely within

EU-27. In 2009, it was highest in Denmark (€ 22.0) and lowest in Romania (€ 1.23). Note that

wages in all EU-12 MS as well as in Greece and Portugal were below the EU-27 average

(€ 6.34). Map 3.2 shows that the level of wages was highest in the north-west of Europe:

Denmark, the Netherlands, Sweden and the French region ‘Champagne-Ardenne’ all had an

average hourly wage of above € 15.0. The contrasting extreme was below € 2.5 in Romania,

Bulgaria, the eastern regions of Poland, and Lithuania.

1

2

3

4

5

6

7

8

9

10

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


38

Figure 3.18: Average nominal wages of paid labour in 2009



Map 3.2: Average nominal wage by FADN region in 2009

Source: DG AGRI EU-FADN

0

3

5

8

10

13

15

18

20

23

DK

NL

SE FI

FR

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BE IE DE IT AT

ES

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Wages/hour EU27 Avearge

39

3.3. Land

For most farm types, access to agricultural land is a precondition for economic growth. This

subsection analyses the amount of agricultural land available per farm, trends in the

ownership of land and the cost of renting land.

3.3.1. Farm size

While it has already become clear throughout this chapter that the structure of farms varies

significantly across Member States, one of the most telling indicators of these differences is

the physical size of farms, measured by the amount of agricultural land per farm. Here again,

the overall picture is confirmed: based on the 2009 data, an average farm in Slovakia was

more than 160 times larger than its counterpart in Malta (575 ha vs 4 ha — see Figure 3.19).

The EU average farm size was 32 ha in 2009, little changed from a year earlier.

Figure 3.19: Total farm UAA by Member State in 2009

(average per farm in ha)

DG AGRI EU- FADN

When measured by farm types, the average utilised agricultural land area was largest in

grazing-livestock farms, followed by field-crop farms. At the other end of the spectrum,

horticultural farms were the smallest. However, it is important to stress that they operate at a

much higher intensity (i.e. the land is a less important determinant of their level of

production).

0

100

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600

SK

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BE IE ES

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UAA EU27 UAA

40

Figure 3.20: Total UAA of farms by TF in 2009

(average per farm in ha)

DG AGRI EU- FADN.

3.3.2. Importance of rented land

Structural change is ongoing in the agricultural sector, as reflected by the steadily decreasing

number of farms. Consequently, the remaining active farms tend to get larger as they buy or

rent the land previously used by farms which have ceased farming.

Figure 3.21: Long-term developments in the share of rented land

(average per farm in %)


As shown by Figure 3.21, the share of rented land in EU-15 has been fluctuating around an

upward trend, rising from about 50 % in 1999 to 53.5 % in 2009. This indicates that a large

part of the land becoming available on the EU-15 market is rented rather than sold. However,

the situation is the reverse in EU-10, as evidenced by a falling trend in the share of rented

land since 2004. Note that these averages for different EU groups mask considerable national

and regional disparities, as depicted by Map 3.3. Rented land as a proportion of total UAA is

0

10

20

30

40

50

60

Grazinglivestock

Fieldcrops Milk Mixed (cropsand livestock)

Granivores Wine Otherpermanent

crops

Horticulture

UAA EU27 UAA

47.0%

48.0%

49.0%

50.0%

51.0%

52.0%

53.0%

54.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU27 EU15 EU10 Linear (EU15)

41

very high in Slovakia (96 %11

), France, eastern and central regions of Germany, the Czech

Republic, western Hungary and Bulgaria. Conversely, it is below 30 % in many southern

European regions, Ireland, Wales, Denmark, north-eastern Poland, Sud-Vest-Oltenia

(Romania) and the Hamburg region (Germany).

Map 3.3: Share of rented land in the total UAA by FADN region in 2009


3.3.3. Level of land rents

As land prices are often influenced by factors originating outside the agricultural sector, the

annual rent farmers have to pay for one hectare of land is typically considered as the best

proxy for the cost of land. Map 3.4 shows that the level of land rents differs markedly across

the EU regions. In 2009, the highest average land rent per ha was observed in the Netherlands

and Canarias (approximately € 735 and € 710 respectively). Land rents were also very high in

the Hamburg region (Germany), Denmark, Alto-Adige (Italy) and Ribatejo e Oeste

(Portugal), where they were well above € 500 per ha. Rents were particularly low, on the other

hand, in the Baltic countries (below € 30 per ha) and in many regions with unfavourable

conditions for intensive agricultural production, such as dry and mountainous areas.

In so far as rent reflects land scarcity, its level can be used as an indicator of the risk of land

abandonment. For instance, if land rents are high, it can be assumed that farming is profitable

and that there are enough farmers willing to use the land. On the other hand, if rents are low,

11 This very high share of rented land in total UAA reflects the business structure of Slovak agricultural

holdings (i.e. cooperatives renting land from their members).

42

this indicates that there is little potential for making economically profitable use of the land.

Hence, adverse changes in the economic environment are highly likely to result in land

abandonment.

Map 3.4: Average land rent in the FADN regions in 2009


Results by farm type

The level of land rents depends on several factors such as the scarcity of land, the degree of

competition between farmers in the local land market and the strength of demand for land

from different sectors. In areas where horticulture or wine production is of importance,

suitable land is scarce and land rents are much higher than, for example, in areas with

extensive grassland, as the profitability of horticulture and wine production is much higher.

Similarly, in areas with intensive livestock production, land prices tend to be higher because

additional land is often a precondition for expanding this production. This is mirrored in the

average level of land rents per farm type shown in Figure 3.22 on the next page.

43

Figure 3.22: Average land rent by farm type in 2009

(average per farm in € per ha)

Source: DG AGRI EU- FADN

Development by EU group

As shown in Figure 3.23, the level of land rents in EU-15 increased very gradually over the

period 1999-2009, from around € 161 per ha to € 175 per ha. However, this trend was more

pronounced in EU-10 during the period 2004-2009, despite a small decrease in the last

observed year: average land rent per hectare rose by more than 45 % during the period under

review, from around € 33 to € 49. In EU-2, land rents followed a hump-shaped pattern, with

the average per hectare falling to nearly € 62 in 2009, yet remaining nearly 7 % above its 2007

level. All in all, average land rent has changed little since 2007 in the EU as a whole, standing

at around € 143 per hectare.

Finally, note that the land rent figures discussed in this subsection are averages and do not

therefore necessarily reflect prices in new rental contracts (which can be well above the

average level observed in the FADN).

Figure 3.23: Long-term developments in land rents

(average per farm in € per ha)


0

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600

700

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1,000

Horticulture Wine Granivores Otherpermanent

crops

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Grazinglivestock

Rent/ha Total Groups

0

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75

100

125

150

175

200

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


44

FIGURE INDEX

Figure 1.1: Farm net value added by Member State in 2009 .................................................. 6

Figure 1.2: FNVA per AWU and remuneration of family labour per FWU by Member State

in 2009 .................................................................................................................. 6

Figure 1.3: Long-term developments in FNVA per AWU and remuneration of family labour

per FWU ................................................................................................................ 7

Figure 1.4: FNVA per farm in EU-27 by type of farming in 2009 ....................................... 10

Figure 1.5: FNVA per AWU by type of farming in 2009 ..................................................... 10

Figure 1.6: FNVA per farm by EU group and organisational form in 2009 ......................... 11

Figure 1.7: FNVA per AWU and remuneration of family labour per FWU by EU group and

organisational form ............................................................................................. 12

Figure 1.8: Distribution of FNVA per AWU by EU groups in 2009 .................................... 13

Figure 1.9: Distribution of FNVA per AWU by year............................................................ 14

Figure 1.10: Distribution of FNVA per AWU by type of farming in EU-15 in 2009 ............. 14

Figure 1.11: Distribution of FNVA per AWU of dairy farms in EU-15 by year .................... 15

Figure 1.12: Distribution of FNVA per AWU of field crop farms in EU-15 by year ............. 15

Figure 1.13: Distribution of FNVA per AWU of granivore farms in EU-15 by year ............. 16

Figure 1.14: Lorenz curve of the distribution of FNVA in EU-27 in 2009 ............................. 17

Figure 1.15: Income components per farm by EU groups in 2009 ......................................... 18

Figure 1.16: Income components per farm by type of farming in 2009 .................................. 19

Figure 1.17: Rate of Return on Assets by MS in 2008 and 2009 ............................................ 20

Figure 1.18: ROA in EU-27 by type of farming in 2009 ........................................................ 21

Figure 1.19: Development of the ROA by EU groups ............................................................ 21

Figure 2.1: Share of public support in total receipts by MS in 2009 ......

Documents

EU farm economics 2012ec.europa.eu/agriculture/rica/pdf/EU_farm_economics_2012.pdf(MS), i.e. at least 90 % of the total Standard Gross Margin1 (SGM) and 90 % of Utilised Agricultural