Micro-economic analyses of EU agricultural holdings August 2010 · 2015-05-04 · August 2010 EU dairy farms report 2010 4 1. Introduction • Annual overview of the EU dairy farms

EU dairy farms report 2010based on FADN data

Micro-economic analyses of EU agricultural holdings

August 2010

August 2010 EU dairy farms report 2010 2

Plan

1. Introduction

2. Method

3. Results


1. Introduction


1. Introduction• Annual overview of the EU dairy farms• based on the latest available data from the Farm

Accountancy Data Network (FADN) for 2007

• developments of milk margin per tonne – until 2007

– and estimates for 2008 and 2009 to assess impacts of the dairy crisis at farm level

• trend in income per work unit until 2007


2. Method

• FADN• Margin• Income• Samples of dairy farms studied


Farm Accountancy Data Network• EU-wide system of yearly sample surveys

• collect structural and accountancy data on farms

• to monitor income and business activities of agricultural holdings

• to evaluate impacts of the Common Agricultural Policy measures

• to simulate new policy scenarios


Farm Accountancy Data Network• Farms above a minimum economic size • Current sample = 81 400 holdings

– representing 5,400,000 farms in the 27 Member States,

– up to 95 % of EU Agricultural Area – around 95 % of EU agricultural production

• only source of harmonised micro-economic farm data for the EU


Margin• The model estimating milk production costs and

margins– In FADN costs refer to the farm as a whole: contribution of each

enterprise to the farm income not directly available

– Costs allocated to one enterprise using different ratios (ratio of milk output in total farm output, ratio of dairy cows on total livestock…)

– New regrouping of costs this year, but methodology unchanged– Operating costs (specific and non-specific)

– Depreciation

– External factors (rent, wages, interests paid)

– Imputed family factors (family labour and own capital)


Milk Price

Milk revenues

Coupled payments

Gross margin

Operating costs

Net margin

External factors

Depreciation

Net economic margin

Imputed family factors

+

-

-

-

-


Margin• Estimates of 2008 and 2009

– Latest FADN data = 2007– Estimate for milk output and operating costs based on

milk price indice and input price indices– Structures and milk production supposed identical– Sources of indices:

• For the milk price: DG AGRI • For purchased feed: DG AGRI FEEDMOD• For the other inputs: EUROSTAT databases (Agricultural

prices and price indices, Economic Accounts for Agriculture, Harmonized Indices of Consumer Prices and Gross Domestic Product inflation rates)


Income

• Indicators

– Farm Net Value Added (FNVA)

– Economic profit (EP)

• Expressed per Annual Work Unit (AWU) to

take into account the differences in the

labour force of the holding


Total output

Gross Farm Income

Intermediate consumptions

Farm Net Value Added

Depreciation

Farm Net Income

External factors

Economic profit

Imputed family factors

Balance current subsidies & taxes

Balance subs. & taxes on invest.

-

-

-

- +

+


Samples of dairy farms studied• For production costs and margins:

– milk specialised farms only (more than 50% of their output come from milk), representing 71% of the dairy cows in the EU-27

• For income:

– milk specialised farms

– non-specialised milk farms (EU-10 represent a high share of dairy cows / milkproduction)

100%56%44%EU 27100%56%44%EU 2100%32%68%EU 10100%75%25%EU 15

Total milk farmsSpecialised milk farms

Non-specialised milk farms

FADN 2007Share of farms


3. Results

• Margins

• Income


EU-15 and EU-10 had different trends in gross margin over 2000-2007, decreasing in the EU-15, and increasing in the EU-10, but the dairy

crisis affected similarly all EU groups

150

71

122

41

186

118

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008estimate

2009estimate

€/tonne of milk EU-15 EU-10 EU-2 EU-27

Source: EU FADN DG AGRI, Model of the allocation of milk costs.

Note: contrary to coupled payments, decoupled payments , progressively introduced from 2005, are not included in margins, but they are of course part of farmers' income.


With the dairy crisis, the milk gross margin is estimated to have decreased by 53% between 2007 and 2009 in the EU-27 as a result of

a dramatic price drop and the development of operating costs

Source: EU FADN DG AGRI, Model of the allocation of milk costs

EU-27 Milk specialised farms

149 141

69

0

50

100

150

200

250

300

350

400

Revenues Operatingcosts



2007 2008 estimate 2009 estimate

€/tonne of milk

Other operating costs

Energy

Feed

Revenues

Gross margin-53%


Impact of the dairy crisis on EU-27 milk specialised farms

98%

86%

99%

90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2009e

Share of milk specialised farms with positive gross margin

Share of specialised farms' milk production with positive gross margin

The share of specialised farms with positive gross margin in the EU-27 is estimated to have dropped from 98% in 2007 to 86% in 2009


14% of farms in distress


The highest impacts in % drop of the dairy crisis on the milk gross margin are estimated for Germany and Ireland in the EU-15…

-53%9%-17%EU 15

-43%5%-13%The United Kingdom

-69%3%-17%Sweden

-1%10%6%Finland

-32%8%-7%Portugal

-54%8%-17%Austria

-50%8%-19%The Netherlands

-61%9%-26%Luxembourg

-35%15%-11%Italy

-74%10%-31%Ireland

-42%11%-8%France

-43%7%-19%Spain

-75%7%-27%Germany

-67%14%-19%Denmark

-63%6%-31%Belgium

Gross margin /t (% difference 2009/2007)

Total operating costs /t (% difference 2009/2007)

Total revenues from milk /t (% difference 2009/2007)Member State



And for Malta, Latvia, Hungary, Slovakia, the Czech Republic, and Estonia in the EU-10… The main drivers of the margin drop (price drop / costs’ increase)

differ from one Member State to another.


-53%9%-18%EU27

-37%10%-17%EU2

-34%10%-17%Romania

-53%10%-17%Bulgaria

-67%9%-24%EU 10

-32%10%-7%Slovenia

-118%6%-28%Slovakia

-61%9%-25%Poland

-235%18%-16%Malta

-142%15%-30%Latvia

-47%0%-26%Lithuania

-139%7%-25%Hungary

-75%9%-22%Estonia

-105%6%-23%The Czech Republic

Gross margin /t (% difference 2009/2007)

Total operating costs /t (% difference 2009/2007)

Total revenues from milk /t (% difference 2009/2007)Member State


In the EU-15, while depreciation and external factors in €/t have not changed much, the imputed family factors have decreased continuously, mainly due to

the reduction of opportunity cost for own capital.


43 43 42 41 43 44 45 46

82 84 76 73 73 71 68 69

31 2323 19 20 14 14 15

0

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007

€/ton of milk

Depreciation Wages Rent Interest Family labour costs Ow n capital unpaid cost


Imputedfamilyfactors

-26%

Externalfactors



30 33 36 37

3946

4551

15

1924

18

0

20

40

60

80

100

120

140

2004 2005 2006 2007

€/ton of milk

Depreciation Wages Rent Interest Family labour costs Ow n capital unpaid cost

In the EU-10, imputed family factors and external factors continuously increased over the period studied, reflecting the gradual increase of the standard of living after accession (wages, family labour costs, rent, etc.)


Imputedfamilyfactors

+28%

Externalfactors

+43%


The net economic margin, after deduction of all costs including opportunity costs for family factors, remains negative over the period studied in the EU-15.

It means that family factors are not remunerated as they would be in other activities. The margin rose abruptly in 2007 to -22 €/t due to the sharp increase in the milk price, which more than offset the rise in operating costs. But given

the gross margin trend for 2008-2009, a significant drop can be expected.


+28%

+43%


322 339 321 314 304351

367 371357 350 352 346 349

373

315323

-45

-32

-36 -36

-29 -31

-46

-22

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007

€/ton of milk

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

Total revenues from milk Total economic costs Net economic margin (after ow n factors) w ith CP*


In the EU-10, given the regular increase of the imputed family factors, the net economic margin seems to be following a slightly decreasing trend if we except

the atypical year 2007, even though the period of four years is too short to identify a firm trend.



222245 253

226253 271

283294

-5

-7

-18

-11

0

50

100

150

200

250

300

350

2004 2005 2006 2007

€/ton of milk

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Total revenues from milk Total economic costs Net economic margin (after ow n factors) w ith CP*


Despite the negative net economic margin, the income indicators of milk specialised farms were positive and rising thanks to the increase in milk farm size and to decoupled payments, until 2007. However, given the estimated

gross margin trend after 2007, a significant drop in income can be expected.



31 090 32 380

40 155

1 219 1 303

7 682

26 780 28 83826 632 26 856

24 931

-4 652-3 635-6 029

-4 110 -2 778-10 000

0

10 000

20 000

30 000

40 000

50 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

€/AWU

-50

0

50

100

150

200

250

€/tonne of milkFarm Net Value Added (FNVA) Economic profit (EP)

Gross margin w ith coupled payments Net economic margin w ith coupled payments


Despite the negative net economic margin, the income indicators of milk specialised farms were positive and rising thanks to the increase in milk farm size and to decoupled payments, until 2007. However, given the estimated

gross margin trend after 2007, a significant drop in income can be expected.



5 7126 497

7 627

9 670

1 106 1 120 1 422

2 956

-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

2004 2005 2006 2007 2008 2009

€/AWU

-20

0

20

40

60

80

100

120€/tonne of milk

Farm Net Value Added (FNVA) Economic profit (EP)

Gross margin (over operating costs) w ith CP* Net economic margin (after ow n factors) w ith CP*


Moreover, except in the EU-2, milk specialised farms on average are in a relatively good situation in terms of income by comparison with other types of

farming. This is not the case for non-specialised milk farms, which have a significantly lower income on average.


Comparison of the income of milk farms with other farms 2007

40 155

9 670

2 543

22 890

9 160

3 528

23 232

4 744

21 077

38 302

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

EU-15 EU-10 EU-2 EU-27

FNVA/AWU

€/AWU

Milk specialised farms Non-specialised milk farms FieldcropsHorticulture Wine Other permanent cropsMilk Other grazing livestock GranivoresMixed Total


EU averages conceal a wide range of situations of margins and income at national level as it is illustrated with the estimated 2009 gross margin by

Member State.


Milk specialised farms - estimates 2009

7045 40

10568

40

129

70 8560

85

156

2869

-424

-25

72

-24 -34

55

-15

7855

136

-100

0

100

200

300

400

500

Belgium

Denmark

German

ySpa

inFranc

eIre

land

Italy

Luxe

mbourg

The N

etherlan

dsAus

triaPort

ugal

Finlan

dSwed

en

The U

nited King

dom

The C

zech

Rep

ublic

Estonia

Hungary

Lithu

aniaLa

tvia

Malta

Poland

Slovakia

Slovenia

Bulgari

aRomania

€/ton of milk

Total revenues from milk Total operating costs Gross margin (over operating costs) with CP*


Within a Member State, the regional milk gross margin can vary significantly.



Even within each Member State, the variety of situation can be huge (distribution of the milk gross margins by Member State in 2007).


€/tonne of milk


Thank you for your attention

Report, annexes and power point available on our website:

http://ec.europa.eu/agriculture/rica/index.cfm?new_language=enFor any question, you can contact:[email protected]

http://ec.europa.eu/agriculture/rica/index.cfm?new_language=en

mailto:[email protected]

Documents

Micro-economic analyses of EU agricultural holdings August 2010 · 2015-05-04 · August 2010 EU dairy farms report 2010 4 1. Introduction • Annual overview of the EU dairy farms