Farm incomes down 12%

According to data released by Eurostat, in 2009 farmers’ incomes in the EU ‘fell by their largest margin in a decade’, down some 12.2% (compared to a decline of only 2.5% in 2008). According to Eurostat, this was mainly a result of ‘a sharp fall in the value of agricultural output’ at the level of real producer prices (-10.9%), with the largest declines in real terms being in crop production (down some 13.2%) as a result of price declines, which were most marked in the cereals sector (-27.5%). In real terms, income from animal production fell only 9.7%, largely as a result of price declines (-8.7%), but also as a result of a small decline in the volume of production (-1.1%). By far the largest decline was for milk, the price of which fell by 20.3%.

Income losses however were not evenly spread across the EU27 countries, and incomes actually rose in five countries, with British farmers seeing the biggest rise in income, up by 14.3%. The largest decline occurred in Hungary (-35.6%), while France, Europe’s biggest grain producer, saw incomes fall by 19.8%, while German farm incomes fell by 21.0%.

According to Padraig Walshe, president of COPA, the EU agri-cooperatives’ organisation, with farmers’ incomes ‘on average less than 50% of average earnings in the EU, … the extreme price volatility on the markets poses a big problem for EU farmers’, particularly since farmers face ‘rock-bottom farm prices and high production costs’. This being stated, input costs according to Eurostat decreased by 9.2% in 2009, in part as a result of a 6.2% decline in prices and a 3.1% decline in the volume of inputs applied (the largest decline being in the use of fertilisers, which fell by 14%). USDA for its part reports the French farming sector as not only reducing input application, but also reducing investment in agricultural machinery.

Against this background, farmers’ organisations are arguing for an active agricultural policy, since ‘the market is simply not functioning properly’. COPA-COGECA Secretary-General Pekka Pesonen has argued that a strengthening of the CAP is essential, since ‘without the CAP, consumers will become dependent on food imports with no control over how they are produced, the price or availability’. A particular area of concern is the weakening of the position of farmers in the food supply chain, where the demand is for action to strengthen the position of producers by ‘concentrating supply via cooperatives and producer organisations’.

Responding to the Eurostat report, Commissioner Mariann Fischer Boel said that the figures made the case for a strong EU agricultural policy and continuing direct aid to farmers, which now represents about one-third of farm income in the EU. She argued that such direct aid payments provide ‘a basic level of income for farmers, cushioning them from price fluctuations’. She stressed, however, that European agriculture had to adapt to meet the ‘multiple challenges faced by our rural areas in the 21st century’.

Meanwhile, USDA has posted a report analysing the breakdown of €1.7 billion in additional French government support being extended to beleaguered farmers in France. This consists of:

• €1 billion in concession loans for five years (at 1.5% interest rather than 3%, with the interest rate subsidy being paid from government funds at a cost of around €260 million over five years);
• the granting of tax exemptions valued at €170 million;
• direct state aid of €650 million.

This comes on the back of a dramatic decline in France’s agricultural trade surplus, with ‘a near halving in the first nine months of 2009 compared to the same period in 2008’.