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European Commission
Directorate-General for Agriculture and Rural Development
http://ec.europa.eu/agriculture
Agricultureand RuralDevelopment
Agricultureand RuralDevelopment
EU Farm Economics Overviewbased on 2012 FADN data
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 2012
European Commission
EU Farm Economics Overviewbased on 2012 FADN data
Disclaimer:This publication does not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein.
Contact:European CommissionDG Agriculture & Rural Development,Microeconomic analysis of EU agricultural holdingsE-mail: [email protected]: http://ec.europa.eu/agriculture/rica/index.cfm
1
EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR AGRICULTURE AND RURAL DEVELOPMENT Directorate E. Economic analysis, perspectives and evaluation; communication E.3. Economic analysis of EU agriculture
Brussels, May 2015
EU FARM ECONOMICS OVERVIEW
FADN 2012
EXECUTIVE SUMMARY
This report provides an overview of key economic developments in European agricultural
holdings based on 2012 data, the latest available in the Farm Accountancy Data Network
(FADN). The FADN survey represents farms that account for the majority of EU agricultural
production.
After the sharp decline in farm income in 2009, recovery started in 2010 and continued in
2012. Overall, income slightly increased due to higher agricultural producer prices and an
increase in the value of agricultural output. The latter is mostly linked to the performance of
animal output (+3.1 %) and to a lesser extent to that of crop production (+1.4 %). However,
significant income differences were observed across European regions as well as across
different types of farming. Despite the high input prices such as the cost of animal feed and
energy in 2012, farms specialised in granivores (pigs and poultry) and field crop farms
generated the highest income per person. From 2011 to 2012, income per person increased
for farms specialised in field crops, granivores, horticulture and other permanent crops, and
for mixed farms (mainly due to higher producer prices and volumes in animal and crop
production in 2012). It decreased for farms specialised in wine, grazing livestock and for
dairy farms. The latter two are due to the decrease of producer prices for milk and the
decrease in sheep meat production.
The income gap between the EU-N101 and EU-15 narrowed in 2011, but began to widen
again in 2012. The average remuneration of family labour in the EU-15 was four times
higher than in the EU-N10.
Finally, in comparison to the previous year, the proportion of direct payments to total
receipts in the EU-27 decreased from 11.9 % to 11.2 % in 2012. One of the reasons for this
was the increase in agricultural output.
1 EU-N10 refers to the ten Member States that joined the EU in 2004.
2
Income developments
The EU-27 average farm net value added (FNVA)2 increased by 2.7 % from 2011 to
2012, mostly due to increases in agricultural output (especially in the value of animal
output) and prices. Compared to 2009, FNVA was 32 % higher in 2012. Average FNVA
per annual work unit (FNVA/AWU) increased by around 4 %, from EUR 18 200 in 2011 to
EUR 19 000 in 2012.
This growth was driven by the increase in FNVA, with labour input remaining stable. It was
primarily influenced by an increase in agricultural real prices, reflecting the continued
recovery of commodity markets in 2012 after the low point in 2009. Remuneration per family
work unit3 stood at around EUR 12 900 in 2012, up from EUR 12 700 in 2011.
This income increase masked substantial differences across Member States, regions and
types of farming. Holdings in Denmark, the UK (England), north-western Germany and
northern France generated the highest FNVA/AWU in 2012. Denmark and the Picardie region
of France had the highest average FNVA/AWU in the EU. The regions with low
FNVA/AWU (i.e. below EUR 10 000) were mostly situated in the EU-N10. Only one region
in the EU-15, namely Norte e Centro (Portugal) had an average FNVA/AWU below
EUR 10 000.
On average, farms specialised in granivores, field crops, wine, horticulture and milk had the
highest FNVA/AWU, while the FNVA/AWU of farms specialised in other permanent crops,
grazing livestock (other than milk) and mixed activities remained below the EU-27 average.
In 2012, FNVA/AWU increased for farms specialised in granivores, horticulture, other
permanent crops and for mixed farms (crops and livestock), and decreased for farms
specialised in field crops, wine, milk and other grazing livestock. This increase was mainly
due to the higher producer prices and to a lesser extent to the volume of output in 2012.
Looking at the distribution of FNVA/AWU in the EU-N10 and EU-2,4 the average
income per worker in these countries remained significantly below the EU-15 level. In
more than 96 % of farms in the EU-2 and around 92 % of farms in the EU-N10, FNVA/AWU
was below the EU-15 average. In the EU-N10, average FNVA/AWU stood at around
EUR 9 500, but was under EUR 4 200 in more than 50 % of farms (median income).
FNVA/AWU was less than EUR 2 500 in 50 % of farms in the EU-2.
Role of direct payments
In 2012, on average, direct payments accounted for nearly 31 % of FNVA in the EU-27, down
from 32 % in 2011. This slight decrease was caused by a slight increase in FNVA and a slight
decrease in direct payments in 2012. The proportion of direct payments to FNVA was highest
in Finland (72 %). It was second-highest in Slovakia (71 %).
2 Farm net value added (FNVA) is used to remunerate the fixed factors of production (labour, land and
capital) whether they are external or family factors. In order to obtain a better measurement of the
productivity of the agricultural workforce and to take into account the diversity of farms, FNVA is also
calculated by annual working unit (AWU, work of one person occupied full time on a farm). This is one of
the FADN’s main income indicators.
3 Remuneration of family labour is equal to: FNVA + balance of subsidies and taxes – wages paid – paid rent
– estimated costs of own land and own capital. The value is given per family work unit (FWU).
4 EU-2 means Bulgaria and Romania.
3
However, direct payments accounted for only 12 % of FNVA in the Netherlands, showing that
Dutch agriculture is more focused on the more profitable sectors that are less dependent on
direct payments, such as horticulture and pig and poultry production.
The proportion of direct payments to agricultural income also fluctuated markedly with the
type of farming. In particular, direct payments represent a substantial part of FNVA (56-42 %)
in grazing livestock, mixed and field crop farms as a result of the historical orientation of the
CAP. On the other hand, subsidies account for only a very limited part of total revenue in
wine and horticulture holdings (6-4 %).
Direct payments helped to even out the variability in EU farm income. The average amount of
direct payments received in 2012 was EUR 9 140 per farm surveyed by FADN.5
Characteristics of farms represented by FADN
The structure of European farms covered by FADN varies markedly in several ways:
Asset value. The average farm size in terms of asset value was highest in Denmark and in
the Netherlands (EUR 2 500 000 and EUR 2 200 000, respectively), reflecting very high
land prices and the importance of sectors which typically need considerable investment
(such as milk, granivores and horticulture). In contrast, farms in Romania had the lowest
total asset value (below EUR 40 000) due to low land prices, small farm sizes and less
capital-intensive types of farming. Bulgaria almost tripled the asset value of its farms
from 2007 to 2012. The land price level in the EU-2 remains well below the EU-27
average.
Labour input. In the FADN survey, the average number of workers employed per farm
in the EU-27 stood at 1.6 AWU in 2012. However, it varied significantly across Member
States, ranging from 14.7 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 higher than in permanent crops other than wine holdings (the
sector with the lowest labour input).The share of unpaid labour (expressed as family
labour hours) accounted for 77 % of the total labour force in the EU-27 and represented
the most prevalent form of labour in all Member States except for Slovakia, the Czech
Republic, Hungary, Estonia and Bulgaria. In these Member States, the proportion of
family labour in the total labour force (in terms of hours worked) was below 50 %. The
average hourly wage of farm workers stood at EUR 7.2 in the EU-27 during 2012, up
4.9 % from the previous year. This nominal wage increase more than compensated for the
general increase in prices (EU-27 HICP6 inflation stood at 2.5 % in 2012).
5 Please note that FADN covers the farms that account for over 90 % of agricultural production in the EU.
It does not cover the smallest farms with low production. See Annex 1 for more details.
6 The Harmonised Index of Consumer Prices (HICP) is an economic indicator constructed to measure the
changes over time in the prices of consumer goods and services acquired by households. It is the official
measure of consumer price inflation in the euro zone for the purposes of monetary policy in the euro area
and for assessing inflation convergence as required under the Maastricht criteria.
4
Land use. The average size of farms covered by the FADN survey was 33 ha7 in 2012.
However, it varied considerably across Member States, ranging from 521 ha per farm in
Slovakia to 3 ha per farm in Malta. Rented land accounted for 54 % of total agricultural
area in the EU-27 in 2012. The land rents in the EU-27 have increased by 15 % since
2009, from EUR 143 per ha to EUR 164 per ha in 2012. Land rents were particularly high
in the Canaries (EUR 1150 per ha) and in the Netherlands (EUR 724 per ha), but
remained under EUR 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 rental price paid by grazing livestock farms.
The Farm Accountancy Data Network (FADN) is a European system of sample surveys
that are run each year to collect structural and accountancy data of farms. Its 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 represent the largest possible proportion of agricultural output, agricultural area and
farm labour, of holdings run with a market orientation. For 2012, the sample consisted of
approximately 83 000 holdings in the EU-27, which represent nearly 5.0 million farms (40 %)
out of a total of 12.2 million farms included in the FSS.8
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 2012 accounting year, due to
time needed for data collection, control and processing.
For further information please see Annex 1 on ‘Farm Accountancy Data Network in the
context of the Farm Structure Survey − Methodology’ (page 56).
7 Please note, that the FADN survey does not contain all agricultural holdings in the EU-27, only those of a
certain minimum size (as specified in Council Regulation (EC) No 1217/2009). Based on this criterion many
small farms have been excluded from the field of survey. Accordingly, it should be emphasised that the
average farm size mentioned in the report does not correspond to the average farm size in the total
agricultural population. See more information in the methodological chapter.
8 FSS is the abbreviation of the Farm Structure Survey. It is carried out every 3 or 4 years as a sample survey
and once in ten years as a census by all Member States. The purpose of the survey is to obtain reliable data
on the structure of agricultural holdings in the European Union, in particular on land use, livestock and
labour force.
5
CONTENTS
1. ECONOMIC SITUATION OF FARMS..................................................................... 6
1.1. Farm income ...................................................................................................... 6
1.2. Distribution of income .................................................................................... 14
1.3. Income components ......................................................................................... 21
1.4. Return on assets ............................................................................................... 23
2. IMPORTANCE OF DIRECT PAYMENTS FOR FARM INCOME ....................... 26
2.1. Proportion of direct payments in total revenue ............................................... 26
2.2. Proportion of direct payments in FNVA ......................................................... 27
3. CHARACTERISTICS OF FARMS REPRESENTED BY FADN .......................... 30
3.1. Financial structure ........................................................................................... 30
3.1.1. Total asset value ................................................................................ 30
3.1.2. Total liabilities ................................................................................... 32
3.1.3. Development of farm net worth ........................................................ 34
3.1.4. Solvency ............................................................................................ 35
3.1.5. Current and fixed assets .................................................................... 36
3.2. Labour ............................................................................................................. 39
3.2.1. Labour force ...................................................................................... 40
3.2.2. Remuneration of farm workers.......................................................... 42
3.3. Land ................................................................................................................. 44
3.3.1. Farm size ........................................................................................... 44
3.3.2. Importance of rented land.................................................................. 45
3.3.3. Level of land rents ............................................................................. 46
6
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 using farm net
value added, family net income 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 (labour, 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 used.
FNVA = output + Pillar I and Pillar II payments + any national subsidies + VAT balance —
intermediate consumption — farm taxes (income taxes are not included) — depreciation.
The value is calculated 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.
Farm net income (FNI): After deduction of the external factors of production from the farm
net value added and by adding the balance of subsidies and taxes on investments, we get the
remuneration of family labour, own land and own capital which can be considered as farm
net income.
FNI = FNVA — total external factors + balance of subsidies and taxes on investments
Remuneration of family labour: In the agricultural sector, the bulk of the workforce consists
of family members who do not receive a salary but have to be remunerated from farm income.
As the FNVA is required to finance not only family labour but all fixed production factors,
another way of estimating income (the remuneration of family labour) is calculated as
follows:
Remuneration of family labour = FNVA + balance of subsidies and taxes — total external
production factors — opportunity costs of own land — opportunity costs of own capital. Or
starting from the previous indicator: farm net income — opportunity cost of own land —
opportunity cost of own capital
The value is calculated per family work unit (FWU). Only farms that use unpaid labour
(which in most cases means family members) are included in the calculation.
Results by Member State
FNVA varied significantly across EU Member States in 2012. Denmark ranked highest, with
EUR 167 600 per farm. This is 28 times higher than in Slovenia, the country with the lowest
value. The Netherlands, Slovakia and the Czech Republic also had high values. The EU-27
average was at around EUR 30 000 (see Figure 1.1). The main advantage of the average
FNVA/farm lies in its relative simplicity but it fails to reveal the differences in farm size, type
of farming or structural decreases in the labour force employed in agriculture. To overcome
this, FNVA is usually expressed per annual work unit (AWU), which can be seen as a
measure of partial labour productivity.
7
Viewed from this angle, the general picture of sizeable income variability within the EU
remains unaffected, though the ranking of Member States changes somewhat (Figure 1.2):
Denmark, the Netherlands and Belgium registered the highest FNVA per AWU, at
EUR 97 900, EUR 54 600 and EUR 43 100 respectively. This is almost three or, in the case of
Denmark, even five times the value of the average FNVA per AWU for the EU-27
(EUR 19 000), showing the predominance of granivore production, specialist horticulture and
milk sectors in the three countries’ agricultural sectors. At the other end of the spectrum,
Poland, Romania and Slovenia had the lowest FNVA per AWU (EUR 7 300, 5 400 and 4 000
respectively), because their agriculture has remained largely oriented towards less productive
types of farming, namely mixed farming and other permanent crops. It should also be noted
that in 2012 there was a decrease in the volume of almost all crop categories and the
agricultural output decreased most significantly in Romania and Slovenia.
It is also worth noting that, within the EU-15, only Portugal and Greece — Member States
characterised by a large number of small farms — had an FNVA per AWU below the EU-27
average. Except for Hungary, the Czech Republic and Estonia, EU-N10 Member States had
average income (FNVA/AWU) below the EU-27 average (EUR 19 000).
Figure 1.1: Farm net value added by Member State in 2012
(average per farm in EUR)
Source: Directorate General for Agriculture and Rural Development (DG AGRI) EU-FADN.
Farm net value added is an indicator that measures the remuneration of all fixed production
factors, whether they are external or family factors. In order to distinguish between them with
respect to income, we have to separate out the external factors of production from the
calculation. By doing this we arrive at farm net income (FNI). If we use this indicator, the
profitability in Member States changes. The most striking is the fact that Slovakia’s FNI was
the lowest out of all countries, although its FNVA was third highest in 2012. This can be
traced back to the characteristics of Slovakian agriculture, which is based mainly on large-
scale holdings cultivated by paid labour. The proportion of small family farms in total
agricultural land is very low today (less than 8 %).9
9 Number of holdings and utilised agricultural area in Slovakia, 2010 Agricultural Census.
8
The Netherlands maintained its leading role in terms of farm net income, indicating that
income is still high enough to finance the estimated family factors of production, even after
deducting all external factors. The UK performed better when measuring FNI than it did for
FNVA, which shows that a significant part of its labour is family labour. The average FNI in
the EU-27 was EUR 19 800.
Figure 1.2: Farm net income by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN
An alternative measure of agricultural income is the remuneration of family labour, as a high
proportion of work in the agricultural sector is carried out by family members. This is
expressed per family work unit (FWU) and is calculated by deducting from FNVA the costs
of wages, rent and interest paid, and the opportunity costs of own land and capital. At EU-27
level, the average remuneration of family labour per FWU stood at EUR 12 900 in 2012.
Denmark kept the first place from the previous year with the highest remuneration of family
labour per FWU, but the subsequent order has changed in 2012 compared to 2011. Denmark
was followed by the Netherlands (EUR 50 600) and France (EUR 33 800), who had the
second- and third highest remuneration of family labour in 2012. Denmark and the
Netherlands achieved these levels despite having had the highest opportunity cost of own land
among the Member States. The gap between the FNVA/AWU and remuneration of family
labour/FWU is the widest in Slovenia, Ireland and Sweden. The reasons behind this are the
high amount of interest paid by Swedish farmers and the high opportunity cost of own capital
in Slovenia (72 % of the family farm income). Slovenian farmers had the lowest remuneration
of family labour (EUR 590).
9
Figure 1.3: FNVA per AWU and remuneration of family labour per FWU, by Member
State in 2012
(average in EUR)
Source: DG AGRI EU-FADN
Results by EU group
Following the very high annual agricultural income (EUR 27 300) in 2011 in the EU-15,
FNVA per farm continued increasing to EUR 28 100 in 2012 (+3 %). In 2012 the increase in
the EU-27 value of agricultural output (+2 % in real terms) is linked to the performance of the
volume of animal output (+3.1 %) and to a lesser extent of crop production (+1.4 %).10
While
total labour input remained stable in the EU-N10, FNVA per farm marginally decreased from
EUR 17 600 to EUR 17 400, which also resulted in a decrease in the FNVA/AWU (by -0.2 %).
The remuneration of family labour per FWU in the EU-N10 decreased slightly more visibly,
from EUR 6 700 to EUR 6 600 (by -1.5 %).
In absolute terms, FNVA per AWU increased by EUR 6 300 or 29 % in the EU-15 in 2004-12,
and by EUR 4 500 or 92 % in the EU-N10 — a stronger increase in relative terms, but a
widening gap due to the fact that income in the EU-15 grew more in absolute terms. Looking
at the 2004-12 period, no convergence in nominal farm income can be observed between the
two groups of EU Member States.
Contrary to the slight decrease seen in the EU-25, FNVA per AWU in the EU-2 increased by
roughly 6.6 % between 2011 and 2012, from EUR 5 500 to EUR 5 800. At the same time the
remuneration of family labour stood at EUR 3 400 in 2011, and decreased to EUR 3 300
(by -2.9 %) in 2012.
10 Source: EU agriculture — Statistical and Economic Information — 2012.
http://ec.europa.eu/agriculture/statistics/agricultural/2012/pdf/overview_en.pdf.
10
Figure 1.4: Long-term developments in FNVA per AWU and remuneration of family
labour per FWU
(average per farm in EUR)
Source: DG AGRI EU-FADN
Regional differences
Map 1.1 shows the regional differences in FNVA per AWU in the EU-27 in 2012. Based on
this indicator, the agricultural holdings with the highest income per working unit were mainly
located in Denmark, the UK (England), north-western Germany, the Netherlands, northern
Italy, northern France and Belgium. In these regions, there is a high percentage of highly
intensive granivore production, horticulture and milk farms. On the other hand, regions with
very low farm income (below EUR 10 000 per year) were mostly situated in the EU-N10.
Only one region in the EU-15, Norte e Centro (Portugal), registered average farm income
below EUR 10 000.
11
Map 1.1: FNVA per AWU by FADN region in 2012
Source: DG AGRI EU-FADN.
When measured by the remuneration of family labour per FWU, the differences in income
between the EU-15 and the EU-N10 appear to be less pronounced compared to FNVA/AWU
(see Map 1.2). However, there are some regions in the EU-15 with extremely high income per
unit of family labour, such as the western part of eastern Germany (Sachsen-Anhalt EUR
104 700), and also in the north Mecklenburg-Vorpommern (EUR 88 800); and the Ile de
France (EUR 83 000) and Picardie regions (EUR 70 900) in France. The highest income per
FWU in the EU-15 is four times higher than in the Észak-Magyarország region in Hungary,
which registered the highest income per FWU (EUR 25 000) in the EU-N10. Income levels
are lowest in Bulgaria and Romania. The southern regions of Bulgaria (with EUR 1 600 and
EUR 2605, respectively) and Romania (EUR 2250) have especially low levels of
remuneration of family labour per FWU. The differences between the extreme values in the
EU-N10 have increased more in 2012 compared to 2011.
12
Map 1.2: Remuneration of family labour per FWU, by FADN region in 2012
Source: DG AGRI EU-FADN.
Results by type of farming
Figure 1.4 shows significant differences in average FNVA across different types of farming.
In particular, average farm income was approximately four times higher in the granivore
sector than in the mixed crops and livestock sectors. One explanation for the relatively low
income of mixed farms is that many of them are very small. On the other hand, holdings
specialised in granivores could have had higher incomes in 2012 due to the growth in the
value of animal output which can be traced back to the increase in real producer prices. The
high income levels of farms specialised in granivores can also be explained by the fact that
most of these farms are big in terms of economic size.
When measured by FNVA per AWU, the general picture of income distribution by type of
farming changes (see Figure 1.5). Farms specialised in horticulture lost their position of
having the second highest FNVA in absolute terms, mainly due to the paid labour intensity
associated with this type of farming. Farms specialising in granivores had the highest FNVA
per AWU in 2012, and were followed by field crop farms. Field crop farms reached higher
income levels compared to 2011 due to higher producer prices for crops. The increase in real
prices (+7 %) offset the lower production values (-5.2 %).11
11 Source: EU agriculture – Statistical and Economic Information – 2012
http://ec.europa.eu/agriculture/statistics/agricultural/2012/pdf/overview_en.pdf.
13
The income of farms specialising in granivores, field crops, wine, horticulture and milk
production was above the EU-27 average. For permanent crop farms (other than wine), farms
specialising in grazing livestock (other than dairy) and mixed farms the income per worker
remained below average. The latter two types of farm had the lowest FNVA per AWU. From
2011 to 2012, FNVA per AWU decreased only for milk (by -12.8 %) and grazing livestock
farms (by -2.9 %), while income increased for all other types of farming. The income decrease
of dairy farms is due to the decrease of EU farm gate milk prices in 2012 compared to the
previous year.12
The remuneration of family labour per FWU does not significantly alter the
picture of relative productivity differences across various types of farming. While holdings
specialised in granivores and field crops remain at the top of the spectrum and mixed farms at
the bottom, dairy farms do slightly better than farms specialising in horticulture in terms of
remunerating family labour.
Figure 1.4: Average FNVA in the EU-27 by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
12 Source: EU agriculture – Statistical and Economic Information – 2012
http://ec.europa.eu/agriculture/statistics/agricultural/2012/pdf/overview_en.pdf.
14
Figure 1.5: FNVA per AWU by type of farming in 2012
(in EUR)
Source: DG AGRI EU-FADN.
Results by organisational form and EU group
From an organisational point of view, holdings in the FADN are divided into three groups:
(1) family farms, where the profits cover 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, on average, non-family farms generated higher FNVA than family
farms, with income disparities particularly visible in the EU-N10 and, to a lesser degree, in
the EU-15 and EU-2. The observed disparities across and within the three groups of Member
States mainly reflect differences in farm size. In the EU-N10, holdings classified as ‘other’
had the highest levels of FNVA. Income in these large commercial farms in the EU-N10
significantly exceeded the FNVA created by the corresponding group of holdings in the
EU-15 and EU-2 (EUR 302 800 as compared to EUR 88 400 and EUR 77 700, respectively).
On the other hand, on average, partnership farms in the EU-2 had significantly higher income
(EUR 199 200) than their counterparts in the EU-15 and EU-N10. On average, family farms
had the lowest FNVA levels out of all the organisational forms in each EU group.
15
Figure 1.6: FNVA by EU group and organisational form in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
When FNVA is weighted by AWU, non-family farms still tend to have higher income than
family farms across different EU groups (see Figure 1.7). However, in this case partnership
farms show higher values than the ‘other’ types (i.e. legal entities). In general, FNVA per
worker is greater in the EU-15 than in the EU-N10 or EU-2, irrespective of the organisational
type of farm. This can be partially explained 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 of the holding
(in EUR)
Source: DG AGRI EU-FADN.
16
1.2. Distribution of income
As depicted by the ‘box-plots’13
in Figure 1.8, agricultural income varies considerably across
farms. The general pattern shows that a high proportion of farms have 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 FNVA per AWU in the EU-15 stood at around EUR 28 100
in 2012. However, 10 % of farms had an income per worker of more than EUR 55 500, and
50 % recorded an FNVA per AWU below EUR 15 100.
Average income per worker in the EU-N10 and EU-2 remained significantly below the EU-15
level. The mean of EU-N10 and EU-2 figures is in the upper 25 % of data, which means that
these box-plots are also skewed to the top (towards higher values). The EU-N10 average
income per worker stood at around EUR 9500, though 50 % of holdings had an income per
worker of less than EUR 4200. In the EU-2, half of the farms reported an FNVA per AWU of
less than EUR 2500.
Figure 1.8: Distribution of FNVA per AWU by EU group in 2012
(in EUR/AWU)
Source: DG AGRI EU-FADN.
Figure 1.9 shows developments in income distribution for the EU as a whole in 2004-12.
Until 2007, income levels in the EU-27 were gradually increasing, as was average farm
income per AWU. From 2007 to 2009, the average level of income decreased. The box-plots
show that income in most farms decreased in the same period. The results shown by the Gini
coefficients (Figure 1.14.) help understand that some farms were able to maintain high
incomes because the inequality of income distribution deepened in 2009.
13 In the box plots, the inter-quartile range (between 25 % and 75 % of farms) is indicated by the yellow box;
the limits of 10 % of farms and 90 % of farms correspond to the end of lines (whiskers); the median (50 % of
farms) is the line crossing the yellow boxes, and the mean is shown by the ‘+’ sign.
17
This cannot be seen from the box-plots alone, as they show only 80 % of farms and exclude
the upper and lower 10 % of farms. The impact of the sizeable drop in agricultural output
prices is visible in the 2009 data, and explains the significant narrowing of the distribution of
income per AWU. After 2009, an upward tendency can be seen, leading once again to a wider
distribution of average income per worker in 2010 and 2011. In 2012, there was a slight
increase in average income per worker (by 4 %), and the upper whisker of the box-plot shows
that the upper 10 % of farms recorded higher average income than in 2011.
Figure 1.9: Distribution of FNVA per AWU by year
(in EUR/AWU)
Source: DG AGRI EU-FADN.
Figure 1.10: Distribution of FNVA per AWU by type of farming in the EU-27 in 2012
(average in EUR/AWU)
Legend:
1 = Field crops
2 = Horticulture
3 = Wine
4 = Other permanent crops
5 = Milk
6 = Other grazing livestock
7 = Granivores
Source: DG AGRI EU-FADN.
Figure 1.10 shows the distribution of FNVA/AWU by type of farm in the EU-27 in 2012.
18
In general terms, income distribution remains asymmetrical within each of the eight sectors
represented in the FADN (i.e. a small proportion of farms with very high income and a large
proportion of farms with low income14
).
The degree of these differences varies greatly across different types of farming. The most
pronounced differences between the mean and median values of FNVA/AWU are observed
for farms specialised in granivores. The distribution of FNVA/AWU is also highly uneven for
field crop and dairy farms (i.e. sectors with a larger inter-quartile range for FNVA/AWU). For
mixed farms, the best performing 25 % of farms have a larger impact on the average than the
remaining 75 % (their mean values are outside the boxes).
The trend in the distribution of FNVA/AWU over time varies from sector to sector. As shown
in Figure 1.11, the distribution of FNVA/AWU for specialised dairy farms became
increasingly asymmetric over the 2005-07 period. In 2007, income discrepancies were
particularly pronounced, and were accompanied by a significant increase in mean and median
levels. In 2008 and 2009, the degree of asymmetry decreased, as did mean and median
income. These developments were predominantly driven by increasing input prices in 2008
and the 2009 decrease in milk prices. From 2010 to 2011, FNVA/AWU increased, with the
mean income per worker approaching almost its 2007 level after a significant recovery in
prices and output during this period. In 2012, the income distribution became smoother as the
upper 10 % of farms registered a lower average income compared to 2011, and the mean and
median levels decreased.
Figure 1.11: Distribution of FNVA/AWU of dairy farms in the EU-15 by year
(in EUR)
Source: DG AGRI EU-FADN.
14 Within a given sample, a single outlier will actually affect the average but will have no impact on the
median.
19
Figure 1.12: Distribution of FNVA/AWU of field crop farms in the EU-15 by year
(in EUR)
Source: DG AGRI EU-FADN.
Figure 1.12 presents the average FNVA/AWU of specialised field crop farms. This ratio
fluctuated in 2004-12, with the first high point in 2007. The income peak was due to the fact
that the 2007 agricultural year was marked by a very sharp and remarkable increase in the
prices of many agricultural commodities, both in the EU and on world markets.
In the following two years (and especially in 2009), FNVA/AWU fell to the 2006 level, and
income distribution narrowed. In 2010-11, it returned to its 2007 level, and income
distribution became wider again. This recovery was the result of higher cereals prices and
volumes in 2010-11. As before, in 2012 the increase in real prices compensated the lower
production value for almost all crop categories. Consequently, farms specialised in field crops
had higher average income compared to 2011. While the best performing 10 % of farms had a
higher income level, the lowest 10 % of farms had lower income than in 2011 and the median
fell too. Therefore, the distribution has slightly shifted again in the direction of inequality.
For farms specialised in granivore production (Figure 1.13), average FNVA/AWU fell to a
low level in 2007 and 2008, as the dampening effect of extremely high feed prices more than
outweighed the favourable impact of higher output prices. After reaching their lowest points
in 2008, the median and mean values gradually started to increase slightly, in parallel with
decreasing income inequalities. In 2012, the best performing 10 % of farms reached a
significantly higher level of income, pushing up the mean value and causing income
distribution to widen again. This increase can be explained by the growth in volume and the
increase in producer prices (particularly for pork).
20
Figure 1.13: Distribution of FNVA/AWU of granivore farms in the EU-15 by year
(in EUR)
Source: DG AGRI EU-FADN
Figure 1.14 shows the distribution of income (FNVA) among the labour force (AWU) in the
EU-27 in 2012 using a Lorenz curve.15
In 2012, approximately one-third of the farm labour
force had a negative cumulated proportion of income.
The Lorenz curve shows that income is unevenly distributed among the labour force:16
80 %
of the labour force generated approximately 32 % of the farms’ income observed in FADN.
The remaining 20 % therefore generated 68 % of FNVA. Note that FNVA/AWU was negative
for around 6 % of total AWU employed in EU agriculture.
15 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.
16 If income were equally distributed among the labour force, the Lorenz curve would become a straight line
linking the origin to the top right corner of the figure.
21
Figure 1.14: Lorenz curve of the distribution of FNVA/AWU in the EU-27 in 2012
So
urce: DG AGRI EU-FADN.
An alternative measure of the statistical distribution of income is the Gini index,17
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 concentration or inequality (with
one work unit capturing all the income in a sector).
Table 1.1 shows that income concentration in the EU-15 is typically lower than in the EU-
N10 or EU-2. In 2004-12, the highest income concentration was seen in the EU-2. Although
comparisons between groups should be made with caution, the observed differences partly
reflect differences in the structure of the farm sector.
For instance, due to the generally higher thresholds in the EU-15, the field of observation in
FADN does not include the lower economic size classes as it is in the most EU-N10
countries.
Looking at the development of the coefficient over time within each EU group, income
concentration has increased in the EU-15 from 2004 to 2011. In 2012, the income levels
converged again and reached the 2010 level. In the EU-N10, there have been minor
fluctuations in income distribution during the whole reference period. The economic crisis in
2009 seems to have increased income concentration in all EU groups, but the EU-N10 was
particularly affected by unequal income distribution. With the economic recovery, income
inequality narrowed in 2010, however there was still a slight concentration in 2011. Since
2011, income distribution has shifted again in the direction of inequality in the EU-N10, and
continued to do so in 2012.
In the EU-2, farm income inequalities were most apparent in the accession year (2007) and in
2009 due to the economic crisis. Income concentration gradually reduced over time due to the
increase of direct payments during the phasing-in process.
17 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.
22
Table 1.1: Development of the Gini coefficient of FNVA per AWU by EU group
2004 2005 2006 2007 2008 2009 2010 2011 2012
EU15 0.54 0.55 0.54 0.55 0.59 0.62 0.60 0.63 0.60
EU-N10 0.68 0.69 0.63 0.65 0.67 0.72 0.64 0.66 0.68
EU2 0.71 0.66 0.70 0.68 0.67 0.65 Source: DG AGRI EU-FADN
23
1.3. Income components
Results by EU group
Figure 1.15 shows the composition of farm receipts and expenses by EU group in 2012. On
average, expenses (including the remuneration of own factors of production) were higher than
receipts for farms in the EU-15, while receipts slightly exceeded expenses for the average
farm in the EU-N10 and EU-2.
On the revenue side, average receipts per farm in the EU-27 stood at EUR 82 000, out of
which total output represented EUR 71 200 (87 %) and subsidies18
EUR 10 800 (13 %). These
aggregated figures hide large differences between the EU groups, both in absolute and relative
terms: the average farm receipt in the EU-2 was roughly three times lower than in the
EU-N10 and 6.7 times lower than in the EU-15. In relative terms, subsidies accounted for
more than 17 % of average farm receipts in the EU-N10, compared to roughly 13 % both in
the EU-15 and in the EU-2.
Figure 1.15: Income components per farm by EU group in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
On the cost side, average farm expenses totalled EUR 82 700 in the EU-27. While this
aggregated figure again reflects highly contrasting price levels in the EU groups, the cost
structure as such has been found to be broadly similar across all countries. Intermediate
consumption19
represented approximately 50 % of total expenses.
18 Subsidies include the sum of net current and investment subsidies. They include EU coupled and decoupled
payments, less favoured area (LFA) payments, rural development payments and national aid. Net means the
balance of current subsidies and taxes plus the balance of subsidies and taxes on investment.
19 Intermediate consumption includes specific costs (including inputs produced on the holding) and overheads
arising from production in the accounting year. Specific costs can stem from seeds, seedlings, fertilisers,
crop protection products, feed for grazing stock and granivores etc.
24
Depreciation and expenses relating to external factors20
accounted for approximately 10-12 %.
The remainder was accounted for by the opportunity costs of own factors (family labour, own
land and own capital). While the EU-N10 and EU-15 show a similar distribution of cost
factors as the EU-27, for farms in the EU-2 intermediate consumption accounts for a smaller
part of total farm expenses (45 %) but opportunity costs account for a larger part of total own
factors (34 %).
Results by type of farming
In 2012, on average, farms specialised in granivores, field crops and horticulture showed a
positive balance of receipts and expenses as shown in Figure 1.16. Farms specialised in
granivores had the highest output of all farm types in the EU-27 (EUR 281 500). On the other
end of the spectrum, farms specialised in permanent crops other than wine generated the
lowest output, namely EUR 30 332. Grazing livestock farms recorded the highest average loss
per farm (EUR -8 100).
As concerns average direct payments per holding, farms specialised in field crops benefitted
most from subsidies (EUR 15 300 per farm), followed by dairy and grazing livestock farms
(EUR 15 200 and EUR 14 600 per farm, respectively). On the other hand, the horticulture
sector received, on average, the lowest amount of subsidies (EUR 2 700 per farm). The most
subsidised field crop farm received more than five times more subsidies than the least
subsidised horticultural farm.21
These discrepancies in subsidies across sectors still reflect the
past features of the CAP, which provided support in particular for the production of cattle and
field crops. However, note that horticultural farms have significantly higher receipts than field
crop or grazing livestock farms and might therefore be less reliant on public support.
Figure 1.16: Income components per farm by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU- FADN.
Note: Receipts (Rec), Expenses (Exp)
20 Expenses for external factors include wages, rent and interest paid.
21 This observation is based on the absolute value of subsidies for the average field crop and horticultural farm
disregarding the differences in the farm size of these two types of farming.
25
The cost structure varies markedly between sectors, reflecting differences in farm size,
technological processes and input prices. Granivore farms (typically large in economic size,
with technological processes involving a high turnover of animals) had the highest costs for
intermediate consumption due to feed costs (driven by higher prices for feeding stuffs),22
both
in absolute and in relative terms (EUR 202 500 per farm annually or nearly 73 % of total
expenses).
On the other hand, intermediate consumption on average totalled EUR 11 200 (or less than
29 % of total costs) for other permanent crop farms. Depreciation costs were, in relative terms,
broadly constant across sectors, amounting to around 11 % of total expenses. Granivore farms
spent least on depreciation (8 % of total expenses) while wine holdings spent most (13 %).
The proportion of external factors (wages, rent and interest paid) in total costs was
particularly high in the horticulture (21 %) and wine sectors (19 %), mainly due to the high
cost of external labour. On the other hand, other grazing livestock and granivore farms had
the lowest proportion of expenditure on external factors (around 8 %). In absolute terms,
horticulture holdings had the highest external factor costs (EUR 33 400), while farms
specialised in other grazing livestock, mixed and other permanent crops had the lowest (less
than EUR 6 000). Finally, the estimated costs of own production factors (family labour, own
land and own capital) as a proportion of total costs were highest for permanent crop farms
(44 %) and lowest for granivore farms (12 %).
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,
where the net income is defined as the
sum of FNVA and investment subsidies
minus wage costs, rent paid and the
opportunity costs of own labour.
Results by Member State
The ROA of an average farm in the EU-27 remained similar to the previous year, at 2.0 % in
2012 and up from 1.8 % in 2010 (and only 0.4 % in 2009). Holdings in Hungary, Lithuania
and Estonia had the highest ROAs, mainly due to relatively low levels of opportunity costs
and fixed asset values (such as land and quotas). In 2012, six Member States registered a
negative ROA, with the lowest value recorded in Sweden (-2.6 %). In 2012, Sweden,
Slovenia, Malta, Slovakia, Finland and Ireland had the lowest ROAs in the EU (see Annex 8
for more details).
22 http://ec.europa.eu/agriculture/statistics/agricultural/2012/pdf/overview_en.pdf.
ROA=
FNVA
+ Balance of investment subsidies and taxes
- Wages paid
- Paid rent
- Capital costs
- Opportunity costs of family labour
Total assets
26
Figure 1.17: Return on assets by Member State in 2011-12
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Results by type of farming
Granivore, horticulture and field crop farms had ROAs above 2.0 %, but this figure dropped
below 1 % for mixed crop-livestock holdings. Farms specialised in grazing livestock had a
negative ROA, which shows that they invested a high amount of capital into their production
while simultaneously receiving little income (see Figure 1.18). This result could be linked to
the slight decrease in production volume and in producer prices for some animal products.
Prices particularly dropped for milk (-4.8 %) in 2012.23
Figure 1.18: ROA in the EU-27 by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
23 Source: EU agriculture – Statistical and Economic Information – 2012.
http://ec.europa.eu/agriculture/statistics/agricultural/2012/pdf/overview_en.pdf.
27
Trends by EU group
As shown in Figure 1.19, ROA fluctuated not only across EU groups but also over time for
each group. It decreased drastically for all countries in 2007-09 (except Bulgaria and
Romania) and from 2010 started to recover for all EU groups, albeit with varying intensity.
In the EU-15, all growth took place between 2009 and 2010, and ROA remained at its 2010
level even in 2012. In the EU-N10, the recovery process continued in 2011, reaching its
highest value in that year (3 %). The percentage of net income relative to farms’ total
resources in the EU-N10 decreased again in 2012 due to the decrease in net income (by -4 %)
and the increase in asset value. The increase in asset value can be explained by the high ROA
in 2011, which led farmers to invest in sowing crops and in equipment. After an increase in
2010, the average ROA marginally decreased in 2011 in the EU-2, and reached its highest
value (3.5 %) in 2012. In relative terms, this ROA was the highest among all EU groups in
2012, which actually masks that in absolute terms both net income and asset value were low
in the EU-2, only their ratio was high compared to other EU groups.
Figure 1.19: Changes in the ROA by EU group
(average per farm in EUR)
Source: DG AGRI EU-FADN.
28
2. IMPORTANCE OF DIRECT PAYMENTS FOR FARM INCOME
This chapter analyses the impact of direct payments on the income situation of European
farmers. Two economic indicators are used to express this: farm revenue and farm net value
added (FNVA). In our calculations, direct payments include total subsidies for operations
linked to production, including national aid.
2.1. Proportion of direct payments in total receipts
Results by Member State
The average amount of direct payments received per holding in 2012 was EUR 9 140. The
proportion of direct payments in total revenue (output plus net current and investment
subsidies) in the EU-27 stood at 11.2 % in 2012, down from 11.9 % in 2011, as total farm
receipts increased by 5 % while the level of average direct payments per farm decreased by
1.4 %. This proportion varies among Member States. The total receipts of Irish, Greek and
Finnish farms are proportionately most dependent on subsidies (which represent nearly 20 %
of their total receipts). The importance of crops such as grain maize, wheat, spelt and
industrial crops, which used to be strongly supported before decoupling, explains the high
proportion of direct payments in Greece’s total revenue. In Finland, the high proportion of
public support in total receipts mainly reflects substantial national payments, which are
granted in addition to EU direct payments (national aid for southern Finland, northern aid and
national aid for crop production24
). Finally, direct payments account for the lowest proportion
of total receipts in the Netherlands (close to 3.5 %), where sectors with a lower proportion of
direct payments in total receipts, such as horticulture, pig and poultry production, are a
significant part of total agricultural output.
Figure 2.1: Proportion of direct payments in total receipts by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN
24 Farming and Food in Finland. Ministry of Agriculture and Forestry, 2011.
29
Results by type of farming
As already stated, the proportion of direct payments in revenue varies markedly across types
of farming, reflecting mainly differences in average farm size. In addition, in the EU-15 the
historical model of the CAP was characterised by asymmetrical direct support across sectors
— a feature which has gradually been reduced following the 2004 reform. Figure 2.2 shows
that direct payments account for the highest proportion of total revenue in grazing livestock
(18.3 %) and field crop farms (15.7 %). On the other hand, they represent only a very limited
part of total revenue in the wine and horticulture sectors (3.3 % and 1.4 %, respectively).
Figure 2.2: Proportion of direct payments in total receipts by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
2.2. Proportion of direct payments to FNVA
The role that direct payments play in sustaining farm income becomes even more apparent
when we look at their comparison with FNVA (see Annex 3). Consequently, if all other
factors remain equal, changes in direct payments will have a much greater impact on FNVA
than on total farm revenue.
Results by Member State
In 2012, on average, direct payments accounted for nearly 31 % of FNVA in the EU-27, down
from 32 % in 2011 (Figure 2.3). This slight decrease was caused by a slight increase in FNVA
and a slight decrease in direct payments in 2012. The proportion of direct payments to FNVA
was highest in Finland (72 %), followed by Slovakia with the second-highest value in the EU-
27 (71 %). On the other hand, direct payments accounted for only 12 % of FNVA in the
Netherlands, which showed that the country was more focused on its highly profitable and
less subsidised sectors, such as horticulture and pig and poultry production.
Map 2.1 shows the regional differences in the proportion of direct payments to FNVA. The
lowest figure was seen in Hamburg (1 %), followed by Liguria and Trentino (2 % and 6 %,
respectively).
30
Figure 2.3: Proportion of direct payments to FNVA by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Map 2.1: Proportion of direct payments to FNVA by FADN region in 2012
Source: DG AGRI EU-FADN.
31
Results by type of farming
For total receipts, the proportion of direct payments to FNVA also fluctuates markedly
depending on the type of farming (Figure 2.4). In particular, direct payments represent a
substantial part of FNVA for grazing livestock, mixed and field crop farms, due to their
average farm size and the historical orientations of the CAP. Grazing and mixed farms
recorded below-average FNVA, while field crop farms had the highest average amounts of
direct payments in 2012, which led to the highest proportion of direct payments to FNVA in
these types of farming. On the other hand, direct payments play only a limited role in
sustaining income within the wine and horticulture sectors, which had one of the highest
FNVA in 2012.
Figure 2.4: Proportion of direct payments to FNVA by farm type in the EU-27 in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
32
3. CHARACTERISTICS OF ANALYSED FARMS
3.1. Financial structure
This chapter analyses the financial structure of agricultural holdings within the FADN field of
survey with respect to two main dimensions (country and type of farming) and using a
number of financial indicators derived from farm 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 has been increasing in both the EU-15 and the
EU-N10. In the EU-15, the average value of total assets rose by more than 40 % in 2004-12,
while in the EU-N10 it nearly doubled during this period.
Figure 3.1: Long-term developments in the value of total assets (TA) and total
liabilities25
(TL)
(average per farm in EUR)
Source: DG AGRI EU-FADN.
25 The concept of total liabilities will be discussed in section 3.1.2.
33
Results by Member State
As shown in Figure 3.2, the value of total assets of an average farm in the EU-27 stood at
approximately EUR 316 500 in 2012. However, this average masks sizeable variations across
Member States, reflecting differences in the structure of national agricultural sectors.
On average, Danish and Dutch farms held the highest amounts of assets (around
EUR 2 500 000 and EUR 2 200 000, respectively), reflecting very high land prices and the
importance of the types of farming that typically need considerable investment, such as milk,
granivores and horticulture production. In contrast, farms in Romania and Bulgaria had the
lowest values of total assets (under EUR 100 000) as they are characterised by less capital-
intensive types of farming and their farms have a smaller average economic size. These low
values of total assets were partly due to the lower land price levels in the EU-2.
Figure 3.2: Average total asset value per farm by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Results by type of farming
Granivores and dairy farms have typically held the highest amounts of total assets — more
than three times the asset value of farms specialised in mixed (crop and livestock) farming,
which had the lowest values. These disparities are partly due to differences in capital intensity
across sectors.
34
Figure 3.3: Average total asset value by type of farming in the EU-27 in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
3.1.2. Total liabilities
Results by Member State
In line with the general trend for total asset values (see Figure 3.1), total liabilities have also
increased. In the EU-15, the average value of total liabilities increased by 50 % in 2004-12,
while in the EU-N10 it rose by 48 % during this period.
In the EU-27, average liabilities per agricultural holding rose to EUR 47 900 in 2012, up from
EUR 47 400 in the previous year. As illustrated in Figure 3.4, both the total amount and the
composition of liabilities show wide variations across Member States. In absolute terms, the
Danish and Dutch farms had, on average, the highest total liabilities within the EU. In
contrast, total liabilities per farm remained very low in many Mediterranean Member States,
which may reflect difficulties farmers have in accessing credit markets in these countries.
However, these very low observed levels could also have resulted from different accounting
practices, where liabilities are typically included in farmers’ private rather than farm accounts.
In relative terms, agricultural holdings relied mostly on medium- and long-term loans, which
represented more than 90 % of total liabilities in Belgium, Italy, Cyprus, Denmark, Finland
and Slovenia. Short-term loans to finance agricultural activities were prominent in Hungary
(70 %), Slovakia (60 %), Lithuania (56 %) and Portugal (52 %).
35
Figure 3.4: Composition of liabilities per farm by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Results by type of farming
As shown in Figure 3.5, farms specialised in granivores, specialised dairy and horticulture
had, on average, the highest total liabilities (EUR 206 500, EUR 96 700 and EUR 91 300,
respectively), which in fact mirrored the high total asset values observed in these farm types.
Permanent crop holdings recorded the lowest liabilities in 2012 (EUR 7 500), but they had the
second-lowest asset values as well.
Medium- and long-term loans were the dominant kind of liability for all farm types. Short-
term loans only played a significant role in wine holdings, where they accounted for around
45 % of total liabilities.
Figure 3.5: Composition of liabilities per farm in the EU-27 by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
36
3.1.3. Development of farm net worth
Results by Member State
Farm net worth is defined as the difference between total assets and total liabilities at the end
of the accounting year. In 2012, the average farm net worth stood at approximately
EUR 268 600 in the EU-27 (+1 % compared to 2011). The average net worth per agricultural
holding was highest in the UK (EUR 1 554 200), in the Netherlands (EUR 1 435 100), and
Denmark (EUR 997 500) (Figure 3.6). This shows the importance of the granivore and milk
sectors, which are characterised by above-average net worth values per farm (Figure 3.7).
Romanian (EUR 38 200) and Bulgarian (EUR 79 600) farms had the lowest values.
Figure 3.6: Farm net worth by EU group and Member State in 2011 and 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Figure 3.7: Farm net worth in the EU-27 by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Farm net worth for mixed farms (crops and livestock) was lowest, and remained significantly
below the EU-27 average, reflecting these farms’ lowest asset value in comparison with other
sectors.
37
3.1.4. Solvency
In this analysis, solvency is measured using the liabilities-to-assets ratio, which shows the
percentage of an agricultural holding’s assets that are financed through debt. 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 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 increases its profitability, it comes at a greater risk as
leveraging magnifies both gains (when investment generates the expected return) and losses
(when investment moves against the investor26
).
As is the case for other financial indicators used, the liabilities-to-assets ratio varies
significantly across Member States and in some cases even within Member States, as shown
on Map 3.1. Farms in Denmark, France and the Netherlands had the highest liabilities-to-
assets ratio (at 60 %, 39 % and 36 %, respectively). The lowest average solvency levels were
observed in many Mediterranean Member States, as well as in Ireland, Romania and Slovenia
(below 3 %).
As has already been stated, 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 farmers’ private accounts. However, in the case of
Ireland, low solvency levels mainly reflect relatively high asset values. As shown in Figure
3.8, the level of solvency also varies markedly across farm types, with farms specialised in
granivores, horticulture, and dairy production having the highest liabilities-to-assets ratios.
26 For example, due to unfavourable weather conditions or outbreaks of animal diseases.
38
Map 3.1: Average liabilities-to-assets ratio per farm by FADN region in 2012
Source: DG AGRI EU-FADN.
Figure 3.8: Farm solvency in the EU-27 by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
39
3.1.5. Current and fixed assets
Results by Member State
Fixed assets27
account for the largest proportion of total assets in all Member States (see
Figure 3.9). In particular, total farm assets in Greece, Ireland, Malta and Slovenia consist
almost exclusively of fixed assets (more than 90 %). Farms there are mainly family-run and
may prefer the low investment risk accompanied with both reasonable and stable profitability
of fixed assets. The proportion of fixed assets was lowest in Slovakia (49 %), where the farms
are run mainly by companies whose operation relies more on current assets.
Figure 3.9: Composition of assets by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Figure 3.10: Composition of fixed assets by Member State in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
27 Fixed assets include agricultural land, farm and other buildings, forest capital, machinery and equipment,
and breeding livestock.
40
The composition of fixed assets across Member States depends on the structure of the
agricultural sector. As shown in Figure 3.10, ‘land, permanent crops and quotas’ was the
largest component in most Member States in 2012. In particular, this category made up more
than 80 % of fixed assets in Ireland and the United Kingdom. On the other hand, ‘buildings’
were of major importance in Austria, Slovakia, Czech Republic and Romania (ranging from
45 % to 50 %). ‘Machinery’ accounted for the largest proportion of fixed assets in Lithuania
(50 %). Finally, ‘breeding livestock’ was the smallest component of fixed assets in all
Member States (ranging from 15 % in France to 1.6 % in Italy).
However, it should be stressed at this point that accounting practices vary markedly across
Member States. For instance, quotas are not marketable in some countries (e.g. France), so
they are not recorded as a farm’s separate asset, 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 how land-related data is recorded. For example, in France, farmers in
some cases set up holdings that rent land to their members, and in this case the value of the
land is not included in these holdings’ total assets. This accounting practice thus increases the
relative proportion of other assets.
Results by type of farming
As shown in Figure 3.11, fixed assets accounted for 80 % of total assets in 2012. This
proportion varied slightly among types of farming, ranging from 84 % in specialised dairy
farms to 66 % in wine holdings.
Figure 3.11: Composition of assets by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
For 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 proportion varied from more
than 80 % in farms growing other permanent crops to about 50 % in granivore farms. On the
other hand, granivore farms had the largest proportion of ‘buildings’ (32 %) and farms
growing other permanent crops had the lowest (10 %).
41
Farms specialised in horticulture recorded the largest proportion of ‘machinery’ in fixed
assets (about 16 %), while the proportion of ‘machinery’ in fixed assets for farms growing
other permanent crops was around 10 %, at the other end of the spectrum. Finally, ‘breeding
livestock’ accounted for the highest proportion of total assets in grazing livestock and dairy
farms (broadly 9 %).
Figure 3.12: Composition of fixed assets by type of farming in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
3.2. Labour
This section analyses the structure of the labour force employed by EU farms, focusing on the
average size of the labour force employed per farm, its composition, and wages paid. The
results show that the proportion of non-family labour in the total workforce is gradually
increasing in the EU-15, reflecting structural changes and increasing farm sizes. A similar
development can be observed in the EU-N10. In addition, there is significantly higher
variability across EU-N10 Member States, due to the predominance of very large farms often
organised as legal entities in many eastern European countries. There are Member States
where the proportion of family labour is higher than the EU-27 average in both the EU-15 and
the EU-N10. In terms of the proportion of unpaid working hours, Slovenia, Ireland and
Austria take the lead (about 95 %), while in Denmark and in the Netherlands this proportion is
around 50 %, showing balanced labour distribution between family and non-family labour
hours. In the EU-N10 the highest proportion of unpaid working hours (89 %) can be observed
in Romania. Slovakia (8 %) and the Czech Republic (22 %) are at the other end of the scale,
due to the predominance of very large farms, which are often organised as legal entities.
42
3.2.1. Labour force
Results by Member State
The average total labour input of holdings stood at 1.6 AWU in 2012 in the EU-27, virtually
unchanged since the last two years, although it has decreased (by -11 %) compared to 2007.
As shown in Figure 3.13, it varied considerably across countries, ranging from 13.7 AWU in
Slovakia to 1.2 AWU in Greece. Slovak and Czech (6.5 AWU) farms had significantly higher
labour input compared to the remaining Member States, reflecting the predominance of very
large non-family agricultural holdings in their agriculture sector.
Figure 3.13: Labour input per farm (in AWU) by Member State in 2012
Source: DG AGRI EU-FADN.
Results by type of farming
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) and
for granivore farms (where the AWU per farm was 25 % higher than the average).
Figure 3.14: Labour input per farm (in AWU) by type of farming in the EU-27 in 2012
Source: DG AGRI EU-FADN.
43
Results by Member State
Traditionally, a significant part of the labour force employed in agriculture is family labour.
Family labour as a proportion of total labour force28
represents the prevalent form of labour in
most Member States, with the exception of Slovakia, the Czech Republic, Hungary, Estonia
and Bulgaria. As Figure 3.15 shows, the proportion of paid labour in the total labour force in
these five countries was higher than 50 % — sometimes significantly so.
Figure 3.15: Proportion of working hours of paid and unpaid labour by Member State
in 2012
Source: DG AGRI EU-FADN.
Results by type of farming
As shown in Figure 3.16, the proportion of paid labour is highest in horticulture holdings,
reflecting the typical recourse to seasonal workers. The proportion of paid labour is typically
lowest in grazing livestock, mixed (crops and livestock), and dairy farms.
28 The proportion is expressed as follows: time worked in hours by unpaid labour input (generally family) in the
holding divided by the time worked in hours by total labour input in the holding.
44
Figure 3.16: Proportion of working hours of paid and unpaid labour in the EU-27 by
type of farming in 2012
Source: DG AGRI EU-FADN.
3.2.2. Remuneration of farm workers
Results by EU group
As shown in Figure 3.17, the nominal hourly wage increased in the EU-15 and in the EU-
N10. In the EU-15, the average nominal hourly wage rose by 23 % between 2004 and 2012,
from EUR 8 to EUR 10. In the EU-N10, it stood at EUR 4 in 2012, up from EUR 2 in 2004
(an increase of some 91 %). The average EU-2 nominal hourly wage came to around EUR 2,
up from EUR 1, which meant a 41 % increase over the 2007-11 period. Only the EU-2
showed a decrease in nominal hourly wage from 2011 to 2012 (by -3.7 %). Finally, the
average EU-27 nominal hourly wage stood at EUR 7.2 in 2012, compared to EUR 6.9 in
2011; this was an increase of about 5 % over this period. The average nominal hourly wage in
the EU-15 was approximately 2.5 times higher than in the EU-N10 and four times higher than
in the EU-2. Note that changes in the nominal wage more than compensated for price
increases over this period, so that the real hourly wage rose by around 2.4 % between 2011
and 2012 (EU-27 HICP29
inflation stood at around 2.5.% during this time).
29 The Harmonised Index of Consumer Prices (HICP) is an economic indicator constructed to measure the
changes over time in the prices of consumer goods and services acquired by households. It is the official
measure of consumer price inflation in the euro zone for the purposes of monetary policy in the euro area
and for assessing inflation convergence as required under the Maastricht criteria.
45
Figure 3.17: Long-term developments in average nominal wages
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Results by Member State
As Figure 3.18 shows, the average hourly nominal wage differs widely across the EU-27. In
2012, it was highest in Denmark (EUR 23) and lowest in Romania (EUR 2). Note that wages
in the EU-N10 and the EU-2, as well as in Greece and Portugal, were below the EU-27
average (EUR 7). Map 3.2 shows that the level of wages was highest in north-western
Europe: Denmark (EUR 23), Sweden (EUR 22), the French Champagne-Ardenne region
(EUR 18) and the Netherlands (EUR 15). At the other end of the scale were Romania,
Bulgaria and the central regions of Poland (around EUR 2).
Figure 3.18: Average nominal wages of paid labour in 2012
(EUR/hour)
Source: DG AGRI EU-FADN.
46
Map 3.2: Average nominal wage by FADN region in 2012
Source: DG AGRI EU-FADN
47
3.3. Land
For most farm types, access to agricultural land is a precondition for economic activity. 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 report 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 average amount of agricultural land per farm. As
shown in Figure 3.19, the farms represented in the FADN are on average largest in Slovakia
(521 ha), followed by the Czech Republic (228 ha) and the UK (161 ha). Farms are smallest
in Greece, Cyprus (9 ha) and Malta (3 ha). The EU average was 32.7 ha in 2012, little
changed from the previous year. It should be noted that this average farm size is based on the
FADN survey, which does not cover all agricultural holdings in the EU but only those which
due to their size could be considered commercial. Thus the interpretation and the use of the
above-mentioned average farm size should be treated with caution (see the methodology
chapter for more information). The average farm size was mostly below the EU-27 average in
the Mediterranean countries, and in some of the Eastern European countries such as Poland,
Romania and Slovenia.
Figure 3.19: Total farm UAA30
by Member State in 2012
(average per farm in ha)
Source: DG AGRI EU- FADN
The average utilised agricultural land area was largest in field crop farms, followed by grazing
livestock farms. At the other end of the spectrum, horticultural farms were the smallest. The
average field crop farm (53 ha) was nearly nine times as large as the average horticultural
farm (6 ha) in 2011. However, it is important to stress that horticultural farms operate at a
much higher intensity, meaning that the land is a less important determinant of their level of
production.
30 UAA is the abbreviation of utilised agricultural area, which describes the area used for farming.
48
Figure 3.20: Total UAA of farms by type of farming in 2012
(average per farm in ha)
Source: 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 proportion of rented land in 2012
(average per farm in %)
Source: DG AGRI EU- FADN.
As shown in Figure 3.21, the proportion of rented land in the EU-15 increased from about
51 % in 2004 to 54 % in 2012. This indicates that more than half of the land available on the
EU-15 market is rented rather than purchased. The proportion of rented land in the EU-N10
first dropped slightly from 51.5 % after the accession year, and then started to increase again
from 2006 until 2009. From 2009, there was another gradual decrease, so that the proportion
of rented land was below 50 % by 2012.
49
Note that these averages for different EU groups mask considerable national and regional
disparities, as shown on Map 3.3. Rented land as a proportion of total UAA is very high in
some regions of France (Picardie: 97 %; Lorraine and Bourgogne: 94 %), Slovakia (95 %31
),
Bulgaria (Severoiztochen: 92 %), Spain (Cantabria: 85 %), the Czech Republic, and in the
eastern and central regions of Germany. Conversely, it is below 30 % in many southern
European regions as well as in Ireland (19 %), Wales (26 %), Austria (28 %), Denmark (29 %),
and north-eastern Poland (30 %).
Map 3.3: Proportion of rented land in total UAA by FADN region in 2012
Source: DG AGRI EU- FADN.
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
EU regions. In 2012, the highest average land rent per ha was observed in the Canarias and in
the Hamburg region (approximately EUR 1 150 and EUR 780, respectively). Land rents were
also very high in the Netherlands (EUR 720) and in Denmark (EUR 640). On the other hand,
rents were particularly low in Latvia and Estonia (below EUR 30 per ha) and in many regions
with unfavourable conditions for intensive agricultural production, such as dry and
mountainous areas.
31 This very high proportion of rented land in total UAA reflects the business structure of Slovak agricultural
holdings (i.e. cooperatives renting land from their members).
50
In so far as the rental value of land 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, 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 levels in the FADN regions in 2012
Source: DG AGRI EU- FADN.
Results by farm type
The level of land rent 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 in
different sectors. In areas where horticulture or wine production are important, suitable land is
scarce and land rents are much higher than, for example, in areas with extensive grassland.
Similarly, in areas with intensive livestock production, land prices tend to be higher because
additional land is often a precondition for expanding this production. Of course, other factors
such as the profitability of production, production structures and the institutional setting of
land markets must also taken into account as they influence the levels of land rents too. This
is mirrored in the average level of land rents per farm type shown in Figure 3.22.
51
Figure 3.22: Average land rent by farm type in 2012
(in EUR per ha)
Source: DG AGRI EU- FADN
Developments in land rent levels by EU group
As shown in Figure 3.23, the level of land rents in the EU-15 increased very gradually over
2004-12, from EUR 174 per ha to EUR 193 per ha. However, this trend was more pronounced
in the EU-N10, despite a small decrease in 2009: average land rent per hectare increased by
more than 117 % during this period, from around EUR 32 to EUR 70. In the EU-2, land rents
fell to EUR 63 in 2009 before increasing to EUR 120 in 2012 (+ 90 %). It is interesting to
observe that the average rent paid per ha has been, on average, higher in the EU-2 than in the
EU-N10 (over the period for which data are available). All in all, average land rents have
gradually increased in the EU since 2007 and stood at around EUR 164 per hectare in 2012
(+15 %). 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 may be well above
the average level observed in the FADN).
Figure 3.23: Long-term developments in land rent levels
(in EUR per ha)
Source: DG AGRI EU- FADN.
52
FIGURE INDEX
Figure1.1: Farm net value added by Member State in 2012 ................................................ 7
Figure 1.2: Farm net income by Member State in 2012 ……….…………………………8
Figure 1.3: FNVA per AWU and remuneration of family labour per FWU by Member
State in 2012 ....................................................................................................... 9
Figure 1.4: Long-term developments in FNVA per AWU and remuneration of family
labour per FWU ................................................................................................ 10
Figure 1.5: FNVA per farm in the EU-27 by type of farming in 2012 ............................... 13
Figure 1.6: FNVA per AWU by type of farming in 2012 ................................................... 14
Figure 1.7: FNVA by EU group and organisational form in 2012 ..................................... 15
Figure 1.8: FNVA per AWU and remuneration of family labour per FWU by EU group
and organisational form .................................................................................... 15
Figure 1.9: Distribution of FNVA per AWU by EU group in 2012 ................................... 16
Figure 1.10: Distribution of FNVA per AWU by year ......................................................... 17
Figure 1.11: Distribution of FNVA per AWU by type of farming in the EU-15 in 2012 .... 17
Figure 1.12: Distribution of FNVA per AWU of dairy farms in the EU-15 by year ............ 18
Figure 1.13: Distribution of FNVA per AWU of field crop farms in the EU-15 by year .... 19
Figure 1.14: Distribution of FNVA per AWU of granivore farms in the EU-15 by year ..... 20
Figure 1.15: Lorenz curve of the distribution of FNVA in the EU-27 in 2012 .................... 21
Figure 1.16: Income components per farm by EU group in 2012 ........................................ 23
Figure 1.17: Income components per farm by type of farming in 2012 ............................... 24
Figure 1.18: Rate of return on assets by Member State in 2011 and 2012 ........................... 26
Figure 1.19: ROA in the EU-27 by type of farming in 2012 ............................................... 26
Figure 1.20: Development of the ROA by EU group ........................................................... 27
Figure 2.1: Proportion of direct payments in total receipts by Member State in 2012 ....... 28
Figure 2.2: Proportion of direct payments in total receipts by type of farming in 2012 ..... 29
Figure 2.3: Proportion of direct payments to FNVA by Member State in 2012 ................. 30
Figure 2.4: Proportion of direct payments in FNVA by farm type in the EU-27, 2012 ..... 31
53
Figure 3.1: Long-term developments in the value of total assets (TA) and total liabilities
(TL) .................................................................................................................. 32
Figure 3.2: Average total asset value per farm by Member State in 2012 .......................... 33
Figure 3.3: Average total asset value by type of farming in the EU-27 in 2012................. 34
Figure 3.4: Composition of liabilities per farm by Member State in 2012 ......................... 35
Figure 3.5: Composition of liabilities per farm in the EU-27 by type of farming in 2012 . 35
Figure 3.6: Farm net worth per farm by EU group and Member State in 2011 and 2012 .. 36
Figure 3.7: Farm net worth per farm in the EU-27 by type of farming in 2012 ................. 36
Figure 3.8: Farm solvency in the EU-27 by type of farming in 2012 ................................. 38
Figure 3.9: Composition of assets by Member State in 2012 ............................................. 39
Figure 3.10: Composition of fixed assets by Member State in 2012 .................................... 39
Figure 3.11: Composition of assets by type of farming in 2012 ........................................... 40
Figure 3.12: Composition of fixed assets by type of farming in 2012 .................................. 41
Figure 3.13: Labour input per farm (in AWU) by Member State in 2012 ............................ 42
Figure 3.14: Labour input per farm (in AWU) by type of farming in the EU-27 in 2012 .... 42
Figure 3.15: Proportion of working hours of paid and unpaid labour by Member State in
2012 .................................................................................................................. 43
Figure 3.16: Proportion of working hours of paid and unpaid labour in the EU-27 by type of
farming in 2012 ................................................................................................ 44
Figure 3.17: Long-term developments in average nominal wages ....................................... 45
Figure 3.18: Average nominal wages of paid labour in 2012 ............................................... 45
Figure 3.19: Total farm UAA by Member State in 2012 ...................................................... 47
Figure 3.20: Total UAA of farms by TF in 2012 .................................................................. 48
Figure 3.21: Long-term developments in the proportion of rented land in 2012 .................. 48
Figure 3.22: Average land rent by farm type in 2012 ........................................................... 51
Figure 3.23: Long-term developments in land rent levels .................................................... 51
Figure 3.24: Physical farm size and Standard Output coverage of FADN compared to FSS
……………………………………………………………………….............. 56
Figure 3.25: FADN thresholds of the Member States in 2012 ..………………………….. 57
54
TABLE INDEX
Table 1.1: Development of the Gini coefficient of FNVA per AWU by EU group ............ 20
Table 1.2: Characteristics of the FSS and FADN ………………………………………... 56
MAP INDEX
Map 1.1: FNVA per AWU by FADN region in 2012 .......................................................... 11
Map 1.2: Remuneration of family labour per FWU by FADN region in 2012 .................... 12
Map 2.1: Proportion of direct payments in FNVA by FADN region in 2012 ...................... 30
Map 3.1: Average liabilities-to-assets ratio per farm by FADN region in 2012 .................. 38
Map 3.2: Average nominal wage by FADN region in 2012 ................................................. 46
Map 3.3: Proportion of rented land in the total UAA by FADN region in 2012 .................. 49
Map 3.4: Average land rent in the FADN regions in 2012 ................................................... 50
ANNEX INDEX
Annex 1: Farm Accountancy Data Network in the context of the Farm Structure Survey -
Methodology ......................................................................................................... 55
Annex 2: Definitions and their interpretations ...................................................................... 58
Annex 3: Income calculation ................................................................................................ 61
Annex 4: Threshold by Member State in 2012 (SO: Standard Output) ................................ 62
Annex 5: FNVA and remuneration of family labour per AWU by Member State and
organisational form in 2012 .................................................................................. 63
Annex 6: Number of holdings by type of farming in 2012 ................................................... 64
Annex 7: Breakdown of revenue and costs of EU farms in 2012 ......................................... 65
Annex 8: Balance sheet components in FADN ..................................................................... 66
Annex 9: Indicators by Member State in 2012 ..................................................................... 67
55
Annex 1: Farm Accountancy Data Network in the context of the Farm Structure
Survey — Methodology
The Farm Accountancy Data Network (FADN) is a European system of sample surveys
that are run each year to collect structural and accountancy data of farms. Its aim is to monitor
the income and business activities of agricultural holdings and to evaluate the impacts of the
Common Agricultural Policy (CAP). 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.
FADN is linked strongly to the Farm Structure Survey (FSS) managed by Eurostat, since the
field of survey in the FADN is based on the FSS farms population. The FSS is organised in all
Member States in a harmonised base, whereas the characteristics are based on community
legislation, therefore comparable data are available for all countries in case of each survey.
The FSS population consists of all agricultural holdings in the EU of at least 1 ha.32
Although
the threshold for inclusion in the survey varies among countries, the FSS covers at least 98 %
of the total utilised agricultural area excluding common land and 98 % of the total number of
farm livestock units.
To ensure that the FADN sample provides representative data concerning the agricultural
population and reflects the heterogeneity of farming in Europe, the sample of farms is set up
on the basis of the typology classification that works on the same principle as in the FSS.
Farms are selected in the FADN sample on the basis of the official selection plan prepared by
each Member State. The selection plan is drawn up on the basis of the most recent statistical
data, from the Agricultural Census carried out every 10 years or the FSS carried out between
censuses. Consequently, the field of survey in FADN is actually a subset of the FSS.33
The selection plan defines the number of farms to be selected by region, type of farming,
economic size classes and specifies the detailed rules applied for selecting the holdings. The
3-way stratification of the universe based on the common typology classification allows it to
be represented as a 3-dimensional matrix of cells. The number of farms in each cell is derived
from the FSS. Each cell corresponds to a specific category of farms. An individual weighting
is applied to each farm in the sample and corresponds to the number of farms in the 3-way
stratification cell of the field of observations (or the FSS farms in a given cell) divided by the
number of farms in the corresponding cell in the sample (or the FADN farms in a given cell).
This weighting system is then used in calculating the FADN aggregated results used in this
report.
32 Member States can use thresholds different than 1 hectare, as long as they follow the coverage requirements
specified in Regulation (EC) No 1166/2008 of 19 November 2008 on farm structure surveys and the survey
on production methods.
33 Note that there are also methodological differences in data collection for the FSS and FADN. For example,
information on animals is requested in June for the FSS and an average of the number of animals over the
year is used in the FADN. Information on other gainful activities is requested for the FSS in the form of a
template, while in the FADN it is calculated based on accounts.
56
Table 1.2 Characteristics of FSS and FADN
FSS
FADN
Type of data Full population Sample of market-oriented farms
Extrapolation to the population based on
weighting factors
Thresholds Alternative thresholds (minimum
coverage should be guaranteed)
Based on Standard Output (formerly
SGM); separate thresholds for each
Member State
Sampling frequency 3-4 year interval Annual
Time series 1999; 2003; 2007; 2010 1989-2012
Spatial resolution Local Administrative Unit Farm identification at NUTS3 level
Information Structural Financial and structural
The FADN intends to cover Europe’s agricultural holdings in the best possible way in order
to represent the largest possible proportion of total agricultural output, area and farm labour
represented in the FSS (Figure 3.24).
Figure 3.24 Physical farm size and Standard Output coverage of FADN compared to
FSS
Note that the FADN’s field of survey does not cover all agricultural holdings in the EU but
only those which due to their size could be considered as market oriented.
57
Market-oriented farms must exceed a minimum economic size threshold measured in
Standard Output34
.
Because of the different farm structures in the European Union, each Member State specifies
their own thresholds. The threshold should ideally ensure high overall FADN coverage of the
FSS population in terms of Standard Output, but also of Utilised Agricultural Area and
Livestock Units at country level. The economic size thresholds range from as low as
EUR 2000 in Bulgaria and Romania to as high as EUR 25 000 in Belgium, Germany, France,
Luxemburg, Netherlands and the UK (Figure 3.25).
Figure 3.25 FADN thresholds in Member States in 2012 (in EUR)
The FADN is primarily designed for the evaluation of income and financial indicators. It is
not suitable for providing data on the farm structure of all farms, because it does not include
the whole agricultural population and applies thresholds. Furthermore, the FADN does not
focus on the totals of production but on average values per farm.
The most recent FADN data available for this report are for accounting year 2012. The
sample consisted of approximately 83 000 holdings in the EU-27, which represent nearly
5.0 million farms (40%) out of the total of 12.2 million farms observed in the FSS.
34 Standard Output (SO) is the average monetary value of the agricultural output at the farm-gate price of
each agricultural product (crop or livestock) in a given region. The SO is calculated by Member States per
hectare or per head of livestock, by using basic data for a reference period of five successive years. The SO
of the holding is calculated as the sum of the SO of each agricultural product present in the holding
multiplied by the holding’s number of hectares or heads of livestock. The SO coefficients are expressed in
euros and the economic size of the holding is measured as the total standard output of the holding expressed
in euros. Previously, using rules set by Decision 85/377/EEC, the economic size was measured as the total
Standard Gross Margin (SGM) of the holding expressed in European Size Unit (ESU) instead.
58
Annex 2: Definitions and their interpretations
Revenue items recorded in the FADN accounts
Output: includes crops and livestock production as well as other output if it is directly linked
to the farm’s activity, e.g. farm tourism, forestry, renewable energy, etc. It does not include
the household’s non-farm income.
Pillar I and Pillar II-type payments: in the context of this analysis, Pillar I and Pillar II-type
payments refer not only to the part financed by the EU but also to subsidies financed by
Member States, including national aid. The FADN does not allow for a clear distinction
between EU and national payments over such a long time period.
Investment subsidies: investment subsidies could be regarded as part of the Pillar II
payments. However, they are shown separately because they are treated differently in the
calculation of income estimates. As in the case of the Pillar I and Pillar II-type payments, they
include national payments.
Costs items recorded in the FADN accounts
Intermediate consumption: total specific costs and overheads arising from production in the
accounting year. Intermediate consumption for example includes the costs of feed, fertilisers,
crop protection and energy.
Depreciation: depreciation of capital assets estimated at replacement value.
(Net) Farm taxes: farm taxes, except VAT, and other taxes on land and buildings. Subsidies
on taxes are deducted. Personal income taxes are not taken into account.
(Net) Taxes on investment: taxes not arising from current productive activity in the
accounting year, net of subsidies.
Wages: wages and social security charges. Amounts received by workers considered as
unpaid workers (wages lower than a normal wage) are excluded.
Rents: rent paid for farm land and buildings and rental charges.
Estimation of the imputed unpaid family factor costs
Family labour cost: this cost is estimated on the basis of wages which the owner of the farm
would have to pay if s/he were to hire employees to do the work carried out by family
members.
It is estimated as the average regional wage per hour based on the FADN data35
multiplied by
the number of hours worked by family workers on the farm.
35 If there are not enough farms (fewer than 20) with paid labour at regional level, the national average is used.
59
It is commonly acknowledged that the number of hours worked by family workers is typically
overestimated. Thus, a ceiling of 3 000 hours per Annual Work Unit is applied (this is the
equivalent of 8.2 hours a day, 365 days a year, and corresponds more or less to the time that
can be spent on a farm by farmers milking cows).36
The use of hours makes it possible to give a manager more remuneration than an employee, if
s/he works more hours.
Reliable family labour cost estimates are difficult to obtain as records of hours worked on the
farm might be overestimated and it is not easy to determine what an appropriate remuneration
for family labour is. Farmers may agree to be remunerated at a below-average wage if they
consider farming as a way of life or have other sources of income for their household
(e.g. other gainful activities directly related to the holding, spouse working outside the farm,
etc.).
Own-capital cost
– Own-land cost: this cost is estimated on the basis of the rent that the owner of the farm
would have to pay if he were to rent the land s/he is using. It is estimated as the owned area
multiplied by the rent paid per hectare on the same farm or, if there is no rented land on the
farm, by the average rent paid per hectare in the same region and for the same type of
farming.37
– Cost of own capital (except land): the cost of own capital (permanent crops, buildings,
machinery and equipment, forest land, livestock and crop stocks) is estimated at its
opportunity cost. That is how much money the farmer could earn if he were to invest the
equivalent of its capital value in ‘safe’ financial assets.
The interest paid on the capital is not known, as this information is optional in the FADN
farm return. Nevertheless, in order to take into account the actual interest rate paid on the
farm, a ‘weighted’ interest rate is calculated as the weighted average of this interest rate for
liabilities and the long-term interest rate obtained from Eurostat. It should be noted that if the
‘weighted’ interest rate is lower than the long-term interest rate (which means that the
calculated rate of interest paid is lower than the long-term interest rate), the long-term interest
rate is used instead of the ‘weighted’ interest rate.
36 A constraint of this estimation method is that if a farmer were to receive a salary he would probably work
less.
37 If there are not enough farms (fewer than 20) in a given region for a given type of farming, the national rent
per hectare for this type of farming is used (based on the TF8 classification).
60
Own-capital value (excluding land and land improvement) is estimated as the average value
of the assets (closing plus opening valuation divided by two) multiplied by the real interest
rate.38
The correction is made by subtracting the inflation rate39
from the nominal interest rate.
The value of total circulating capital is not taken into account in the estimation process as data
are not sufficiently reliable in some Member States. The crop stocks value is included,
however.
To calculate unpaid capital costs, the interest paid is deducted from the sum of the own-land
cost and the cost of own capital except land to avoid double counting. The total capital cost
must be at least equal to the interest paid:
Imputed unpaid capital costs = Max (interest paid; own-land cost + estimated cost for own
capital except land – interest paid)
38 Any increase in the value of assets is excluded from income calculations. For example, land appreciates in
value over time, which is one of the reasons why investors invest in land. This gain is not included in the
income; therefore it would not be consistent to include it in the cost of capital. In addition, in the FADN
assets are valued at replacement value. Depreciation is based on this replacement value and therefore
already takes the increase in prices (inflation) into account. Consequently, it would be double counting to
include the inflation part of interest in the cost of capital.
39 The inflation rate is based on the Eurostat annual average rate of change in the Harmonised Indices of
Consumer Prices (HICPs), available from 1997. Inflation rates based on a GDP deflator and on a deflator of
gross fixed capital consumption have been tested, but were found to lead to very high negative costs for
capital, mainly in the EU-N10. An inflation rate calculated on the basis of price indices for gross fixed
capital consumption has been tested, as it seemed to be more closely related to assets. However, this rate has
been fluctuating widely over the years for certain Member States. In addition, land is one of the most
important assets which does not depreciate. It follows that the inflation rate of gross fixed capital
consumption may not have a closer relationship with the change in the price of agricultural assets than with
the consumer price indices.
61
Annex 3: Income calculation
Source: DG AGRI EU-FADN.
62
Annex 4: Threshold by Member State in 2012 (SO40
: Standard Output)
Member State
Threshold
(in 1000
EUR)
Belgium 25
Bulgaria 2
Cyprus 4
Czech Republic 8
Denmark 15
Germany 25
Greece 4
Spain 4
Estonia 4
France 25
— France (Guadeloupe) 15
— France (Martinique) 15
— France (La Réunion) 15
Hungary 4
Ireland 8
Italy 4
Lithuania 4
Luxembourg 25
Latvia 4
Malta 4
Netherlands 25
Austria 8
Poland 4
Portugal 4
Finland 8
Sweden 15
Slovakia 15
Slovenia 4
Romania 2
United Kingdom 15
— United Kingdom (Northern Ireland) 15
40 The Standard Output (SO) is the average monetary value of the agricultural output at the farm-gate price of
each agricultural product (crop or livestock) in a given region. The SO is calculated by Member State per
hectare or per head of livestock, by using basic data for a reference period of five successive years. The SO
of the holding is calculated as the sum of the SO of each agricultural product present in the holding
multiplied by the holding’s relevant number of hectares or heads of livestock. The SO coefficients are
expressed in euros and the economic size of the holding is measured as the total standard output of the
holding expressed in euros.
63
Annex 5: FNVA and remuneration of family labour per AWU by Member State and organisational form in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN Note. Where no information is displayed in a column, this is for confidentiality reasons (i.e. there were fewer than 15 holdings in the given category of the 2012 sample).
64
Annex 6: Number of holdings by type of farming in 2012
Farms represented Sample farms
Types of farming Sum Sum
Field crops 1 120 030 23 820
Horticulture 185 840 5 146
Wine 278 840 4 456
Other permanent crops 688 340 6 649
Milk 605 080 14 121
Grazing livestock 807 400 11 368
Granivores 170 050 5 785
Mixed (crops and livestock) 1 063 780 11 951
Total groups 4 919 360 83 296 Source: DG AGRI EU-FADN
65
Annex 7: Breakdown of revenue and costs of EU farms in 2012
(average per farm in EUR)
Source: DG AGRI EU-FADN.
Note: Receipts (Rec), Expenses (Exp).
66
Annex 8: Balance sheet components in the FADN
Source: DG AGRI EU-FADN
67
Annex 9: Indicators by Member State in 2012
Member
State
FNVA FNVA per
AWU
Income
remaining
per FWU
(*)
Return
on
assets
Proportion
DIRECT
PAYMENTS
in revenue
Proportion
DIRECT
PAYMENTS
in FNVA
Average
asset
value
Average
liabilities Net worth
Paid
labour
input
Unpaid
labour
input
Wages /
hour
Average
UAA
Proportion
of rented
land
Level of
rents
EUR EUR/AWU EUR/FWU % % % EUR EUR EUR % % EUR/hour ha % EUR/ha
BE 91 918 43 112 19 601 4.9 % 7.1 % 22.2 % 662 243 190 431 471 812 17.4 % 82.6 % 10.5 49.1 72.7 % 277.2
BG 18 969 7 692 3 247 6.1 % 12.4 % 30.9 % 99 054 15 780 83 275 52.8 % 47.2 % 1.8 35.7 89.3 % 163.2
CY 13 361 9 241 7 378 1.0 % 7.3 % 24.2 % 188 675 9 926 178 748 28.4 % 71.6 % 3.7 9.0 67.3 % 166.9
CZ 130 048 19 791 18 441 4.2 % 14.6 % 47.3 % 912 565 224 630 687 936 78.5 % 21.5 % 6.4 227.9 82.6 % 70.7
DK 167 619 97 888 79 925 3.1 % 7.1 % 21.2 % 2 467 701 1 470 169 997 532 49.7 % 50.3 % 23.3 95.3 29.0 % 641.6
DE 91 540 41 232 31 252 3.4 % 10.2 % 32.9 % 842 602 166 921 675 681 40.7 % 59.4 % 10.5 85.6 67.3 % 246.2
EL 14 077 12 202 -1 194 3.6 % 20.3 % 42.5 % 109 773 406 109 367 17.3 % 82.7 % 3.3 9.3 51.6 % 213.7
ES 28 030 20 033 14 856 1.9 % 14.1 % 30.2 % 263 385 7 685 255 700 23.8 % 76.2 % 7.6 38.6 36.8 % 115.9
EE 39 264 19 519 17 051 7.4 % 11.8 % 40.5 % 242 252 70 435 171 817 54.5 % 45.5 % 5.6 125.9 62.2 % 23.4
FR 77 253 38 041 33 831 5.2 % 12.0 % 35.9 % 436 510 169 077 267 433 30.3 % 69.7 % 13.4 85.4 87.7 % 168.0
HU 31 438 19 903 17 354 8.7 % 14.5 % 39.1 % 170 181 28 677 141 504 58.6 % 41.4 % 4.0 46.3 62.4 % 123.2
IE 28 905 23 683 6 341 -0.2 % 18.6 % 54.8 % 898 974 23 520 875 454 6.8 % 93.2 % 10.4 50.3 19.3 % 258.7
IT 28 653 22 699 18 896 0.4 % 8.9 % 18.8 % 388 298 3 347 384 951 20.1 % 79.9 % 8.9 15.3 43.1 % 193.1
LT 18 195 10 267 10 228 8.3 % 13.5 % 37.8 % 117 096 16 565 100 530 17.7 % 82.3 % 2.6 48.5 53.8 % 38.7
LU 60 088 33 711 26 827 0.6 % 11.8 % 47.5 % 1 129 609 250 321 879 287 18.6 % 81.4 % 11.3 79.1 52.6 % 217.7
LV 19 488 9 670 7 301 4.2 % 13.0 % 46.0 % 135 879 43 364 92 516 32.6 % 67.4 % 3.4 68.9 47.7 % 20.1
MT 10 289 7 390 6 383 -2.3 % 5.0 % 19.9 % 188 493 8 034 180 460 11.5 % 88.5 % 5.0 2.6 81.9 % 71.3
NL 150 707 54 634 50 607 2.1 % 3.5 % 11.7 % 2 238 490 803 345 1 435 145 44.6 % 55.4 % 15.3 35.7 41.3 % 724.7
AT 31 776 22 508 18 471 1.0 % 9.4 % 27.2 % 441 709 47 248 394 461 6.1 % 93.9 % 8.3 31.5 28.1 % 224.0
PL 12 736 7 375 5 606 1.3 % 12.9 % 36.8 % 156 236 9 525 146 710 12.4 % 87.6 % 2.9 18.8 26.7 % 68.2
PT 15 077 9 506 5 574 2.2 % 14.0 % 33.5 % 99 319 3 520 95 799 19.4 % 80.6 % 4.3 24.2 26.5 % 94.6
RO 7 093 5 440 3 270 2.8 % 12.0 % 24.6 % 39 774 741 39 033 11.0 % 89.1 % 1.7 10.1 56.5 % 93.6
FI 35 285 27 178 18 626 -0.8 % 16.5 % 72.2 % 428 061 112 898 315 163 19.2 % 80.8 % 13.8 54.7 33.9 % 215.8
SE 53 537 37 206 11 501 -2.6 % 10.6 % 47.9 % 934 995 291 931 643 064 19.9 % 80.1 % 21.4 101.3 54.1 % 218.4
SK 141 208 10 285 13 172 -1.3 % 15.4 % 71.7 % 941 465 129 657 811 809 92.4 % 7.6 % 5.8 521.5 95.0 % 41.3
SI 5 790 3 975 590 -2.5 % 11.9 % 69.0 % 193 767 4 732 189 035 4.4 % 95.6 % 4.0 11.6 35.0 % 97.7
UK 87 960 39 420 31 895 1.2 % 11.1 % 38.1 % 1 724 720 170 560 1 554 160 39.0 % 61.0 % 11.6 161.1 43.6 % 142.3
EU-27 29 587 18 957 12 886 2.0 % 11.2 % 30.9 % 316 437 47 863 268 575 22.7 % 77.3 % 7.2 32.7 54.2 % 164.4
EU15 42 844 28 125 19 891 1.9 % 10.8 % 29.9 % 480 992 78 048 402 943 25.3 % 74.7 % 10.2 41.9 54.1 % 193.0
EU-N10 17 399 9 506 6 568 2.4 % 13.4 % 40.3 % 172 483 16 723 155 760 23.1 % 76.9 % 4.1 30.1 48.7 % 70.0
EU2 8 279 5 831 3 268 3.5 % 12.1 % 26.0 % 45 694 2 243 43 451 16.6 % 83.4 % 1.8 12.6 65.8 % 120.3
Source: DG AGRI EU-FADN. (*) After deducting all economic costs except the opportunity costs for family labour.
European Commission
EU Farm Economics Overviewbased on 2012 FADN data
Disclaimer:This publication does not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein.
Contact:European CommissionDG Agriculture & Rural Development,Microeconomic analysis of EU agricultural holdingsE-mail: [email protected]: http://ec.europa.eu/agriculture/rica/index.cfm
European Commission
Directorate-General for Agriculture and Rural Development
http://ec.europa.eu/agriculture
Agricultureand RuralDevelopment
Agricultureand RuralDevelopment
EU Farm Economics Overviewbased on 2012 FADN data
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 2012