Supporting viable farm income

To support viable farm income and resilience of the agricultural sector across the Union in order to enhance long-term food security and agricultural diversity as well as to ensure the economic sustainability of agricultural production in the Union.

Agricultural entrepreneurial income

In agriculture, income fluctuates stronger than in most other sectors due to the strong dependency on weather and price variations. Agricultural entrepreneurial income measures the income derived from agricultural activities that can be used for the remuneration of own production factors, i.e. non-salaried (= family) labor, land owned by the agricultural holding and own capital. It is obtained by deducting wages, rent and interest payments from agricultural factor income.

The income per family worker in the agricultural sector is significantly lower than the average wage in the economy. However, in the EU, despite strong yearly fluctuations, the difference between agricultural income and average wages is decreasing. Average EU agricultural income represented 31% of average wage in the economy in 2005 and increased to 65% in 2022.

The next graph shows the agricultural entrepreneurial income plus wages per annual work unit (AWU). This shows the level of income that can be used to remunerate work on the farm (both family and salaried). In the EU, the value has been steadily increasing since 2005.

Agricultural factor income

Agricultural factor income measures the remuneration of all factors of production (land, capital, labor), regardless of whether they are owned or borrowed/rented. It represents all the value generated by a unit engaged in an agricultural production activity.

Agricultural factor income is well suited for evaluating the impact of changes in the level of public support (i.e. direct payments) on the capacity of farmers to reimburse capital, pay for wages and rented land as well as to reward their own production factors.

The graph shows an increasing trend in the EU since 2009, but one should note that the proportion of own and external production factors varies in some cases significantly between and within Member States and that the remuneration of own and external production factors is often unequal at farm level.

Variability of agricultural income

Farm net value added by sector

Level of income by physical farm size

Farm net value added in areas with natural constraints

Increasing competitiveness

To enhance market orientation and increase farm competitiveness both in the short and long term, including greater focus on research, technology and digitalisation.

Agricultural productivity

Graph 1 : Total factor productivity (TFP) compares total outputs (in volume) relative to the total inputs (in volume) used in production of the output. TFP reveals the joint effects of many factors including new technologies, efficiency gains, economies of scale, managerial skill, and changes in the organization of production.

As both output and inputs are expressed in term of volume indices, the indicator measures TFP growth. The change in production and input volumes is measured over a defined period (2010=100).

Graph 2 : Labor productivity in agriculture is expressed as total Gross Value Added (GVA) in agriculture at basic prices per Annual Work Unit (AWU).

Gross Value Added is defined as the value of output less the value of intermediate consumption.

GVA per AWU provides comparable data on labor productivity and allows for comparison between sub-sectors and countries.

Gross fixed capital formation in agriculture

Gross Fixed Capital Formation in agriculture measures farmers’ investments in fixed assets (meaning assets that are intended for use in the production for a period of more than a year). It mostly refers to “produced assets”, which result from a production process, and does not include, for example, the purchase of land and natural resources.

The graph shows data at Member State level. At EU level, the amount of investments is fluctuating around EUR 50 billion per year since 2005 (between EUR 44 billion and EUR 56 billion per year).

Gross Fixed Capital Formation as a share of the Gross Value Added (GVA) in agriculture measures how much of the value added is invested in fixed assets rather than consumed, and is a key element for indicating future competitiveness. At EU level, since 2005, GFCF has been fluctuating between 30% and 38% of GVA, with important differences between Member States.

Revenue and cost structure

Agricultural entrepreneurial income measures the income derived from agricultural activities that can be used for the remuneration of own production factors. This varies enormously between the different countries, partly due to the organizational structure of agriculture and due to different degrees of mechanization and labor use, different levels of debts, or to differences in commodity prices and purchasing power, amongst others. The graph shows the evolution of the cost and revenue distribution. For EU farmers, crop and animal outputs are the main revenues and feedstuffs, energy and labor the main costs.

Agri-food trade imports and exports

Agricultural trade balance shows the value of both the exports and imports of agricultural goods for each EU Member State and indicates whether the country has a trade surplus or deficit in agricultural products and its size. At EU level, agri-food trade balance is positive (meaning that the EU is a net exporter of agri-food products), and follows a positive trend in which both imports and exports are increasing over time. However, agri-food trade balance varies significantly between Member States.

Ratio EU prices versus world market

The graph shows the historical evolution of the price difference between the EU and the world market for different products. The shift away from management of agricultural markets in the EU reduced the price gap between EU and world market prices over time. It increased trade opportunities but also EU price volatility.

Number of farms, hectares and Livestock units

Number of farms (graph 1): For several decades, the number of farms in the EU has been decreasing and the general pattern in the EU has been towards a greater concentration of agriculture. Therefore, land use and agricultural production have become more concentrated. To reverse these trends, the CAP has different interventions to support smaller farms.

This graph shows the evolution of the total number of farms and the average farm size (in hectares) in absolute figures.

Hectares (graph 2): This graphs shows both the total Utilized Agricultural Area (UAA) in hectares and the share of UAA dedicated to three main categories of land use (as defined by Eurostat):

-Arable land is land worked (ploughed or tilled) regularly, generally under a system of crop rotation.

-Permanent crops are usually ligneous crops, meaning trees or shrubs, not grown in rotation, but occupying the soil for several (usually more than five) consecutive years. It concerns all fruit and nuts trees, berry plantations, vineyards, olive trees and all other permanent crops used for human consumption (e.g. tea, coffee or carobs) and for other purposes (e.g. nurseries, Christmas trees or plants for plaiting and weaving such as rattan, or bamboo). Permanent crops are usually intended for human consumption and generally create a higher added value per hectare than annual crops. They also play an important role in shaping the rural landscape.

-Permanent grassland is land used permanently (for several consecutive years, normally 5 years or more) to grow herbaceous fodder, forage or tttenergy purpose crops, through cultivation (sown) or naturally (self-seeded), and which is not included in the crop rotation on the holding. Grassland must have fodder interest, i.e. they include vegetal species of fodder interest.

The share of different land uses varies greatly between countries.

Livestock units (graph 3): The livestock unit, (LSU) is a reference unit which facilitates the aggregation of livestock from various species and age.The reference unit used for the calculation of livestock units (=1 LSU) is the grazing equivalent of one adult dairy cow producing 3 000 kg of milk annually, without additional concentrated foodstuffs.

The livestock density index measures the stock of animals cattle sheep, goats, equidae, pigs, poultry and rabbits)converted in livestock units (LSUs) per hectare of utilized agricultural area (UAA). The livestock density index is an indicator for the pressure of livestock farming on the environment. Livestock, through manure production, contributes to climate change (greenhouse gas emissions) and nutrient leaching into water and air. A higher livestock density means that a higher amount of manure is available per ha of UAA, which increases the risk of nutrient leaching. However actual impact on the environment of livestock farming is not only depending on the amount and density of livestock, but also depends on farming practices.

Extensive grazing (graph 4): Areas of extensive grazing measures the area under grazing livestock production (cattle, sheep and goats), where the stocking density does not exceed 1 livestock unit per ha of forage area (forage crops, permanent pastures and meadows). It shows both the area in Ha and the share of total UAA dedicated to extensive grazing (in %).