Everything you need to know about the EU agricultural sector

Among their complaints, farmers denounce the crisis surrounding the cost of living, fuel taxes, environmental regulations, burdensome bureaucracy, unfair competition and free trade agreements.

The apparently coordinated movement, which has already reached countries including Germany, France, Italy and Spain, has caught Brussels off guard and put the Green Deal under serious political pressure ahead of the next European Parliament elections.

Ursula von der Leyen, the brains behind the Green Deal, has responded by publicly singing odes to farmers, praising their steadfastness, dedication and economic contribution and promising to pay more attention to their concerns.

Farmers “work hard every day to produce the quality food we eat. For this I think we owe them appreciation, thanks and respect,” the President of the European Commission said earlier this month, announcing the withdrawal of a controversial pesticide law.

“The problems have escalated in recent years. Our farmers need to be listened to. I know they are concerned about the future of agriculture and their future as farmers.”

Here’s what you need to know about agriculture in the EU.

A small but vital sector

Agriculture is one of the oldest means of production in the world, dating back 12,000 years ago, when prehistoric civilizations transitioned from nomadic hunter-gathering to farming in permanent settlements. In the millennia that followed, agriculture served as a major driving force of progress, helping to develop many of the European cities we know today.

But with the advent of the Industrial Revolution, agriculture gradually began to lose prominence as countries moved strongly toward manufacturing and later the service sector.

Today the sector represents a small part of the EU economy: according to EurostatIn 2022, agriculture contributed €215.5 billion to the bloc’s gross domestic product (GDP). In relative terms, this means 1.4% of total GDP, a share that has remained stable over the past twenty years.

After selling the many products on the markets, the sector will have harvested more than €537 billion in 2022, of which €287.9 ​​billion comes from crops such as grains, vegetables, fruit, wine and potatoes, and €206 billion from milk, pigs and cattle. , poultry and eggs.

France was the biggest seller that year, earning €97.1 billion, followed by Germany (€76.2 billion), Italy (€71.5 billion), Spain (€63 billion) and Poland (€39.5 billion). .

Production costs were significant: 316.7 billion euros in 2022, an increase of almost 22% compared to the previous year. The increase was mainly caused by the Russian invasion of Ukraine, which sent energy and fertilizer prices to record highs.

Heavy concentration

An estimated 8.6 million people work in the agricultural sector, accounting for 4.2% of employment in the EU. Romania (1.76 million) and Poland (1.46 million) are by far the largest employers. However, these figures do not give the full picture, because harvesting is a seasonal activity, with many people employed on temporary, part-time contracts. When these details are taken into account, Eurostat estimates the working population at 17 million people, more than twice the nominal figure.

The sector is male-oriented and aging: a large majority of business managers are male (68.4%) and over 55 years old (57.6%). The Netherlands has the most pronounced gender inequality: only 5.6% of farmers are women, while Latvia and Lithuania are closest to achieving an equality ratio of 50-50.

All these farmers work spread over 157 million hectares farmland, which in turn is split into 9.1 million companies. But this distribution is very uneven: about 52% of agricultural land is owned by 4% of all agricultural holdings, which are larger than 100 hectares. In contrast, small farms, those smaller than 5 hectares, use only 6% of all available land, despite representing 40% of all holdings.

This high concentration of land reflects the industrialization of agriculture, where a few companies can afford to deploy advanced technologies, machines and methods to produce crops on a large scale and sell them on a global scale.

Billions in subsidies

Agriculture is a risky industry at the mercy of weather conditions, volatile demand and foreign competition, making it difficult to generate profits and attract investment. This explains why agriculture is one of the most heavily subsidized industries in the EU, despite its minuscule contribution to economic growth.

First established in 1962, the Common Agricultural Policy (CAP) is a major state aid program aimed at ensuring that European farmers receive a minimum, stable income and can compete across borders. For decades, CAP was the standard reason for existence of the common budget, accounting for more than 60% of all expenditure. Nowadays that accounts for a third.

The cap assigns €264 billion for the period 2023-2027, mainly spent on two lines of action: €189.2 billion for income support, the direct payments to compensate farmers, and €66 billion for rural development to address the challenges of impoverished areas.

Direct payments, crucially, are not linked to the amount of crops farmers produce. Brussels argues that this link would stimulate overproduction to obtain a greater share of subsidies and upend the market. Instead, payments are rolled out based on hectares (agricultural land) and respect for biodiversity, animal welfare and health rules.

The CAP is one of the most high-profile elements of EU policy and has attracted persistent criticism for, among other things, its uneven distribution (about 80% of the budget is in the hands of 20% of farmers), its questionable effectiveness (the farmers’ incomes remain 40% lower compared to average wages in the EU) and commercial disruption compared to the World Trade Organization (WTO).

Abundance of methane

Another recurring accusation against the CAP is the weak enforcement of environmental standards. This is because agriculture is a major cause of pollution. bookkeeping responsible for more than 10% of greenhouse gas emissions in the EU.

The European Environment Agency (EEA) attributes these emissions to three sources:

  • CH4 (methane) from enteric fermentation, which refers to the digestive process in ruminant animals such as cattle, sheep and goats.

  • N2O (laughing gas) mainly comes from the use of nitrogen-based fertilizers.

  • CH4 (methane) from manure management and disposal.

Although the agricultural sector is subject to the EU’s overarching target to gradually reduce greenhouse gas emissions and achieve climate neutrality by 2050, the reduction achieved so far is extremely limited.

The EEA estimates that agricultural emissions increased in thirteen Member States between 2005 and 2021, with Estonia exceeding the 30% limit. Based on current projections, the agency predicts a modest decline of 4% in 2030 compared to 2005 levels, which could rise to 8% if additional climate action is taken.

This slow pace is particularly worrying because at least 25% of global warming is caused by methane, an odorless gas that is 80 times more harmful than CO2 in the first 20 years after it enters the atmosphere. In the meantime, chemical pesticides often used to maintain crop yields, are a factor behind loss of biodiversity, poor quality water, degraded soils and pest resistance, and are linked to chronic diseases.

Road to self-reliance

In response to the COVID-19 pandemic, the war in Ukraine and the energy crisis, the European Commission has embraced ‘strategic autonomy’ as a guiding philosophy to reduce costly dependence on unreliable suppliers.

Fortunately for Brussels, agriculture is a sector that is well advanced in this regard.

The EU has achieved self-reliance (meaning it can meet all its domestic needs through domestic production) in a wide range of goods we consume every day, such as wheat, olive oil, tomatoes, apples, peaches, cheese, butter, beef , pork and poultry. (For others, such as rice, sugar, oilseeds and vegetable oil, imports are still desperately needed.)

This has made the bloc a commercial powerhouse on world markets: in 2022the bloc exported €229.1 billion in agricultural products and imported €195.6 billion, leading to a comfortable surplus of €33.4 billion. The most valuable EU export was drinks and spirits, which generated €39 billion.

However, this does not mean that the EU is completely out of trouble.

Extreme weather events and rising temperatures pose a serious threat to food security and could lead to an increase in certain imports in the long term. At the same time, some of the bloc’s customers are developing self-reliance strategies and may not buy as much EU-produced food in the future as they do now.

A recent one report The European Commission warned that China’s economic slowdown, which will worsen due to the country’s rapidly aging population, could severely limit global exports of common wheat, maize, barley, beef, pork and most dairy products.

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