Original publication: July 2015
Authors: Wageningen University: Justus Wesseler, Alessandro Bonanno, Dušan Drabik, Valentina C. Materia, Luca Malaguti, Marcel  Meyer, and Thomas J. Venus
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Overview of the Agricultural Inputs Sector in the EU

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The development of input markets has always been an important issue for the agricultural sector and its stakeholders. Price and quality developments in the input markets affect the comparative advantage of agricultural production among regions and types of production; these developments also affect the income of farm households and can have implications beyond the farm level. Concerns regarding the concentration in input markets have been expressed by different stakeholder groups, including farmer unions, advocacy groups, and policy makers. The concerns arise especially with respect to market power of input suppliers as this can result in higher input costs and a distribution of rents different from what a competitive market would produce.


This study analyzes the seed, feed, energy, fertilizer, and plant protection agents farm input sectors from two perspectives: the demand  side and the supply side.

The study focuses on the following five main aspects of each input sector:

  • Farm-level demand and usage among EU Member States;
  • European farmers’ cost structure;
  • Market structure;
  • Market concentration;
  • Important mergers and acquisitions.

For the demand side, we use country- and NUTS2-level data from the Farm Accountancy Data Network (FADN). Due to a change in the methodology of the data collection, the FADN database contains two overlapping periods. In the period of 1989–2009, the average data for represented farms were calculated using a farm typology based on Standard Gross Margins (SGM). The period 2004–2012 contains average data for represented farms calculated using a farm typology based on Standard Output (SO). The time-series for Member States start in the year when a Member State entered the EU.

For the supply side, first insights in whether or not market power has increased over time can be gained by investigating the development of market concentration. If the largest companies operating in an industry can be identified, one can obtain concentration ratios (CRs), defined as , where N represents the number of companies with N highest market shares in the industry and S represents a company’s share. The concentration ratios for the Top 3, 5, and 10 companies, where possible, have been calculated. If the shares of the largest companies increase, market concentration increases as well.

However, concentration ratios ignore differences in market shares among companies;  therefore, we calculated the Herfindahl-Hirschman Index (HHI) for the different input sectors as well.

Main Findings

The share of seeds in total farm cost ranges between 2% and 15% among EU Member States and shows a declining trend over time. The EU commercial seed market is less concentrated than the world seed market. The HHI of 673 for the EU seed market in 2014 is low. Substantial differences in concentration can be observed by seed markets. The sugar beet seed market shows the largest concentration with an HHI of 2444. Mergers and acquisitions in the world and the EU seed market since 2010 are characterized more by investments in technology rather than acquisition of seed companies. Acquisition of seed companies by the World Top 10 seed companies over the past five years concentrated on Latin America.

The EU-28 produces roughly 16% of global compound feed production. Compound feed is mainly produced and consumed in the same country. The eight biggest EU compound feed producers are Germany, France, Spain, the UK, Italy, The Netherlands, Poland, and Belgium. The turnover of the EU feed companies increased by 50% over the last eight years, whereas the number of companies decreased in most countries by more than 15%. The five largest feed producers in Europe have an average market share of 53%. Some market concentration can be found on a country-level, for example, the share of the countries’ five largest producers are: 38 % in Germany, 44% in the UK, 53% in Poland, 63% in Belgium, and 69% in The Netherlands. None of the merger decisions of the European Commission showed a concern about competition in the feed sector due to the large number of important, internationally active competitors present in the market.

The agricultural sector of the EU-27 has become more energy-intensive. Farmers in 23 out of 27 Member States spent more than 50% of their energy costs on motor fuel and lubricants. Energy companies in the EU market are often vertically integrated and operating on several energy markets (e.g., natural gas and electricity; crude oil and natural gas). The concentration in the energy sector gradually increases. Crude oil sector is the most concentrated, followed by natural gas, and electricity sectors. Low crude oil prices may result in more frequent mergers and acquisitions in the energy sector in the future.

Consumption of inorganic fertilizers has been declining in the EU-27; the decline in consumption of N-based products is less marked than for K and P. Differences in relative usage of the three types of fertilizers (N, K, and P) can be found across geographic areas, with Mediterranean areas showing less consumption of N-based products and higher consumption of P-based products than other countries. The share of fertilizers costs over total specific cost has followed a positive but declining trend over time. Among the EU-15, the share of soil improvers increased in the previous decades to decline in the recent years; among post enlargement Member States (PEMS), one can observe a growing and increasing cost share of fertilizers. The total value of sales of fertilizers’ company operating in EU Member States has increased in the period 2003–2012, recovering from the sharp decline marking the years of the economic recession. The number of enterprises producing fertilizers and soil improvers has increased in the period 2003-2012. Germany, France, Poland, the United Kingdom, and The Netherlands are the countries with the largest values of fertilizer sold, accounting for more than 50% of the total fertilizer turnover in the EU-27. The European fertilizer industry appears only moderately concentrated with an estimated range of the CR5 spanning from 22.23% to 29.48%, and simulated HHIs that vary between 205 and 302. Firms in the European fertilizer industry appear actively engaged in operations of mergers and acquisition.

Consumption of plant protection agents in Europe increased in value until 2008, to show a decline for the following years. Quantity consumed has overall declined, suggesting an increase in unitary value of these products. Herbicides are the plant protection agents consumed in largest amounts, especially in northern Member States. Fungicides are the second most consumed. Mediterranean countries show the largest consumption share of insecticides and the lowest share of herbicides over the total plant protection agents consumed. The incidence of plant protection agents’ costs over total farming cost in the EU-15 has declined over the last two decades, while there is an uptrend for PEMS. The total value of sales of plant protection agents’ companies operating in EU Member States has seen a slight decline in the period 2003-2009, followed by a marked increase in the following years. The number of enterprises producing plant protection agents has maintained relatively steady, varying between 630 and 655 in the period 2003–2012. Germany, France, the UK, Italy and Spain are the countries where the highest values of plant protection agents turnover is realized, concentrating more than 80% of total sales. The European plant protection agents industry appears concentrated, with an estimated range of the CR5 spanning between 79% and 83%, and calculated HHI values varying between 1556 and 1717. The number of patents in the plant protection agents industry in Europe has declined considerably in the last decades. Investments cost for R&D and product development for companies operating in the EU crop protection agents industry are large and can play a role of sunk costs acting as barriers to entry and fostering further consolidation.

Table 1 shows the average time coefficients of the input cost shares trend analysis by input in the period 2004–2012. A positive coefficient implies a percentage cost share increase and a negative a percentage cost share decrease. The share of energy costs increases faster for the EU-15 farmers (0.346 percentage points per year) than for their PEMS counterparts (0.197 percentage points per year). On average, for the EU-27 the share of seed costs decreased the largest over the period 2004–2012 with 0.08 percentage points per year.

Table 1: Average time coefficients of the input costs shares among EU farmers for the period 2004–2012

Table 2 shows the concentration among the suppliers of farm inputs. The feed, fertilizer, and seed sectors indicate a level of concentration that is not of concern. The results for the seed sector differ substantially by crop. Nevertheless, considering the competition among crops, market power is highly limited and overall the EU seed market is less concentrated than the word seed market (CR5 of 54%). This looks different for the plant protection agents sector. The concentration in this sector is moderately high but has not yet reached a level of high concentration yet is larger in the EU markets than world markets (CR5 of 69.5%). The market concentration in the energy market is also higher than in the seed, feed, and fertilizer markets, but less than in the plant protection agents sector.

Table 2: Concentration of agricultural input sectors in the EU Input Sector CR3 CR5

Link to the full study: http://bit.ly/563-385

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