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Authors: ÖIR GmbH: Mailin GAUPP-BERGHAUSEN, Bernd SCHUH, Arndt MÜNCH, Manon BADOUIX, Kinga HAT, Sanja BRKANOVIC Federal Institute of Agricultural Economics, Rural and Mountain Research (BAB): Thomas DAX, Ingrid MACHOLD, Karin SCHROLL University of Ljubljana: Luka JUVANČIČ, Emil ERJAVEC, Ilona RAC, Ana NOVAK
Executive summary
Key findings
- The European Farming Model (EFM) is built on the recognition of the multifunctionality and diversity of European agricultural systems, and the notion that EU farming is a crucial provider of public goods.
- Almost all EU regions are undergoing long-term structural change in farming – a steady increase in average farm sizes and a concentration of production on fewer and larger farms, with major temporal and regional variation; the decline is stronger in new Member States.
- The number of farms in EU-27 declined between 2003 and 2016 from about 15 to 10 million (-32%), with the decline strongest among small farms (<5 ha; -38%), and moderate among medium sized farms (5-19 ha, 20-49 ha; 17% and 12%, respectively), while the number of large farms (>50 ha) has increased by 7%. A very large majority of EU NUTS-2 regions is projected to be under moderate risk of declining numbers, while 16% are under high (8%) or very high (8%) risk (Projection from 2016 to 2040).
- By 2040, the EU might lose an additional 6.4 million farms, resulting in a remaining number of approx. 3.9 million farms across the EU, an impressive 62% decrease as compared to 2016 figures.
- Despite the presence of some policy measures addressing structural change, the Common agricultural policy has a limited and indirect effect on structures. Its distribution of funds and measures focuses on economic issues and consequently favours large, intensive farms, compounding the shift towards concentration dictated by market forces. The existing structural measures (Less Favoured Areas/Areas facing Natural Constraints, payment for small farms and young farmers) do not compensate for this effect due to poor targeting or insufficient funds, but clearly demonstrate that direct goals and targeted funding could achieve structural objectives.
- To address these changes and foster sustainability and resilience, the EFM must adapt to include diverse emerging farmer profiles; despite its relatively weak impact on structures, this must be endorsed by a policy, which should include clear, explicit objectives and targeted measures to adapt to a greater diversity in current and emerging farmer’s profiles and stimulate socially desirable adaptive strategies. A balanced consideration of potential policy impacts on structural change could prove instrumental in better aligning with the Sustainable Development Goals. A prioritisation of structural change and farm types, categorisation of beneficiaries, and adjustment of policy tools to directly target each group is important to improve targeting.
- To increase the resilience of farms, measures should support adding value to products, education and advisory services, removing barriers to entry, risk management and collective action to a greater degree, necessitating a general overhaul of agricultural policy and a greater shift towards rural development measures.
The European Farming Model (EFM)
Since the 1980s, EU agricultural policy has taken a broader view of agricultural objectives, including the environmental and spatial implications of land management. Seeing agriculture as rooted in cultural notions of land use, the relevant concerns were captured by the concept of multifunctionality. This perspective led the European Council in 1997 to advocate a “European model of agriculture”, whereby it argued that the agricultural sector “must … be versatile, sustainable, competitive and spread throughout European territory, including regions with specific problems”. Thus, from the outset, the EFM was framed as subsuming the diversity of European regions, traditions and agricultural systems reflected in the wide variety of farm structures, types of land cultivation and range of products.
However, while the specific impact of small-scale farming on various aspects of multifunctionality and on maintaining traditional European agricultural landscapes, has been recognized, a literature review of the function and role of the EFM and ongoing structural adjustment also underlines the long-term process of structural change. In contrast to the assumptions of a standard prototype of farm management, it dispels the notion of a unique farming model and underlines the need for land management systems that enhance multifunctionality and public goods provision as a core task of European farming systems, highlighting the dynamic character of the evolution of land management in the EU. Similarly, the report “Farmers of the Future” stresses the “emergence of more diverse and experimental models of farming to face the environmental challenges and to address the diverse consumption models”. This shift of the general framework towards an increasing diversity of farming models has strong implications for governance, but should also allow for place-sensitive adaptation of agricultural systems across European regions. In the future, the EFM will be shaped by adaptation strategies adopted at farm-level and along value chains to respond to emerging sector-specific and external challenges.
Dynamics of the European Farming Model
The analysis of the quantitative trends of structural adjustment confirms a drastic decline in the number of farms, especially small farms, across the EU. This decline is more pronounced in New Member States due to their recent accession, the associated transition process and rigid social agricultural structures. Conversely, large farms are growing in number. This has significant implications for the multifunctional role and resilience of European agriculture, particularly in terms of sustaining economic activity and employment in rural areas, enhancing the value of rural areas, maintaining environmental quality, safeguarding biodiversity, and preserving the landscape and its beauty.
Projections into the future show a substantial decline in the number of farms in almost all NUTS 2 regions of the EU-27 and a prevalence of adaptation strategies that entail a substantial increase in the size and/or intensity of remaining farms and/or a greater EU dependence on agricultural imports. This trend toward farm concentration is particularly evident in southern and eastern regions. Mountainous areas are also at high risk of abandonment. Results of the scenario analysis predict increased polarisation of the farming structure, with continued abandonment and specialisation under all scenarios.
The drivers of farm decline are primarily structural, economic and social, and to a lesser extent environmental. Drivers such as agricultural subsidies, agricultural prices, macroeconomic and demographic variables play a greater role in the New Member States and affect the various types of farms differently. Previous studies of drivers of farm structural change in the EU-27 suggest that the main determinant of farm structure is past farm structure. The strong dependence of structural trends on local conditions was underscored by case study results, which demonstrate that the main structural driver of farm decline is a market structure that favours intensive production and large-scale farms, related to tightening margins and low bargaining power. Furthermore, barriers to entry compound the issues of demographic change (aging populations) and rural exodus. While there are concerns with the EU subsidy system, the consensus remains that subsidies are indispensable, but should be further tailored to reverse negative effects.
Policy responses
Since the late 1980s, EU food security has been taken for granted, which may explain why public concern and policy discourse have shifted to focus on environmental implications of farming and product quality, in addition to the decline in farms and the reduction of farm employment. Agricultural policy support was assumed to contribute to the competitiveness of the sector and farming incomes, suggesting that increased support would slow the decline in the agricultural labour force. While some measures (in particular rural development and structural measures) are intended to guide structural adaptation, others (in particular market measures and income support) may yield unintended structural consequences.
The CAP and other relevant EU policies can only partly and indirectly address external challenges affecting the farming sector, while the scope of policies is greater for sector-specific challenges. Our assessment shows that the CAP cannot adequately address new societal challenges and its capacity to reconcile the constraints of agricultural markets with the EFM and emerging societal demands is limited. The policy framework pursues the three elements of sustainable development (economic, ecological, social), but hardly lessens the effects of global market mechanisms on structural adjustment and resilience of food systems.
While farm structures seem to be taken as a given and are not addressed as such in the CAP objectives, CAP measures need to integrate more clearly and specifically the implications for structural adjustment and the preservation of the diversity of farming practices. Many measures address the multiple drivers of structural change, while only a few address specific structural challenges (generational change/young farmers, organic farming). Targeted measures could achieve more specific goals in terms of resultant structures and sustainability.
As the CAP’s policy focus is primarily on addressing economic issues (farm income, competitiveness, market pressures), a disproportionate share of spending is allocated to large farms, implicitly accelerating their growth and concentration processes. To support the pursuit of the Sustainable Development Goals, a greater shift in policy focus is needed, with increased attention to diverse transition strategies. Agricultural policies need to be thoroughly revised, including structural goals, to create an environment that supports multifunctional and resilient strategies through openness to new forms and types of land management, farming practices, and market relationships.
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