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Everything you need to know about the EU agriculture sector

2024-02-14 09:52:02Biznes SHKRUAR NGA REDAKSIA VOX

Everything you need to know about the EU agriculture sector

Among their grievances, farmers decry the cost of living crisis, fuel taxes, environmental regulation, burdensome bureaucracy, unfair competition and free trade agreements. The seemingly coordinated movement, which has already reached countries such as Germany, France, Italy and Spain, has gripped Brussels and put the Green Deal under serious political pressure ahead of the upcoming European Parliament elections.

Ursula von der Leyen, the mastermind behind the Green Deal, has responded by publicly singing the praises of farmers, praising their courage, 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 that, I think we owe them appreciation, thanks and respect," she said earlier this month, while announcing the withdrawal of a controversial pesticide law.

Agriculture is one of the world's oldest means of production, dating back 12,000 years ago, when prehistoric civilizations transitioned from nomadic hunter-gatherers to agriculture to permanent settlements. In the millennia that followed, agriculture acted as a major force of progress and helped develop many of the European cities we know today. But with the advent of the Industrial Revolution, agriculture began to gradually recede in importance as countries moved heavily towards manufacturing and later, services. Today, the sector represents a small part of the EU economy: according to Eurostat, agriculture contributed €215.5 billion to the bloc's gross domestic product (GDP) in 2022. In relative terms, this means 1.4% of GDP of the total, a percentage that has remained stable over the past 20 years.

After selling its many products on the markets, the sector reaped more than €537 billion in 2022, with €287.9 ​​billion coming from crops such as cereals, vegetables, fruit, wine and potatoes, and €206 billion from milk. , pigs, 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 hefty at 316.7 billion euros in 2022, an increase of nearly 22% compared to the previous year. The increase was driven largely by Russia's invasion of Ukraine, which sent energy and fertilizer prices soaring to record levels.

About 8.6 million people work in the agricultural sector, which accounts for 4.2% of employment in the EU. Romania (1.76 million) and Poland (1.46 million) are by far the biggest employers. However, these figures do not give the full picture because harvesting is a seasonal activity that employs many people on temporary and part-time contracts. When these features are taken into account, Eurostat puts the labor force at 17 million people, more than double the headline figure.

The sector is male-oriented and aging: the vast majority of farm managers are men (68.4%) and over 55 (57.6%). The Netherlands has the most pronounced gender imbalance, with only 5.6% of female farmers, while Latvia and Lithuania are closer to achieving a 50-50 parity ratio. All these farmers work on 157 million hectares of agricultural land, which in turn is divided into 9.1 million farms. But this distribution is completely uneven: about 52% of agricultural land is controlled by 4% of all farms, those larger than 100 hectares. In contrast, small farms, those under 5 hectares, use only 6% of all available land, despite representing 40% of all holdings.

This large concentration of land reflects the industrialization of agriculture, where some corporations afford to use advanced technologies, machines and methods to produce crops on a large scale and sell on a global level. Agriculture is a risky business that is at the mercy of weather, volatile demand and foreign competition, making it difficult to make a profit and attract investment. This explains why agriculture is one of the most subsidized industries in the EU, despite its small contribution to economic growth.

First established in 1962, the Common Agricultural Policy (CAP) is a massive state aid program aimed at ensuring that European farmers receive a minimum, stable income and can compete across borders. For decades, the CAP was the common budget's raison d'être, receiving more than 60% of all spending. Today, it accounts for a third. The CAP allocates 264 billion euros for the period 2023-2027, mainly dedicated to two lines of action: 189.2 billion euros for income support, direct payments that compensate farmers and 66 billion euros for rural development to address the challenges of poor areas.

Direct payments are essentially unrelated to the amount of crops farmers produce. Brussels argues that the link would encourage overproduction to take a bigger share of the subsidies and distort the market. Instead, payments are made according to hectares (cultivated land) and compliance with biodiversity, animal welfare and health regulations.

The CAP is one of the most talked about elements of EU policy and has received constant criticism for, among other things, its unbalanced distribution (about 80% of the budget ends up in the hands of 20% of farmers), its effectiveness suspicious. (farmer incomes remain 40% lower compared to EU average wages), and the trade distortion caused vis-à-vis the World Trade Organization (WTO). Another recurring charge against CAP is the poor implementation of environmental standards. This is because agriculture is a significant driver of pollution, accounting for more than 10% of EU greenhouse gas emissions. The European Environment Agency (EEA) estimates these emissions in three sources:

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

· N2O (nitrogen oxide) mainly from the use of nitrogen-based synthetic fertilizers.

· CH4 (methane) from manure management and disposal.

Although the agricultural sector is subject to the EU's main objective of gradually reducing greenhouse gas emissions and achieving climate neutrality by 2050, the reduction achieved so far has been extremely limited. In fact, between 2005 and 2021, the EEA estimates that agricultural emissions increased in 13 member states, with Estonia exceeding the 30% mark. Based on current projections, the agency predicts a modest decline of 4% by 2030 compared to 2005 levels, which could expand to 8% if additional climate measures are put in place.

This slow pace is particularly worrying given that at least 25% of global warming is driven by methane, an odorless gas that is 80 times more harmful than CO2 in the first 20 years after being released into the atmosphere. Meanwhile, chemical pesticides commonly used to maintain crop yields are a factor behind biodiversity loss, poor water quality, degraded soils and pest resistance, and have been linked to chronic disease. 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 dependencies on unreliable suppliers. Fortunately for Brussels, agriculture is an advanced sector in this regard.

The EU has gained self-reliance (meaning it can meet all its domestic needs through domestic production) in a wide range of goods that we consume on a daily basis, 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 very much needed.) This has allowed the bloc to become a commercial powerhouse in global markets: in 2022, the bloc exported €229.1 billion of agricultural products and imported 195.6 billion euros, leading to a comfortable surplus of 33.4 billion euros. The EU's most valuable export was beverages and spirits, bringing in €39 billion.

This, however, does not mean that the EU is completely out of the woods. Extreme weather events and rising temperatures pose a serious threat to food security and may cause 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 food products in the future as they do now. A recent European Commission report warned that the economic slowdown seen in China, set to worsen due to the country's rapidly aging population, could severely limit global exports of soft wheat, corn, barley, beef, pork and most dairy products.


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