Farm Economics brief

Similar documents
ANNUAL PUBLICATION: detailed data. VOLUME OF EXPORTS FELL BY 4,7 PER CENT IN 2015 Export prices rose 0,7 per cent. 24 March 2016

European Commission. Communication on Support Schemes for electricity from renewable energy sources

Work life balance as a factor of gender equality which perspective? Some findings from the European Working Conditions Survey

Core projects and scientific studies as background for the NREAPs. 9th Inter-Parliamentary Meeting on Renewable Energy and Energy Efficiency

I) Background information. 1. Age

Phosphorus Regulations in Europe

FARM LAND RENT IN THE EUROPEAN UNION

The compound feed industry in the EU livestock economy

Workshop on developed country targets. Bangkok, 3 April EU contribution

Introduction to Solid Waste Management and Legal framework in the European Union

Prepared for: IGD 2014

INNOVATION UNION SCOREBOARD 2011

SHIPMENTS TO ALL COUNTRIES OF THE EUROPEAN UNION

Role of the trade unions in the protection and interest representation of employees in Europe

Publishing date: 06/10/2017 Document title: We appreciate your feedback. Share this document

A European Food Prices Monitoring Tool

Biogas from Co-Fermentation of Biowaste at a Waste Water Treatment Plant

Agricultural statistics

ECONOMIC BULLETIN Q2 2017

Non-technical Innovations Definition, Measurement & Policy Implications. The new service economy: growth and implications for service innovation

Best practices in implementing the Packaging Waste Directive to maximize efficient collection and recycling

PROSPECTS FOR THE AGRICULTURAL INCOME IN ROMANIA

ELARD on the road to the

HORIZON Spreading Excellence and Widening Participation. Twinning Info day. Telemachos TELEMACHOU Policy Officer Tel-Aviv, 28 February 2017

15189/04 DGE/coc 1 DG C II

How to enhance New Member States and Candidate Countries participation in FP6+

Quality Report. Eurostat, Unit F2. May Contents

Wind in power 2014 European statistics. February 2015 THE EUROPEAN WIND ENERGY ASSOCIATION

Attitudes towards radioactive waste in Switzerland Report

Sea freight data indicate weak import demand both in US and EU27. Data on inland road and rail freight indicate weak domestic activity

European Union Directorate-General for Agriculture and Rural Development

ESF Ex-Post evaluation

EUROPEAN INNOVATION SCOREBOARD 2009 COMPARATIVE ANALYSIS OF INNOVATION PERFORMANCE

Public Services Online: how is Europe progressing? Web-based Survey on Electronic Public Services, Results October 2004 Brussels, February 2005

Sectoral Profile - Industry

% of Reference Price 190% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Beef & Veal Production (E28 Slaughtering) - Tonnes

International Indexes of Consumer Prices,

The Fourth Community Innovation Survey (CIS IV)

Table 1. Labour productivity indicators * EU EU ,1 106,0 105,

Work-Life Balance and Flexible Working Arrangements in the European Union

Radio Equipment Directive RED 2014/53/EU

Waste-to-Energy in Europe + implementation of the Waste Framework Directive

ENERGY PRIORITIES FOR EUROPE

Developing Infrastructure and Operating Models for Intermodal Shift - DIOMIS Intermodal Rail/Road Transport In Europe 2007

Teagasc National Farm Survey 2016 Results

.eu brand awareness. Domain names have a high awareness. About 81% of the European Internet population has heard of domain names.

% of Reference Price 190% Avg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec. Male Calves Dairy Type Male Calves Beef Type

EU CONSUMER HABITS REGARDING FISHERY AND AQUACULTURE PRODUCTS FINAL REPORT LAST UPDATE JANUARY Maritime Affairs and Fisheries

Photo: Thinkstock. Wind in power 2010 European statistics. February The European Wind energy association

Solid biofuel markets in Europe

European Data Market SMART 2013/0063. D8 Second Interim Report. The Data Market and The Data Economy

Wind in power 2015 European statistics. February 2016 THE EUROPEAN WIND ENERGY ASSOCIATION

INDIVIDUAL AND INSTITUTIONAL DETERMINANTS OF SKILL UNDERUTILIZATION

EPR and packaging what are current challenges and issues :

% of Reference Price 190% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Beef & Veal Production (E28 Slaughtering) - Tonnes

EU Climate and Energy Policy Framework: EU Renewable Energy Policies

INVESTMENT IN HUMAN CAPITAL - Assessing the Efficiency of Public Spending on Education

Production, yields and productivity

How to secure Europe s competitiveness in terms of energy and raw materials? The answer, my friend, is blowing in the wind

Energy Statistics 2017 edition

EVOLUTION OF ORGANIC AGRICULTURE - A RESPONSE TO EUROPEAN CONSUMER REQUIREMENTS

Transboundary air pollution by main pollutants (S, N, O 3 ) and PM. France

Microsoft Dynamics GP. Enhanced Intrastat

ION RALUCA, ANDREEA NOVAC CORNELIA, MIHAELA NOVAC OVIDIU, CONSTANTIN

EU-ETS: Analysis of dangers. WARSAW, 9 December 2008

International trade related air freight volumes move back above the precrisis level of June 2008 both in the EU area and in the Unites States;

Solar Thermal. Europe 2006)

To what extent will climate and land use change affect EU-28 agriculture? A computable general equilibrium analysis

Output and employment growth in primary agriculture and the food processing sector across the EU: Are some doing better than others?

European Innovation Scoreboard 2017

Reform of the Common Agricultural Policy

HRD monitoring and assessment tools and their relevance for linking up national progress to European benchmarks

The Community Innovation Survey 2010

Pál Gáspár. Factors and Impacts in the Information Society: Analysis of the New Member States and Associated Candidate Countries

EUROPEAN SOCIAL DIALOGUE: ACHIEVEMENTS AND CHALLENGES AHEAD

Pesticide residues in food - Monitoring programs in Europe

External Price Referencing an European overview

The Innovation Union Scoreboard: Monitoring the innovation performance of the 27 EU Member States

Technical note on the robustness of a modified research excellence index

COMMISSION STAFF WORKING DOCUMENT. Annual Public Procurement Implementation Review 2012

Inventory of data on manure management

Renewable energy in Europe 2017 Update

DPD PRICE LIST Parcel delivery in Croatia and worldwide

Air pollution by ozone in Europe in summer 2001

Part-time work in Europe

Air pollution by ozone in Europe in summer 2001

WATER PRICING Seizing a Public Policy Dilemma by the Horns

Indicator Fact Sheet (WQ2) Water use by sectors

15. Salzburger Telekom-Forum 26. August Breitbandregulierung in Europa

European Innovation Scoreboard 2003

Core Theme Interim Report

Futures climate policy in Finland: Mitigation measures for agricultural greenhouse gas emissions

ANNEXES. to the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

3rd Cattle Network EAAP Workshop

Eurostat current work on resource-efficient circular economy Renato Marra Campanale

European beef farming systems classification

The European Working Conditions Surveys series (the EWCS) Agnès Parent-Thirion, on behalf of the European Working Conditions Survey team

Evolution of Renewable Energy Support Mechanisms in Europe Influence on Biogas Market

12. Waste and material flows

Precision Agriculture and the Future of Farming in Europe

Transcription:

Farm Economics brief N 2 EU production costs overview July 211 Contents The effect of the economic crisis on costs and margins Operating costs in the EU groups Highly contrasted costs among the Member States Total economic costs lower in EU- 1 but increasing Introduction This brief presents key findings on EU production costs for the following agricultural sectors: cereals, dairy and beef. Cost levels and their breakdown are compared between EU groups, and among Member States. The brief looks not only at operating costs, but also at total economic costs including opportunity costs for family factors. This allows the comparison of total costs for farms with different structures in terms of land, labour and capital. Cost and margin developments in recent years are analysed and the impacts of the agricultural price boom and the economic crisis are assessed. Given the contrasted trends in prices and costs, margins have been squeezed in 28 for beef and in 29 for milk and cereals. Looking at margins, data show that low costs do not necessarily mean high margins, and the inverse also holds. In addition, margins do not only depend on the level of prices, but also on coupled subsidies. In the EU-1 in particular, total economic costs are in general lower thanks to lower opportunity costs for family labour and capital. Differences in production costs illustrate the variety of production systems, of natural conditions, and of economic contexts in the EU. Some trends may be explained by changes in exchange rates as not all Member States are in the Eurozone. Production costs and margins were estimated based on data from the Farm Accountancy Data Network (FADN). The FADN is an annual sample survey collecting structural and accountancy data on farms. This brief gives a glimpse of the latest sector reports available on this website: http://ec.europa.eu/agriculture/rica/publications_en.cfm This publication does not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein. Contact: DG Agriculture & Rural Development, Microeconomic analyses of EU agricultural holdings E-mail: agri-rica-helpdesk@ec.europa.eu Internet: http://ec.europa.eu/agriculture/rica/index.cfm European Communities, 211. Reproduction is authorised, provided the source is acknowledged as "European Commission EU FADN", save where otherwise stated. Where prior permission must be obtained for the reproduction, such permission shall cancel the above mentioned general permission and shall clearly indicate any restrictions on use. When data/information are adapted or modified by the user, this shall be explicitly stated at a suitably prominent place in the work.

1. The effect of the economic crisis on operating costs and gross margins Box 1: Definition operating costs Operating costs cover all cash expenditures necessary to operate, for example feed and veterinary costs, energy, seeds, fertilisers, pesticides (wages, rent and interest paid are not included here). Gross margins correspond to the total receipts from the product (including possible coupled payments) minus the operating costs. The costs and margins are expressed per unit of product. For the products analysed, EU-15 operating costs (see Box 1) increased steadily in nominal terms over the period 2-27. Figure 1: Trend in EU operating costs (nominal terms) The main drivers of the increase depend on the sector. For milk, the rise was mainly driven by energy and labour costs. For cereals, it was mostly explained by fertilisers, machinery, seeds and crop protection. Milk costs have risen mainly since 27.The average annual growth was and 4.6 % for beef breeders and fatteners (farms combining both breeding and fattening). In the EU-1, the rise in operating costs over the period 24-27 was more significant: from 2.5 % average annual growth for beef breeders and fatteners to 25 % for cereals (Figure 1). Cereals and milk - /t Operating costs - EU-15 Cereals Milk Beef - breeders Beef - fatteners Beef - b&f 3 25 2 15 1 5 1 4 1 2 1 8 6 4 2 beef - /cow or /male cattle sold 2 21 23 24 25 26 27 28 estimate 29 estimate 3 25 2 15 1 5 Operating costs - EU-1 Cereals Milk Beef - breeders Beef - fatteners Beef - b&f Cereals and milk - /t 24 25 26 27 28 estimate 29 estimate 1 4 1 2 1 8 6 4 2 beef - /cow or /male cattle sold /t 3 25 2 15 1 5 Operating costs - EU-2 Cereals 27 28 estimate Milk 29 estimate Source: EU FADN DG AGRI, Models for the allocation of costs. Farm economics brief Page 2 / 14

In the livestock sectors, operating costs rose abruptly in 28 (from +12 % to +26 %, depending on the EU-group and on the product). This was primarily due to the increase in feed costs (+38 % between 27 and 28 for milk in the EU-15). In 29, feed costs decreased significantly and so did operating costs; yet they remained higher than their 27 level. On the other hand, 28 cereals operating costs decreased by 1 % in comparison with 27 (average for the EU-27) thanks to better yields. But they increased significantly, by 17 %, between 28 and 29. The main items contributing to this increase were fertilisers, machinery costs, seeds and crop protection. Figure 2: Trend in beef revenues and costs For beef, prices did not change dramatically between 27 and 29, so gross margins diminished in 28 (Figure 2). Given the developments in prices (peak in 28 and dramatic drop in 29), milk and cereals gross margins were squeezed in 29 (Figure 3). Figure 4 below illustrates the disruption in the pattern of output and input price developments in recent years. A rather steady pattern of real price declines in output and input prices, with the former decreasing faster, was observed until 25. However, since 26, the gap between input and output prices has widened faster, driven mainly by factors outside agriculture: energy prices, exchange rates, and financial events. Figure 3: Milk and cereals revenues and costs breeders and b&f- /cow fatteners - /male cattle sold Bee f breeders revenues breeders operating costs fatteners revenues fatteners operating costs b&f revenues b&f operating costs /t 4 Cereals and milk Cereals revenues Cereals operating costs Milk revenues Milk operating costs 1 8 35 1 6 3 1 4 25 1 2 2 15 1 1 8 5 6 27 28 estimate 29 estimate Source: EU FADN DG AGRI, Models for the allocation of costs. Revenues include coupled subsidies. 27 28 estimate 29 estimate Source: EU FADN DG AGRI, Models for the allocation of costs. Revenues include coupled subsidies. Figure 4: Development in agricultural output and input prices Source: Eurostat price statistics Elaboration DG AGRI. Farm economics brief Page 3 / 14

2. Operating costs in the EU groups Box 2: Terminology The following terminology is used with regard to costs. Total economic costs comprise of: - operating costs: o o specific costs (seeds, fertilisers, crop protection, or feed, veterinary costs) non-specific operating costs (machinery and buildings, power (fuel and electricity), contract work, taxes and other dues, taxes on land and buildings, insurance for farm buildings and other direct costs); - depreciation; - external factors (wages, rent and interest paid); - opportunity costs for unpaid family factors (family labour cost and own capital cost). Operating costs for cereals in 27 do not differ much between EU groups (Figure 5): they remain between -7 % and +1 % around the EU-27 average. The only exception is the EU-1 average operating costs for grain maize, which are 2 % higher than the EU average. The grain maize yield was indeed exceptionally low in 27 in the EU-1. We look indeed at the development of costs per tonne, so in the case of cereals, the fluctuations of yield play a major role in the development of the cereals costs per tonne. For milk, beef fatteners and beef breeders and fatteners, the contrast between EU groups is more marked: the EU-1 and EU-2 have significantly lower operating costs than the EU-27 average (- 18 % and -27 % respectively for milk). Beef breeders operating costs are similar for all EU groups. The breakdown of operating costs depends primarily on the sector considered. In cereals, fertilisers, crop protection and energy represent the bulk of the operating costs (around 5-6 % on EU average). For milk, the most important cost item is feed (around 5 %). Energy represents between 9 % of the average milk operating costs in the EU-15 and 14 % in the EU- 1 and EU-2. Feed is also a major cost item for beef breeders and fatteners in the EU-15 (4 %); however, in the EU-1, it represents only 2 % of the operating cost given the lower price for feed. In the EU-1, the beef non-specific costs are considerably higher because of the substantial costs of building and machinery upkeep, and energy costs. Farm economics brief Page 4 / 14

Figure 5: EU groups' operating costs by product - 27 /t Cereals operating costs - 27 Cereals /t - operating costs - 27 Wheat operating costs - /t Grain maize operating costs - /t Barley operating costs - /t Cereals operating costs - /t Fertilisers and crop protection Other operating costs Fuel and energy 14 12 1 119 17 11 16 125 118 118 17 1% 9% 8% 7% 54 42 59 52 8 6 4 6% 5% 4% 3% 15 24 17 2 EU-15 EU-1 EU-2 EU-27 2% 1% % 38 43 35 38 EU-15 EU-1 EU-2 EU-27 /t Milk operating costs - 27 Milk /t - operating costs - 27 25 2 15 1 21 162 143 196 1% 9% 8% 7% 6% 5% 4% Feed Fuel and energy Other operating costs 89 51 47 85 18 2 18 5 3% 2% 94 89 76 93 EU-15 EU-1 EU-2 EU-27 1% % EU-15 EU-1 EU-2 EU-27 1 4 1 2 1 8 6 4 2 Beef operating costs - 27 1 196 1 188 1 16 1 15 726 Beef - breeders operating costs - /cow Beef - fatteners operating costs - /male cattle sold Beef - b&f operating costs - /cow 682 944 941 723 EU-15 EU-1 EU-2 EU-27 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Beef breeders & fatteners /cow - operating costs - 27 Feed Fuel and energy 41 71 299 426 41 147 195 198 Animal purchase Other operating costs 4 73 295 419 EU-15 EU-1 EU-2 EU-27 Source: EU FADN DG AGRI, Models for the allocation of costs. Farm economics brief Page 5 / 14

3. Highly contrasted operating costs among the Member States Box 3: Methodology The production costs and margins analysed in this brief are estimated based on the Farm Accountancy Data Network (FADN) database. The FADN is a European system of sample surveys that take place each year and collect structural and accountancy data relating to farms; their aim is to monitor the income and business activities of agricultural holdings and to evaluate the impacts of the Common Agricultural Policy (CAP). Costs available in the database are for the whole farm. Models are used to allocate farm costs to a particular product. They use different ratios: for example, product output to total output. They are calculated based on samples of specialised farms (for example, farms for which more than 4 or 5 % of the output comes from the product considered). For 27 production cost estimates, the samples of specialised farms studied represent 28 % of the cereals area, 71 % of dairy cows and 74 % of the suckler cow herd. It should be underlined that the presented EU or Member States average figures are not weighted by volume or value of EU or Member State production, but by number of farms represented in the population. In certain cases, there are not enough specialised farms in the EUgroup or in the Member State to allow calculating an estimate. This is why there are some blanks in certain tables or graphs. For 28 and 29, operating costs and gross margins have been estimated on the basis of agricultural price indices and input price indices (source DG AGRI and ESTAT). Farm structures were assumed to remain unchanged. Figure 6 on the following page shows the difference between the national average operating costs and the EU-27 average for each analysed product. This difference ranges from - 63 % (Portugal, for beef breeders and fatteners) to +84 % (Belgium, for beef breeders and fatteners) of the EU-27 average, reflecting the variety of production systems in the EU and the cost aspect of the national competitiveness for the product in question. For these products, Member States can be ranked according to their level of operating costs: - Spain, Estonia, Lithuania, Poland and Slovenia have low operating costs in comparison with the EU-27 average. - Denmark, Greece, Finland, Sweden, the United Kingdom, Cyprus, the Czech Republic, Hungary, Malta and Slovakia have high operating costs in comparison with the EU-27 average. - France, Luxembourg, the Netherlands and Austria are close to the EU-27 average operating costs for the products studied. - Belgium, Germany, Italy, Ireland, Portugal, Latvia, Bulgaria and Romania provide a mixed picture based on the product in question. For example, Belgium has low operating costs for milk, but very high ones for beef, especially for breeders and fatteners. Portugal has very low operating costs for beef, but not for cereals. Bulgaria has low operating costs for milk, but not for grain maize. It should be underlined that since not all Member States are members of the Eurozone, changes in the exchange rate may explain some differences between Member States. The value of labour, land, and buildings decreases in euro terms when the value of a non-euro currency falls. On the other hand tradable inputs (fertilisers, pesticides, energy) get more expensive. Farm economics brief Page 6 / 14

Figure 6: Member States' operating costs in comparison with the EU-27 average - 27 Wheat Barley Grain maize Cereals Milk Beef - breeders Beef - fatteners Beef - b&f -8% -6% -4% -2% % 2% 4% 6% 8% 1% BE DK DE EL ES FR IE IT LU NL AT PT FI SE UK CY CZ EE HU LT LV MT PL SK SI BG RO Source: EU FADN DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State. Farm economics brief Page 7 / 14

Figures 7 and 8 illustrate the average operating costs and the gross margin by Member State for 27 and by analysed product. It should be underlined that there is no systematic negative correlation between operating costs and gross margins, as these depend on the price level and on the possible coupled subsidies applied in the Member State. Therefore it should be kept in mind that low operating costs do not necessarily mean high profitability or vice versa. For example thanks to high prices and coupled subsidies, Finland has a good average milk gross margin despite its very high operating costs (Figure 7). Similarly, thanks to strong prices, Belgian beef breeders and fatteners have one of the highest gross margins in spite of their extraordinarily high operating costs (Figure 8). For cereals, Cyprus and Finland have the highest operating costs. However, high operating costs are not driven by the same factors in the two countries. In Cyprus the high operating costs are mainly driven by very high fertiliser and crop protection costs. In Finland they are explained mainly by machinery and building upkeep and other direct costs (insurance, taxes, etc.). Poland, Estonia, Lithuania and especially Spain have very low operating costs in most products. The main drivers of these low costs likewise differ according to the Member State and to the sector. For milk, the lowest average operating costs are for Lithuania, Romania and Poland. Malta and Finland have the highest costs. Figure 7: Operating costs and gross margin by Member State 27 (cereals and milk) /tonne operating costs - /t 2 the lowest operating costs 18 16 138 14 132 121 117 12 111 112 13 1 8 74 133 Cereals - 27 155 126 12 gross margin - /t 172 the highest operating costs 124 126 124 119 94 94 81 18 1 6 4 2 DK DE EL ES FR IE IT AT PT FI SE UK CY CZ EE HU LT LV PL SK BG RO /t 35 operating costs - /t Milk - 27 gross margin - /t 39 3 278 25 2 15 161 197 3 17 166 187 173 189 21 194 234 196 3 166 9 112 19 146 219 163 157 139 1 5 BE DK DE ES FR IE IT LU NL AT PT FI SE UK CZ EE HU LT LV MT PL SK SI BG RO S ource: EU FADN DG AGRI, Models for the allocation of costs. Gross margins include coupled subsidies (but not decoupled payments, included in income). Data are not displayed when there are not enough specialised farms in the region. Farm economics brief Page 8 / 14

When considering costs and margins for the beef sector, the reader should keep in mind that results are expressed per cow or male cattle sold. The final product is not always homogeneous (i.e. quantity of meat produced per cow), particularly between Member States, thus comparisons should be interpreted with caution. In beef, national average operating costs reflect natural conditions and/or the existence or nonexistence of quality-oriented systems for cattle breeding and fattening. The highest total operating costs were found in Belgium (specific high quality production), Finland and Sweden (extreme climatic conditions) (Figure 8). Figure 8: Operating costs and gross margin by Member State 27 (beef) /cow 1 4 1 2 1 8 6 4 2-2 -4 89 1 13 65 operating costs - /cow 552 835 644 Beef breeders - 27 492 The lowest costs are observed in Portugal, Spain and the Czech Republic. It is also interesting to note that some Member States have a very different level of operating costs depending on the system (breeder/breeder and fattener/fattener). For example Italy appears to have on average low operating costs for breeders and for breeders and fatteners but it has the highest operating costs for fatteners. However, this does not prevent Italy from having a good gross margin for all production systems thanks to good prices. On the other hand, Spain and Portugal have very low operating costs for all production systems. 788 785 gross margin - /cow 353 1 232 99 784 793 BE DK DE ES FR IE IT LU AT PT FI SE UK CZ SI 529 /male cattle sold 1 4 Beef fatteners - 27 operating costs - /male cattle sold 1 37 gross margin - /male cattle sold 1 2 1 8 1 96 8 1 17 1 118 1 75 913 6 4 2 BE DK DE EL ES FR IE /cow 2 5 2 1 5 1 5 2 185 1 147 Beef breeders and fatteners - 27 operating costs - /cow gross margin - /cow 1 269 1 346 1 16 935 656 437 1 923 1 721 1 539-5 BE DE ES FR IE IT LU PT FI SE UK Source: EU FADN DG AGRI, Models for the allocation of costs. Gross margins include coupled subsidies (but not decoupled payments, included in income). Data are not displayed when there are not enough specialised farms in the Member State. Farm economics brief Page 9 / 14

The structure of operating costs can be very different from one Member State to the other (Figure 9). Fertilisers and crop protection represent almost 45 % of cereals operating costs in Cyprus, Lithuania, Latvia and Poland, and only 21 % in Austria. Energy accounts for a large share of cereals operating costs in Portugal, Hungary and Latvia, and a relatively limited one in Ireland, France and Denmark. For milk production feed can represent a widely varying share of the operating costs, ranging from 36 % in Luxembourg to 8 % in Malta. Figure 9: Breakdown of operating costs by Member State and product 27 Feed is a major component of operating costs for milk and beef production in Italy, Spain, Portugal and Malta: Southern countries have greater recourse to purchased feed, which is more expensive. In Finland and Austria other operating costs represent a large share of total operating costs for all the products presented, mainly because of the weight of the machinery and building upkeep cost in these countries. 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Cereals /t - operating costs - 27 Cereals - /t Fertilisers and crop protection Cereals - /t Fuel and energy Cereals - /t Other operating costs 36 27 42 31 42 62 57 38 55 5 57 62 59 78 56 66 59 57 87 65 85 73 17 19 25 18 19 7 18 11 2 3 13 35 2 14 28 27 11 18 57 46 46 76 42 35 33 41 46 46 4 37 52 43 47 26 36 4 4 36 34 DK DE EL ES FR IE IT AT PT FI SE UK CY CZ EE HU LT LV PL SK BG RO Milk /t - operating costs - 27 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Feed Fuel and energy Other operating costs 26 19 11 17 18 25 27 2 34 13 13 11 11 23 27 36 14 18 14 19 26 247 11 124 117 77 9 94 85 78 64 74 8 18 17 98 91 128 85 93 52 89 17 41 21 11 19 74 66 BE DK DE ES FR IE IT LU NL AT PT FI SE UK CZ EE HU LT LV MT PL SK SI BG RO Beef breeders & fatteners /cow - operating costs - 27 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Feed Animal purchase Fuel and energy Other operating costs 525 134 155 112 484 376 444 584 495 526 39 95 65 931 57 141 76 98 66 55 245 183 73 82 153 163 287 272 435 474 427 36 2 342 441 892 186 432 313 39 269 523 527 473 BE DE ES FR IE IT LU PT FI SE UK Source: EU FADN DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State. Farm economics brief Page 1 / 14

4. Total economic costs lower in EU-1 but increasing In this chapter, we look at total economic costs, which take into account operating costs and all other costs (see Box 2). They allow comparing total costs for farms with different structures in terms of land, labour and capital and to explain some differences of competitiveness among Member States. For the sectors analysed, EU-15 and EU-2 total economic costs are in general very close to the EU-27 average (Figure 11). The exception is with the EU-2 grain maize total economic costs, which are 25 % higher than the EU-27 average as a result of the exceptionally bad yield in 27. Expressed in EUR/ha, EU-2 cereals costs are significantly lower than EU-15 ones. In contrast, for all products studied, EU-1 total economic costs are more or less lower (from -9 % to -2 % in comparison with the EU-27 average). This is in particular due to lower imputed family factors (Figure 11). However, it should be noted that both external and imputed family factors have been steadily rising since 24 in the EU-1 (Figure 1), driving the increase in total economic costs. Such increases (in wages, family labour costs, rent, etc.) probably reflect a mix of increasing living standards and the strengthening of currencies of those Member States. In the milk sector, EU-1 external wages increased faster than the net margin (amount available to remunerate own factors). This explains the increase in the total economic costs of the EU-1 for cereals and milk (Figure 1). In the EU-15 the trend in total economic costs is quite flat over the period 2-27 or very slightly increasing depending on the product. The breakdown of total economic costs shows that operating costs represent between 4 % and 55 % of total economic costs (Figure 11). On average, the share of operating costs is a little higher for livestock sectors. In the EU-1, they represent the highest share (55 %) for all the products studied given the lower costs for external and family factors explained above. Depreciation is generally lower in the EU-1 and EU-2 groups due to older buildings or equipment and/or the longer average life of assets and/or lower prices of assets. In the EU-2 external and imputed family factors represent a large share of the total costs. This is mainly due to the high labour input in Bulgarian and Romanian farms. In spite of very low wages per hour the total labour cost is high. The shares of external and family factors differ greatly between cereals and milk. This is because on average in the EU-2 farms specialised in cereals rely heavily on paid labour whereas milk specialised farms rely heavily on family labour. Figure 1: Trend in EU total economic costs (nominal terms) EU-15 total economic costs Cereals and milk - /t Cereals EU-15 Milk EU-15 Beef - b&f EU-15 4 35 3 25 2 15 1 5 2 5 2 1 5 1 5 beef - /cow EU-1 total economic costs Cereals and milk - Cereals EU-1 /t Milk EU-1 35 3 25 2 15 1 5 2 21 23 24 25 26 27 24 25 26 27 Source: EU FADN DG AGRI, Models for the allocation of costs. Farm economics brief Page 11 / 14

Figure 11: EU groups total economic costs by product 27 /t Cereals total economic costs - 27 Wheat total economic costs - /t Barley total economic costs - /t Grain maize total economic costs - /t Cereals total economic costs - /t 3 252 25 244 248 241 242 235 2 193 191 15 1 5 EU-15 EU-1 EU-2 EU-27 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Cereals /t - total economic costs - 27 Operating costs Depreciation External factors Imputed family factors 37 39 78 69 19 56 28 29 29 31 28 31 17 16 118 17 EU-15 EU-1 EU-2 EU-27 /t Milk total economic costs - 27 Milk /t - total economic costs - 27 4 35 3 25 2 15 1 5 373 361 366 294 EU-15 EU-1 EU-2 EU-27 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Operating costs Depreciation External factors Imputed family factors 84 69 85 42 26 17 4 46 37 44 26 21 162 196 143 EU-15 EU-1 EU-2 EU-27 2 5 2 1 5 1 5 1 46 Beef total economic costs - 27 Beef - breeders total economic costs - /cow Beef - fatteners total economic costs - /male cattle sold Beef - b&f total economic costs - /cow 2 32 2 34 1 519 1 258 1 314 1 874 1 512 1 458 EU-15 EU-1 EU-2 EU-27 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Beef breeders & fatteners /cow - total economic costs - 27 Operating costs External factors 719 577 714 15 254 11 245 Depreciation Imputed family factors 149 254 1 196 1 196 1 188 EU-15 EU-1 EU-27 Source: EU FADN DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State. Farm economics brief Page 12 / 14

The difference between the national average total economic costs and the EU-27 average is presented in Figure 12. It can range from -56 % (Portugal, for beef breeders and fatteners) to +98 % (Cyprus, for cereals) compared to the EU-27 average. It allows Member States to be classified according to their level of total economic costs: - Spain, Estonia, Lithuania, Latvia, Poland and Bulgaria have low total economic costs for the products studied. - Denmark, Greece, Austria, Finland, Sweden, Cyprus, Malta and Romania have very high total economic costs. - France, Luxembourg, the Netherlands, the Czech Republic (except barley) and Hungary are close to the EU-27 average total economic costs for the products studied. - Belgium, Germany, Ireland, Italy, Portugal, the United Kingdom and Slovakia have a contrasted situation according to the product studied. For example, Belgium has low total economic costs for wheat and milk, but high ones for beef. Portugal has low operating costs for milk and beef, but not for cereals. The main drivers of high or low total costs may differ considerably among Member States. For example, Denmark s high total economic costs are mostly driven by very high amounts of interest paid, whereas in the case of Romania it is due to a low yield for cereals and to high family labour input for milk. Finally, it should be underlined that the national average may conceal wide disparities across farms within the country. You can find more details in the sector farm reports, available at: http://ec.europa.eu/agriculture/rica/publications_en.cfm Cereal farms report 21 http://ec.europa.eu/agriculture/rica/pdf/cereals_report_21.pdf Dairy farms report 21 http://ec.europa.eu/agriculture/rica/pdf/dairy_report_21.pdf Beef farms report 21 http://ec.europa.eu/agriculture/rica/pdf/sa52_beefreport.pdf Farm economics brief Page 13 / 14

Figure 12: Member States total economic costs in comparison with the EU-27 27 Wheat Barley Grain maize Cereals Milk Beef - breeders Beef - fatteners Beef - b&f -8% -6% -4% -2% % 2% 4% 6% 8% 1% 12% BE DK DE EL ES FR IE IT LU NL AT PT FI SE UK CY CZ EE HU LT LV MT PL SK SI BG RO Source: EU FADN DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State. Farm economics brief Page 14 / 14