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Performance of EU agriculture: productivity challenge

Pierluigi Londero

DG Agriculture and Rural Development

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Outline

• Focus on past and projected EU performance

• G20 boost to productivity

• AGRI analysis

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Farm income grew faster in the new MS than in the EU15, though the gap is still substantial…

2 2 3 .7

1 7 2 .6

1 8 9 .4

1 7 0

1 8 0

1 9 0

2 0 0

2 1 0

2 2 0

2 3 0

1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

0

1 0

2 0

3 0

4 0

5 0

6 0

E U 15 - le ft a x is

N M S 12 - r ig h t a x is

E U 27 in 200 0 = 10 0

1 6 .6

2 7 .7

Development of agricultural factor income per AWU in the EU-15 and EU-12, 1993-2009, EU-27 in 2000=100, in real terms

4Agricultural factor income per AWU by farm type in the EU‑25, avg 04-06

0

5 000

10 000

15 000

20 000

25 000

30 000

Pig & Poultry Milk Wine Horticulture Grazinglivestock

Field crops Otherpermanent

crops

Mixed

Income (per worker) depends on WHAT is produced …

5Agricultural factor income per AWU by economic size class in the EU-25, average 2004-2006

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

< 4.8 4.8 - 9.6 9.6 - 19.2 19.6 - 48 48 - 120 >120

Economic size (potential gross margin in 1000 € )

… and on HOW LARGE the farm is

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Development of agricultural output and input prices in the EU-27, 2000-2008, in real terms

80

85

90

95

100

105

110

115

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Agricultural input price

Agricultural output price

Poor profitability in recent years as a result of a deterioration in terms of trade…

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Evolution of agricultural labour productivity in the EU-27, 2002-2009, 2002=100

90

95

100

105

110

115

120

125

130

2002 2003 2004 2005 2006 2007 2008 2009

… in spite of increasing labour productivity…

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Evolution of annual work units and farms in the EU-27, 2000-2009

annua l w o rk un its

fa rm s

11 000 000

11 500 000

12 000 000

12 500 000

13 000 000

13 500 000

14 000 000

14 500 000

15 000 000

15 500 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

… driven by structural adjustment

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Recent trends in commodity prices

Source: World Bank.

(World Bank nominal price indices, 2000=100)

0

75

150

225

300

375

450

525

600

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Fertilisers + 163 % Energy + 223 %

Agriculture + 50 %

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Cereals: (low) yield growth will keep the sector growing

EU-27 area, yield and production projections – 2020/21 vs. 2009/10 - %

-15%

-10%

-5%

0%

5%

10%

15%

20%

soft wheat durum wheat barley maize rye oats other cereals TOTALCEREALS

area yield supply

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Cereals: focus on yield growthEU-27 past and projected yield growth – average annual rate of

change

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Soft wheat Durum wheat Barley Maize Rye Oats Other cereals TOTALCEREALS

1990s 2000s 2010s

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Resulting in a slow down in farmers’ income

average 2005-2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Factor income in nominal terms

EU-27 100.0 108.6 109.1 107.9 107.4 107.1 108.5 110.7 110.6 113.7 114.5 EU-15 100.0 108.8 108.9 107.2 106.1 105.3 106.4 108.2 107.5 110.4 110.5 EU-12 100.0 107.2 109.8 111.7 114.6 117.1 120.3 124.4 127.4 132.2 136.3

Labour input

EU-27 100.0 91.9 89.9 87.9 85.9 84.0 82.2 80.4 78.6 76.9 75.2 EU-15 100.0 93.1 91.6 90.2 88.7 87.3 85.9 84.6 83.2 81.9 80.6 EU-12 100.0 90.9 88.3 85.8 83.4 81.1 78.8 76.6 74.4 72.3 70.3

Agricultural income in real terms per labour unit

EU-27 100.0 110.3 111.3 110.6 110.8 110.2 112.2 115.2 114.9 119.0 119.7 EU-15 100.0 109.9 110.0 108.1 106.8 105.6 106.4 108.0 107.1 109.6 109.6 EU-12 100.0 108.2 110.8 114.2 119.9 119.5 125.8 133.4 133.9 142.8 144.9

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Results of G20 Agricultural Ministerial

• The Action Plan on food price volatility and agriculture mentions productivity 13 times! It includes:– We stress the need to increase agricultural production and

productivity on a sustainable basis.

– It requires improvements in • land and water management, • improved agricultural technologies, • an appropriate and enabling environment which could lead to increased

investments notably from the private sector, • well-functioning markets and • means to mitigate and manage risks associated with excessive price

volatility of agricultural commodities.

– We recognize that agricultural policies have an important role to play with regard to all these challenges.

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Results of G20 Agricultural Ministerial

• The Action Plan on food price volatility and agriculture includes:– We recognize the importance of a significant increase in agricultural

production and productivity, considering the diversity of conditions world-wide and the need for a sustainable use of natural resources, in order to respond to the challenge of a growing demand.

– To feed a world population expected to reach more than 9 billion in 2050, it is estimated that agricultural production will have to increase by 70 percent over the same period, and more specifically by almost 100 percent in developing countries.

– … also requires significant advances to reduce pre and post-harvest losses and food waste along value chains.

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Results of G20 Agricultural Ministerial

• The Action Plan on food price volatility and agriculture includes:– We encourage the

• first G20 conference on agricultural research for development, involving our agricultural research centers, to be held in Montpellier on 12 and 13 September 2011 and

• the G20 seminar on Agricultural Productivity to be held I October 2011.

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Findings of in-house analysis: demand growth slowdown

Annual % rate of growth in period

0%

2%

4%

6%

8%

10%

12%

Wheat Maize Rice Total grains Totalfeedgrains

Soybeans Soybean meal

Palm oil Soybean oil

Total vegetable

oils

1961-72 1973-84 1985-96 1997-08

Source: USDA, FAO

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Findings of in-house analysis:demand still faster than yields

Annual % rate of growth in period

0%

1%

2%

3%

4%

5%

6%

7%

Wheat dmd Wheat yield Maize dmd Maize yield Rice dmd Rice yield Soybean dmd Soybean yield

1961-72 1973-84 1985-96 1997-08

Sources: FAO; Eurostat, DG Agriculture and USDA

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Thank you!