Sources: European Commission - DG Agriculture and Rural Development (Units I.1/L.1) and DG Economic and Financial Affairs (AMECO database)/Eurostat

Annual expenditure, in 2007 constant prices.

Sources: European Commission - DG Agriculture and Rural Development (Agriview Market prices and Circa)

World Bank - Pink Sheets

Volatility of agricultural market prices is increasing:

•Since 2005, EU market prices are fluctuating more for the most part of agricultural commodities.

•However, this variation would be bigger with world prices and in dollars.

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Since last year, the term "farm price crisis", and then "food crisis", has been used interchangeably to describe the dramatic increase, and then the dramatic decline of farm commodity prices. Rarely a day passes without some reference to price developments in commodity markets; clearly not just in agricultural commodities.

Some days prices will increase, others will see prices decline; yet regardless of the direction, it is the extent of variability in price movements that has been the main concern of farmers across the world.

Clearly, it is not the presence of price variability as such that is of concern. This has been a permanent feature of agricultural markets, driven by the simple fact that the discontinuous, weather-dependent farm production interacts with the continuous, daily demand for food.

What has been of concern is the magnitude that farm price variations have taken in recent years, and the fact that sometimes wide price swings seem to be linked more to parallel developments in all commodity markets than to the fundamentals of each individual market. As a result of this development, the signal that farmers receive about market direction becomes unclear, and often distorted, and hampers their capacity to respond.

Source: European Commission - DG Agriculture and Rural Development (Units L.1 and L.2), based on Eurostat – Economic Accounts for Agriculture

- Income situation is particularly difficult, with stagnation since the end of the 1990s.

- Due to the significant drop in 2009 linked to the impact of the economic crisis, agricultural income has come back to its 1993 level (erasing all the gains of the reform process started in 1992).

- On average, agricultural income as a share of average total income in the economy is 61% for EU-15 and 31% for EU-12

Source: European Commission - DG Agriculture and Rural Development (Units L.1 and L.2), based on Eurostat – Economic Accounts for Agriculture

Source: Eurostat. Caclulated on the basis of real prices for the "agricultural output" and "total intermediate consumption" aggregates (by Unit L.2)

Sources: Net ceilings = ‘gross amounts minus (modulation and transfers, as well as cotton and POSEI)’ - European Commission - DG Agriculture and Rural Development (Unit I.1)

Area = Potentially eligible area in 2008 - IACS

Beneficiaries in FY 2008 – DG Agriculture and Rural Development (2008 CATS Report)

These amounts correspond to the gross ceilings foreseen in Reg. 73/2009 with phasing-in completed for EU-12, including the transfers from the wine enveloppe and the silkworms, after modulation and transfers in accordance with Decision 379/2009.

This graph shows the issue of different levels of direct payments between Member States.

•The bars in blue show the average level of payment per hectare in each Member State in 2016 if we keep the current situation or status quo (2016 is considered to take into account the full phasing in of the new member states). This is a calculation obtained by dividing the total amount of direct payments by the agricultural utilized area in each MS. It provide us with the average level of payment per hectare in each MS. The difference between the MS reflect the historical references for the direct payments, firstly introduced in the 1992 reform, to compensate price reductions, and calculated in function of past production levels of each MS.

•The black bars show the difference between the average direct payments in old MS (262 EUR/ha) and new MS (182 EUR/ha)

•The orange line shows the level in which the EU flat rate (calculated by dividing the total amount of direct payments in the EU by the total amount of agricultural utilised area) all the amount would be set up to (with 100% of current overall budget). The MS with high levels  of aid would lose (left) and the MS with low levels would win (right).

•The bullets show an alternative calculation: average payments per beneficiary instead of hectare (it is not actually the hectares who get the money…). The case of Greece, that passes from the highest level of aid per hectare to one of the lowest  per beneficiary, or Chec Republic in a opposite manner, shows how the payment level discussion can have different angles.

•One could as well see other alternative conclusions: the average payments divided by the level of the country GDP. Here New Member states, like Latvia would have a higher level of aid…

Impacts of levelling direct payments:

•In short, the levelling of direct payments across the EU can lead to important budgetary redistribution between Member States and regions. The extreme would be to introduce a EU wide flat rate across the EU, leading to big losers and winners.

•This redistribution as important implications, beyond the budgetary ones:

•It would lead to a big impact in land values: in the MS loosing, land values would be depressed while in the winning MS they would be inflated (with negative effects, in particular, in “loosing” MS where the debt to equity ratio of farms are already high);

•There would big impact in farmer’s incomes. However, not necessarily in terms of distribution of support between farmers (as flat rate direct payments do not fundamentally affect the distribution of support between farms) because with a flat rate this is largely determined by the unequal distribution of land. 

Source: European Commission - DG Economic and Financial Affairs, based on Eurostat and DG Agriculture and Rural Development (Agriview) data