Agricultural output, price indices and income
From Statistics Explained
- Data from May 2014. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: November 2014.
This article gives an overview of recent changes in agricultural output, gross value added and prices in the European Union (EU), and their effect on income from agricultural activity; the information presented is drawn from the economic accounts for agriculture (EAA).
One of the principal objectives of the common agricultural policy (CAP) is to provide farmers with a reasonable standard of living. Although this concept is not defined explicitly within the CAP, a range of indicators including income development from farming activities may be used to determine the progress being made towards this objective.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
Main statistical findings
Output and subsidies
In value terms, the EU-28’s crop output grew 2.3 % in 2012 to EUR 208 764 million and animal output increased by 4.7 % to EUR 164 219 million (see Table 1); these increases in gross output were offset to some extent by an increase in the value of intermediate consumption of goods and services at basic prices (up 3.4 %). As a result, the agricultural sector generated EUR 156 908 million of gross value added at producer prices in 2012, which represented a 3.0 % increase in relation to the previous year.
Value added at producer prices reflects the value of output before taking account of subsidies and taxes on products and production. Value added at basic prices adds in any subsidies (less taxes) on products: in 2012 the EU-28’s agricultural sector recorded value added at basic prices that was EUR 161 100 million, 2.7 % higher than the valuation at producer prices. Value added at factor cost also adds in subsidies (less taxes) on production: in 2012 this was valued at EUR 208 088 million, a further 29.2 % higher than the valuation at basic prices. The various valuations of value added reflect the relative importance of product and production subsidies and to a lesser extent taxes. In 2012, total subsidies (before the deduction of taxes) on products for the agricultural sector were EUR 4 361 million, while subsidies on production were nearly 12 times this level, EUR 52 312 million; after deducting taxes these levels were EUR 4 192 million for products and EUR 46 988 million for production — see Table 2.
Types of agricultural subsidy have changed over time through successive reforms of the CAP: the shift from product to production subsidies was mainly implemented in 2005 and 2006. Whereas production subsidies were nearly 12 times as high as product subsidies in 2012, in 2005 they had only been 1.5 times as high. In total these two types of subsidy were equivalent to an extra 36.1 % of value added at producer prices in 2012 in the EU-28. The net impact of subsidies less taxes in 2012 was to add an extra 32.6 % to value added at producer prices; for comparison, in 2005 the increase due to subsidies less taxes was 34.5 %.
Changes in the value of agricultural output comprise a volume and price component: one important strand of recent changes in agricultural policy has been to move away from price support mechanisms, so that prices more accurately reflect market forces and changes in supply and demand. During the period 2008 to 2012 (see Figure 2) there were considerable differences between the EU Member States in the development of deflated agricultural output prices; such deflated prices show the extent to which agricultural prices have changed compared with consumer prices. Deflated output prices rose in 14 of the EU Member States, the largest increases being recorded for Hungary (average growth of 5.2 % per annum), Poland (2.4 % per annum) and Ireland (2.3 % per annum), while reductions were posted in 12 of the EU Member States, the largest being in Cyprus (-4.2 % per annum); output prices were unchanged in Estonia and the Netherlands.
The development of deflated agricultural input prices showed a slightly different picture, as prices rose in 10 of the EU Member States, with Bulgaria, Romania and Poland recording the highest input price increases (Croatia not available). One similarity was that Cyprus again recorded the largest fall in prices, input prices declining by 5.3 % per annum on average, while the Netherlands again recorded no change in prices. For 14 of the EU Member States the change in output prices was greater than the change in input prices, with the largest (percentage point) difference observed for Hungary. Among the 12 EU Member States where input price changes exceeded the change in output prices the greatest differences were observed for Slovenia, Bulgaria and Portugal.
There was an overall 35.9 % increase in EU-27 output prices for agricultural goods between 2005 and 2012. When analysed for the main components there was an increase of 41.7 % for crop output and 30.1 % for animal output. The upward development of output prices between 2005 and 2012 did not follow a smooth pattern, as there was a considerable reduction in prices between 2008 and 2009 when the price of agricultural goods fell by 11.5 %, which could be largely attributed to falling prices for cereals, milk, fruits, olive oil and industrial crops (all down by an amount between 14 % and 31 %) — see Table 3. Equally, the 5.9 % increase in output prices for agricultural goods between 2011 and 2012 was led by a 39.3 % increase for eggs, while potatoes (-4.8 %) recorded the largest fall in output prices in 2012 among the product categories shown in Table 3.
Income: Indicator A
The real net value added at factor cost of agricultural activity per unit of labour (expressed in annual work units), also known as the agricultural income indicator A, increased by 0.3 % in the EU-28 from 2011 to 2012. There were stark contrasts among the EU Member States in the development of this indicator, with income rising at a rapid pace in Lithuania (24.9 %), Denmark (33.4 %) and Cyprus (38.4 %), in contrast to relatively strong falls in income recorded for Romania (-21.9 %), Slovenia (-15.6 %) and Croatia (-14.8 %) — see Table 4.
Data sources and availability
Economic accounts for agriculture (EAA) provide an insight into:
- the economic viability of agriculture;
- agriculture’s contribution to each EU Member State’s wealth;
- the structure and composition of agricultural production and inputs;
- the remuneration of factors of production;
- relationships between prices and quantities of both inputs and outputs.
These accounts comprise a production account, a generation of income account, an entrepreneurial income account and some elements of a capital account. For the production items, EU Member States transmit to Eurostat values at basic prices, as well as their components (values at producer prices, subsidies on products, and taxes on products). The data for the production account and for gross fixed capital formation are transmitted in both current prices and the prices of the previous year.
The output of agricultural activity includes output sold (including trade in agricultural goods and services between agricultural units), changes in stocks, output for own final use (own final consumption and own-account gross fixed capital formation), output produced for further processing by agricultural producers, as well as intra-unit consumption of livestock feed products. The output of the agricultural sector is made up of the sum of the output of agricultural products and of the goods and services produced in inseparable non-agricultural secondary activities; animal and crop output are the main product categories of agricultural output.
Gross value added equals the value of output less the value of intermediate consumption and is shown in producer prices (the producer price excludes subsidies less taxes on products). Intermediate consumption represents the value of all goods and services used as inputs in the production process, excluding fixed assets whose consumption is recorded as fixed capital consumption. The EU Member States transmit information on intermediate consumption to Eurostat using values at purchaser prices (basic prices).
Eurostat also collects annual agricultural prices (in principle net of VAT) to compare agricultural price levels between EU Member States and to study sales channels. Quarterly and annual price indices for agricultural products and the means of agricultural production, on the other hand, are used principally to analyse price developments and their effect on agricultural income. Agricultural price indices are obtained by a base-weighted Laspeyres calculation (2005 = 100), and are expressed in nominal terms or as deflated indices based on the use of an implicit consumer prices (HICP) deflator.
Agricultural income indicators are presented in the form of:
- an index of real income of factors in agricultural activity per annual work unit (indicator A);
- an index of real net agricultural entrepreneurial income, per unpaid annual work unit (indicator B);
- and the net entrepreneurial income of agriculture (indicator C).
The information presented in this article for indicator A (as found in Table 4) relates to prices of the previous year — in other words, an example value of 107.1 represents a 7.1 % increase (based on the prices of the previous year).
Significant reforms of the common agricultural policy (CAP) have taken place in recent years, most notably in 2003, 2008 and 2013, with the aim of making the agricultural sector more market-oriented. The 2003 reform introduced a new system of direct payments, known as the single payment scheme, under which aid is no longer linked to the level of production (decoupling); this single payment scheme aims to guarantee farmers more stable incomes. Farmers can decide what to produce in the knowledge that they will receive the same amount of aid, allowing them to adjust production to suit demand. In 2008, further changes were made to the CAP, building on the reform package from 2003, such that all aid to the agricultural sector should have been decoupled by 2012.
The Europe 2020 strategy offers a new perspective on economic, social, environmental, climate-related and technological challenges and future agricultural reform is likely to be made in relation to the goals of developing intelligent, sustainable and inclusive growth, while taking account of the wealth and diversity of the agricultural sector within the EU Member States. As part of this process, the European Commission launched a public debate on the future of the CAP during 2010. Its outcome, coupled with input from the European Council and Parliament led the Commission to present a Communication in November 2010, titled ‘The CAP towards 2020: meeting the food, natural resources and territorial challenges of the future’ (COM(2010) 672 final).
In December 2013, this latest reform of the CAP was formally adopted by the European Parliament and the Council. Among the main elements of the CAP post-2013 are a fairer distribution of direct payments (with targeted support and convergence goals), revisions to public intervention and private storage aid, and continued support for rural development. For more information, see the introductory article for agriculture, forestry and fisheries.
Further Eurostat information
- Agriculture, forestry and fishery statistics — 2013 edition
- Agriculture, fishery and forestry statistics — Main results — 2010–11 — 2012 edition
- EU Agricultural income per annual work unit in EU-27 remained at the same level in 2012 — Statistics in focus 19/2013
- Agriculture (t_agri), see:
- Economic Accounts for Agriculture (t_aact)
- Crop output - basic and producer prices (tag00054)
- Animal output - basic and producer prices (tag00055)
- Output of the agricultural industry - basic and producer prices (tag00102)
- Gross value added of the agricultural industry - basic and producer prices (tag00056)
- Indicator A of the income from agricultural activity (tag00057)
- Agricultural prices and price indices (t_apri)
- Agriculture (agri), see:
- Economic Accounts for Agriculture (aact)
- Economic Accounts for Agriculture (aact_eaa)
- Economic accounts for agriculture - values at current prices (aact_eaa01)
- Economic accounts for agriculture - values at n-1 prices (aact_eaa02)
- Economic accounts for agriculture - values at constant prices (2005=100) (aact_eaa03)
- Economic Accounts for agriculture - values at real prices (aact_eaa04)
- Economic accounts for agriculture - indices : volume, price, values (aact_eaa05)
- Economic accounts for agriculture - agricultural income (indicators A, B, C) (aact_eaa06)
- Agricultural Labour Input Statistics (aact_ali)
- Agricultural Labour Input Statistics: absolute figures (1 000 annual work units) (aact_ali01)
- Agricultural Labour Input Statistics: indices (2005 = 100) (aact_ali02)
- Economic Accounts for Agriculture (aact_eaa)
- Agricultural prices and price indices (apri)
- Selling prices of agricultural products (absolute prices), land prices and rents (apri_ap)
- Price indices of agricultural products (apri_pi)
Methodology / Metadata
- Economic Accounts for Agriculture (ESMS metadata file — aact_esms)
- Price indices of agricultural products (ESMS metadata file — apri_pi_esms)
- Selling prices of agricultural products (absolute prices), land prices and rents (ESMS metadata file — apri_ap_esms)
Source data for tables and figures (MS Excel)
- Handbook for EU agricultural price statistics (PDF)
- Regulation 138/2004 on the economic accounts for agriculture in the Community
- European Commission — Agriculture and Rural Development — Agricultural markets and prices
- Food and Agriculture Organisation of the United Nations (FAO) — Statistics