Agricultural output, price indices and income
From Statistics Explained
- Data from September 2012. Most recent data: Further Eurostat information, Main tables and Database.
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.
Main statistical findings
Output and subsidies
In value terms, the EU-27’s crop output grew 9.1 % in 2011 to EUR 203 330 million and animal output increased by 9.9 % to EUR 154 057 million (see Table 1); these increases in gross output were offset by a sharp increase in the value of intermediate consumption of goods and services at basic prices (up 11.1 %). As a result, the agricultural sector generated EUR 148 556 million of gross value added at producer prices in 2011, which represented a 6.0 % 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 2011 the EU-27’s agricultural sector recorded value added at basic prices that was EUR 153 000 million, 3.0 % higher than the valuation at producer prices. Value added at factor cost also adds in subsidies (less taxes) on production: in 2011 this was valued at EUR 198 932 million, a further 30.0 % 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 2011 total subsidies (before the deduction of taxes) on products for the agricultural sector were EUR 4 709 million, while subsidies on production were more than ten times this level, EUR 50 821 million; after deducting taxes these levels were EUR 4 445 million for products and EUR 45 932 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 ten times as high as product subsidies in 2011, in 2001 product subsidies had been nearly twice as high as production subsidies. In total these two types of subsidy were equivalent to an extra 37.4 % of value added at producer prices in 2011 in the EU-27. The net impact of subsidies less taxes in 2011 was to add an extra 33.9 % to value added at producer prices; for comparison, in 2001 the increase due to subsidies less taxes was 25.8 %.
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 2006 to 2011 (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 22 of the EU Member States, the largest increases being recorded for the United Kingdom (average growth of 7.0 % per annum) and Romania (4.3 % per annum), while reductions were posted in five of the EU Member States, the largest being in Belgium (-1.7 % per annum) and Cyprus (-1.4 % per annum).
The development of deflated agricultural input prices showed a broadly similar picture, as prices rose in 24 of the EU Member States, with the United Kingdom again recording the highest input price increases. Cyprus figured at the other end of the range, in this case with by far the largest decrease in input prices (-2.2 % per annum). 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) differences observed for Romania and the United Kingdom. Among the 13 EU Member States where input price changes exceeded the change in output prices the greatest differences were observed for Slovenia, Spain, Belgium and Portugal.
There was an overall 28.3 % increase in EU-27 output prices for agricultural goods between 2005 and 2011, which could be broken down for the main components into increases of 33.7 % for crop output and 22.8 % for animal output. The upward development of output prices between 2005 and 2011 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 and olive oil (all down by between 14 % and 31 %) – see Table 3. Equally, the 9.6 % increase in output prices for agricultural goods between 2010 and 2011 was led by a 34.7 % increase for cereals, while fruits (-0.3 %) and vegetables and horticultural products (-6.8 %) were the only product categories shown in Table 3 to record falling output prices in 2011.
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 7.1 % in the EU-27 from 2010 to 2011. There were stark contrasts among the EU Member States in the development of this indicator, with income rising at a rapid pace in Romania (56.8 %) and Hungary (49.2 %), in contrast to falling income in Belgium (-22.5 %), Malta (-14.0 %), Portugal (-10.3 %) and the Netherlands (-8.9 %) and to a lesser extent in Finland, Greece, France and Spain – 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 and 2008, 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). This was followed, in October 2011, by a set of legal proposals concerning the future of the CAP: it is planned that this revised agricultural policy will be in place by January 2014 – for more information, see the introductory article for agriculture, forestry and fisheries.
Further Eurostat information
- Agriculture and fishery statistics – Main results - 2008-2009 pocketbook
- Agriculture – Main statistics - 2007-2008 pocketbook
- Agriculture – Main statistics - 2008-2009 pocketbook
- Agricultural statistics – Main results 2006-2007 pocketbook
- EU Agricultural income rose by 12.6 % in 2010 - Statistics in focus 37/2011
- 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 (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 Organization of the United Nations (FAO) - Statistics