Performance of the agricultural sector

Data extracted in November 2019.

Planned article update: January 2021.

Highlights
The EU's agricultural industry created gross value added of EUR 181.7 billion in 2018.
Agriculture contributed 1.1 % to the EU's GDP in 2018.
Agricultural income per annual work unit was -4.6 % lower for the EU-28 in 2018 than the level in 2017 and +19.7 % higher than in 2010.
Performance in agricultural sector 2018.png

This article is part of a set that is taken from Eurostat’s publication Agriculture, forestry and fishery statistics - 2019 edition. It gives an overview of indicators on agricultural output, agricultural income and of agricultural prices in the European Union (EU). The data are extracted from Eurostat collections of agricultural statistics: economic accounts for agriculture (EAA) and agricultural price indices (API).

Full article

Value of agricultural output

Agriculture is an activity that falls within the primary sector of the economy, which is concerned with the extraction or harvesting of products from the earth. In an accounting context, an industry is a branch of economic activity. The term 'agricultural industry' is used to describe the branch of agricultural production but it should not be understood as inferring that agriculture is industrialised or that it is about the processing of raw materials. Indeed, the food and beverages processing industry is analysed in Chapter 7 of the publication Agriculture, forestry and fishery statistics.

In this article, the term 'agricultural industry' is used only where precise accounting terms are required, with 'agricultural sector' being used elsewhere.

Agriculture contributed 1.1 % to the EU's GDP in 2018

Agricultural production in the EU by the millions of predominantly small farms adds up to being big business, even without considering its importance as the key building block for the downstream food and beverages processing industry. The agricultural sector contributed EUR 176.9 billion towards the EU's overall GDP in 2018. To put this in some context, the contribution of agriculture to the EU's economy was only slightly less than the GDP of Greece in 2018, the seventeenth largest economy among the Member States.

This contribution is the difference between the value of agricultural output and the value of various input costs built up in the production process, adjusted for taxes and subsidies on products. It is therefore interesting to look at the structure and composition of the value of this agricultural production and the various inputs used.

The agricultural industry created an estimated added value of EUR 181.7 billion in 2018

The gross value added by the EU’s agricultural industry, which is the difference between the value of everything that the EU’s primary agricultural sector produced in 2018 and the costs of the services and goods used in the production process, was an estimated EUR 181.7 billion in 2018. One way of looking at this is that for every 1 euro spent on the cost of goods and services used in the production process (known as intermediate consumption), the agricultural industry created added value of EUR 0.72. Whilst this relative value added was lower than the EUR 0.77 in 2017, it was still higher than all the other years since 2008.

The value of the output produced by the EU's agricultural industry was an estimated EUR 434.3 billion in 2018

The value of everything that the EU's agricultural industry produced in 2018 was an estimated EUR 434.3 billion; this includes the value of crops, of animals, of agricultural services as well as of some goods and services that were not strictly agricultural but which could not be separately measured.

About one half (51.8 %) of the value of the total output of the EU's agricultural industry in 2018 came from crops (EUR 224.9 billion), within which vegetables and horticultural plants and cereals were the most valuable (see Figure 1). A further two fifths (39.6 %) came from animals and animal products (EUR 172.0 billion), a majority coming from just milk and pigs. Agricultural services (EUR 20.8 billion) and inseparable non-agricultural activities (EUR 16.6 billion) contributed the rest (8.6 %).

Figure 1: Output of the agricultural industry, EU-28, 2018
(% of total output)
Source: Eurostat (aact_eaa01)

Contributions from Member States varied significantly, reflecting differences in volumes produced, prices received as well as the mix of crops grown, animals reared, animal products collected and services offered. More than one half (55.0 %) of the total output value of the EU's agricultural industry came from the 'big four' of France (EUR 77.2 billion), Italy (EUR 56.9 billion), Germany (EUR 52.7 billion) and Spain (EUR 52.2 billion). About another one quarter (23.4 %) came from the combined output of the United Kingdom (EUR 29.8 billion), the Netherlands (EUR 28.2 billion), Poland (EUR 25.0 billion) and Romania (EUR 18.6 billion). Three-quarters (78.4 %) of the total value of EU's agricultural industry in 2018 came from these eight Member States.

Intermediate consumption costs for the EU's agricultural industry were an estimated EUR 252.6 billion in 2018

Producing all this output incurred costs. Farmers had to make purchases of goods and services to be used as inputs in the production process; they bought things like seeds, fertilisers, animal feedingstuffs and fuel for their tractors as well as veterinary services, among other things. These input costs are termed 'intermediate consumption' in an accounting context. Intermediate consumption costs for the agricultural industry came to a total of EUR 252.6 billion for the EU as a whole in 2018.

Some costs are associated with the farming of animals; they required feed, which accounted for over one third (37.3 %) of total intermediate consumption costs, and veterinary services (a further 2.6 %). Likewise, some costs are associated with crop farming; farmers required seeds and plants (5.1 % of total costs), many used plant protection products, such as herbicides, insecticides and pesticides (4.9 %) and fertilisers and soil improvers (6.6 %). Other costs are common to all types of farm, independent of whether specialist or mixed-type.

The value of the output produced by the EU's agricultural industry in 2018 upheld the 2017 peak

The estimated value of agricultural output in 2018 inched higher (a year-on-year rise of +0.6 % in nominal terms), maintaining the rebound recorded in 2017 (see Figure 2). This change in nominal value reflected slight rises in both the nominal price for agricultural goods and services as a whole (an estimated +0.3 %) as well as in the volume of output (also an estimated +0.3 %).

Figure 2: Indices of value, volume and price of output produced by the agricultural industry, EU-28, 2005–2018
(2010 = 100)
Source: Eurostat (aact_eaa05)

This further small rise in the value of the EU’s agricultural industry was particularly driven by the developments in the values recorded in Romania (+8.0 %), France (+5.6 %), Italy (+3.0 %) and Spain (+3.0 %). It should be noted that the highest proportional increase was in Slovenia (+17.9 %). In contrast, there were declines in the values of the agricultural industries in a number of countries, including Denmark (-8.9 %), Sweden (-8.8 %), Germany (-6.3 %) and Poland (-2.4 %).

The gross value added generated by the EU's agricultural industry fell back from its 2017 peak

Although the value of agricultural output in 2018 was slightly higher (+0.6 %) than in 2017, the cost of the intermediate goods and services used increased at a faster rate (an estimated +3.8 %), resulting in an estimated decline (-3.5 %) in the gross value added generated by the agricultural industry from its peak level in 2017.

Figure 3: Indices of the value of output, intermediate consumption costs and value added generated by the agricultural industry, EU-28, 2005–2018
(2010 = 100)
Source: Eurostat (aact_eaa05)

Agricultural labour productivity

The performance of the agricultural industry can be measured in terms of net value added at factor cost, which is gross value added adjusted for the consumption of fixed capital, and subsidies and taxes on production. It is also known as factor income, as it is the remuneration available for all the factors of production.

Factor income in the EAA can be expressed per full-time labour equivalent. As such, it is considered a partial labour productivity measure; it is a measure of the net value added by the equivalent of each full-time worker in the agricultural industry. This indicator of performance is measured in real terms (adjusted for inflation) and expressed as an index. It should not be confused with total income of farming households or the income of a person working in agriculture.

To understand the development of this agricultural income measure, it is first necessary to understand the development of the agricultural labour amongst which this remuneration is notionally shared. With so much part-time, seasonal and unsalaried labour input in agriculture, the amount of work actually carried out in farming activities is best described when using a unit called the Annual Work Unit (AWU). This unit expresses the volume of work done in full-time work equivalents.

Downward trend in the volume of agricultural labour in the EU continued in 2018

Agricultural labour input in the EU was the equivalent of an estimated 9.3 million full-time workers in 2018. These are the notional workers that are remunerated with agricultural income.

A majority of total agricultural labour input is non-salaried labour; it was the equivalent of an estimated 6.8 million full-time workers in 2018. Salaried labour was the equivalent of 2.5 million full-time workers in 2018. In many Member States, more salaried agricultural labour was used in 2018 than in 2017 (see Figure 4). This was often in contrast to the overall decline in the total amount of agricultural labour used, reflecting hiring requirements at seasonal peaks.

Figure 4: Change in agricultural labour input, 2018/2017
(% change)
Source: Eurostat (aact_ali02)

There has been a long-established downward trend in the number of people working in the EU’s agricultural sector; during the period between 2005 and 2018, the average rate of decline in the volume of agricultural labour used across the EU as a whole was -2.5 % per year. Although the downward trend continued in 2018, the rate of decline (-1.1 %) was slower than the trend average.

Among Member States, there were considerable differences; compared to 2017, the volume of labour used in the Netherlands rose most sharply (+2.2 %) in 2018, with other increases recorded including the United Kingdom (+0.7 %) and Belgium (+0.7 %), which contrasted with further sharp declines in Finland (-5.5 %), Latvia (-5.6 %), Bulgaria (-6.9 %) and Hungary (-7.1 %).

Over the long-term, the volume of agricultural labour has been in steep and steady decline

The volume of total agricultural labour declined sharply in almost all Member States during the period between 2005 and 2018 (see Figure 5); the sharpest declines were in Bulgaria (an average -7.7 % per year), Slovakia (-6.3 % per year), and Latvia (-5.0 % per year). This contraction in the agricultural labour force reflected both push and pull factors; there have been great strides in mechanisation and efficiency on the one hand and, on the other, a wider choice of attractive job opportunities in other sectors of the economy. The main exceptions to this general trend were Malta (an increase of +1.0 % per year on average) and Ireland (+0.6 % per year on average).

Figure 5: Change in agricultural labour input, 2005-2018
(average annual growth rate, % change)
Source: Eurostat (aact_ali02)

The reduction in the work input from non-salaried labour was more pronounced than for salaried labour at the level of the EU as a whole (-3.1 % per year on average compared with -0.2 % per year). There were higher levels of salaried labour input in Ireland (+5.0 % per year on average), Luxembourg (+3.9 % per year on average), Austria (+2.6 % per year on average) and Poland (+2.2 % per year on average) among others, but sharp declines in Slovakia (-5.2 % per year on average), Greece (-3.6 % per year on average), Czechia (-3.3 % per year on average) and Romania (-3.2 % per year on average).

Agricultural income as defined by real factor income per AWU declined for the EU-28 in 2018 (-4.6 %)

Agricultural income, as defined by deflated (real) factor income per Annual Work Unit and expressed as an index (called Indicator A), for the EU as a whole was an estimated -4.6 % less in 2018 than it was in 2017. This reflected a slightly stronger rate of decline (-5.7 %) in factor income that was notionally shared amongst a smaller agricultural labour input (-1.1 %).

A majority of Member States recorded declines in this index of agricultural income in 2018 (see Figure 6) and almost all of these were sharp falls of over -4.0 %. The sharpest rates of decline were recorded in Denmark (an estimated -45.9 %), Germany (-26.9 %), Lithuania (-23.8 %), Sweden (-23.1 %), Estonia (-23.0 %), Belgium (-17.5 %) and the Netherlands (-17.0 %). In the case of Denmark, Sweden and Belgium these falls returned the average level of agricultural income back towards other lows in the period since 2005 or set new lows.

Figure 6: Agricultural income per annual work unit (Indicator A), 2018/2017
(2010=100)
Source: Eurostat (aact_eaa06)

The more moderate decline in agricultural income per AWU at the level of the EU as a whole reflected higher agricultural incomes in two of the ‘big four’ agricultural producer-Member States; France recorded a sharp increase (+9.6 %), with a more moderate rises in Italy (+4.2 %). The sharpest rate of increase was recorded for Slovenia (+35.9 %), agricultural income reaching a new high after rebounding from falls in the previous two years.

The upward trend in the index of agricultural income for the EU-28 faltered in 2018

Agricultural income per AWU for the EU as a whole in 2018 fell back from the high recorded in 2017. This mirrored the development in factor income, with the shrink in agricultural labour input continuing. Nevertheless, it remained about one fifth higher (+19.7 %) than the level in 2010.

Figure 7: Agricultural income per annual work unit (indicator A) and key components, EU-28, 2005-2018
(2010=100)
Source: Eurostat (aact_eaa06), (aact_eaa05) and (aact_ali02)

Resource performance of the agricultural sector

There is increasing interest in the efficiency with which resources are used [1]. In order to become more sustainable, an economy would need to decouple economic growth from resource use and its environmental impact.

One area of focus is the links between farming activities and the environment; there is scrutiny of the impact of agricultural activity on water, air and soil quality, land use diversity, ecologies and wildlife. Indicators to monitor many of these impacts are being developed as part of the Sustainable Development Goals (SDGs). It is proposed that the future common agricultural policy (CAP) specifically includes objectives on climate change action, environmental care and the preservation of landscapes and biodiversity.

Another area of interest is addressing prices that reflect the real costs of resource use. The social and environmental outputs of farming activities are rarely priced; indeed so-called ‘green accounts’ for agriculture are far from being completed nor the green efficiency indicators that could result from them. Likewise, total factor productivity indicators for agriculture that look at a measure of agricultural output against a combined measure of the input from intermediate consumption, land, labour and capital are also not yet available.

Some indication of the resource performance of agriculture, however, can be derived from the EAA by looking at trends in the ‘volumes’ of outputs generated and of the goods and services used up or ‘consumed’ as inputs in the production process can be derived. These volumes come from a decomposition of the values into price and volume components. These implicit volumes are not quantities; they are not measured in terms of kg or tonnes. They are termed ‘volumes’ because they capture not only changes related to quantity but also to quality as well as composition, which is important to bear in mind. As indices, they provide an overview of the trends in the volumes of inputs and outputs, which can be used for some productivity and performance measures.

Rising output volume of agricultural industry mirrored by rising volume of input goods and services as a whole

Over the reference period between 2005 and 2018, there was a relatively steady upward trend in the output volume of the EU’s agricultural industry (a total +9.4 %). To a large extent, higher output volumes were mirrored by the greater volume (+7.9 %) of input goods and services consumed (see Figure 8). As such, intermediate consumption growth has largely been in line with overall agricultural output growth in the EU. This suggests that there is yet to be any decoupling of output growth from resource use at the EU level.

Figure 8: Indices of the volume of agricultural output and of intermediate consumption, EU-28, 2005-2018
(2010=100)
Source: Eurostat (aact_eaa05)

Among Member States there was also little suggestion of an apparent decoupling of agricultural output growth from intermediate consumption resource growth, with a couple of notable exceptions. Over the period between 2005 and 2018, agricultural industry output in Belgium grew by a little over one-tenth (+11.5 %) at the same time reducing by one-quarter (-28.4 %) the volume of intermediate consumption goods and services consumed. Likewise, Slovenia also recorded a rise in agricultural output over the same period (+10.6 %) at the same time as a reducing by one-tenth (-9.7 %) its consumption of intermediate consumption goods and services. It should be borne in mind that these changes may in part reflect changes within the structure of the agricultural industries in these Member States as well as improved resource efficiency.

Figure 9: Volume of agricultural output and of intermediate consumption, 2005-2018
(% change)
Source: Eurostat (aact_eaa05)

Data sources

The economic accounts for agriculture (EAA) are a satellite account of the European system of accounts (ESA 2010). They cover the agricultural products and services produced over the accounting period sold by agricultural units, held in stocks on farms, or used for further processing by agricultural producers. The concepts of the EAA are adapted to the particular nature of the agricultural industry: for example, the EAA includes not only the production of grapes and olives but also the production of wine and olive oil by agricultural producers, if produced from own grapes and olives. It includes information on intra-unit consumption of crop products used in animal feed, as well as output accounted for by own account production of fixed capital goods and own final consumption of agricultural units.

The EAA comprises 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 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 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.

Three indicators are computed in relation to agricultural income:

  • an index of real income of factors in agricultural activity per AWU (indicator A);
  • an index of real net agricultural entrepreneurial income, per unpaid AWU (indicator B);
  • and the net entrepreneurial income of agriculture (indicator C).

The information presented on agricultural income relates to indicator A (the real income of factors in agriculture per AWU). This indicator corresponds to the real (deflated) net value added at factor cost of agriculture per AWU and is expressed as an index. Net value added at factor cost is calculated by subtracting from the value of agricultural output at basic prices the value of intermediate consumption, the consumption of fixed capital, and adding the value of (other) subsidies less taxes on production.

Agricultural price statistics provide information on the development of producer (output) prices for agricultural products and purchaser prices for the means of agricultural production (the intermediate consumption of goods and services within the production process). Data on prices are available for single commodities and for larger aggregates in the form of absolute prices and price indices.

The index of producer prices for agricultural products is based on sales of agricultural products, while the input index (for intermediate goods and services) is based on purchases of the means of agricultural production. Prices should be recorded at points which are as close as possible to those of the transactions which the farmer actually undertakes. This means that product prices should be recorded at the first marketing stage so as to best indicate the actual producer prices received by farmers.

Similarly the prices paid by farmers for their means of production should be recorded at the last marketing stage, that at which the items arrive on the farm, so as to best indicate the purchase prices paid by farmers. It is assumed, by convention, that the fertilisers and feeding stuffs purchased are used in the same production period and that there are no stocks on farm.

As regards spatial comparisons, the structure of the weights with respect to products and means of production reflect the value of the sales and purchases in each country during the base year (currently 2010=100); the weights therefore differ from one country to another.

Context

The performance of the agricultural sector has traditionally been about how successful farming is in delivering primary agricultural products and services. However, it is increasingly taking on a green aspect, recognising the impact of agriculture on water, air and soil quality, land use diversity, ecologies, wildlife and climate change.

Assessing the performance of the agricultural sector matters for a number of reasons:

  • farming is a cornerstone of the rural community, one on which a number of ‘upstream’ sectors (such as machinery, animal healthcare and input businesses) and ‘downstream’ sectors (such as food processing, packaging and transport businesses) depend;
  • farming is about providing a stable supply of safe, quality food;
  • farming has a key role to play in preserving landscapes and biodiversity;
  • farming has a key role to play in climate change action, and;
  • to support this, there is a need to ensure a fair income to farmers.

Economic impacts on farmers therefore not only influence future farming business decisions but also wider ecological and environmental business decisions and behaviour.

The performance of the agricultural sector as a whole can be conducted by bringing the information about the volume and price changes for agricultural goods and services under the umbrella of an accounting structure. To this end, the Economic Accounts for Agriculture (EAA) provide a set of comparable data that provide an insight into:

  • the economic viability of agriculture;
  • the income generated by farmers;
  • the structure and composition of agricultural production and the inputs used in that production, and;
  • the relationships between prices and quantities of both outputs and inputs.
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Economic accounts for agriculture (t_aact)
Agricultural prices and price indices (t_apri)
Economic accounts for agriculture (aact)
Economic Accounts for Agriculture (aact_eaa)
Agricultural Labour Input Statistics (aact_ali)
Unit value statistics for agricultural products (aact_uv)
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)

Notes

  1. The EU has produced a Roadmap to a Resource Efficient Europe (COM(2011) 571) that outlines how the European economy can be transformed into a sustainable one by 2050.