Performance of the agricultural sector

This is the stable Version.

Data extracted in November 2018.

Planned article update: February 2020.

Highlights
The EU's agricultural industry created gross value added of EUR 188.5 billion in 2017; this is a new high.
Agriculture contributed 1.2 % to the EU's GDP in 2017.
Agricultural income per annual work unit was +10.9 % higher for the EU-28 in 2017 than the level in 2016 and +24.6 % higher than in 2010.

Value, volume and price of output produced by the agricultural industry, EU-28, 2005-2017

This article is part of a set that is taken from Eurostat’s publication Agriculture, forestry and fishery statistics - 2018 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 contributed 1.2 % to the EU's GDP in 2017

Primary agricultural production in the EU (henceforth termed 'the agricultural industry') is big business, even without considering its importance as the key building block for the downstream food and beverages processing industry. The agricultural industry contributed EUR 183.0 billion towards the EU's overall GDP in 2017. To put this in some context, the contribution of the agricultural industry was slightly more than the GDP of Greece in 2017, the 17th largest economy among the Member States.

This contribution is the difference between the value of agricultural production 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 added value of EUR 188.5 billion in 2017

The gross value added by the EU's agricultural industry, which is the difference between the value of everything that the EU's agricultural industry produced in 2017 and the costs of the services and goods used up in the production process, was an estimated EUR 188.5 billion in 2017. 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 0.77.

The value of the output produced by the EU's agricultural industry was an estimated EUR 432.6 billion in 2017

The value of everything that the EU's agricultural industry produced in 2017 was an estimated EUR 432.6 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 (50.6 %) of the value of the total output of the EU's agricultural industry in 2017 came from crops (EUR 218.9 billion), within which vegetables and horticultural plants and cereals were the most valuable (see Figure 1). A further two-fifths (40.9 %) came from animals and animal products (EUR 176.9 billion), a majority coming from just milk and pigs. Agricultural services (EUR 20.4 billion) and inseparable non-agricultural activities (EUR 16.4 billion) contributed the rest (8.5 %).

Figure 1: Output of the agricultural industry, EU-28, 2017
(% 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. A little more than one half (54.2 %) of the total output value of the EU's agricultural industry came from the 'big four' of France (EUR 72.6 billion), Germany (EUR 56.2 billion), Italy (EUR 55.1 billion) and Spain (EUR 50.6 billion). Another quarter (23.9 %) came from the combined output of the United Kingdom (EUR 31.8 billion), the Netherlands (EUR 28.9 billion), Poland (EUR 24.9 billion) and Romania (EUR 17.5 billion). More than three quarters (78.1 %) of the total value of the EU's agricultural industry in 2017 came from these eight Member States (see Figure 2).

Figure 2: Output value of EU's agricultural industry (% of EU total)
Source: Eurostat (aact_eaa01)

Intermediate consumption costs for the EU's agricultural industry were an estimated EUR 244.1 billion in 2017

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 feed 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 244.1 billion for the EU as a whole in 2017.

Some costs are associated with the farming of animals; they required feed, which accounted for one third (36.5 %) of total intermediate consumption costs, and veterinary services (a further 2.7 %). Likewise, some costs are associated with crop farming; farmers required seeds and plants (5.3 % of total costs), many used plant protection products, herbicides, insecticides and pesticides (5.2 %) and fertilisers and soil improvers (7.0 %). 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 rebounded strongly in 2017

After three successive years of contraction, the total value of output produced by the EU's agricultural industry rebounded strongly in 2017 (+6.2 % higher than 2016) and moved above the previous peak value recorded in 2013 (see Figure 3). This rebound reflected an upturn in overall prices for agricultural goods and services as well as a further rise in the volume of output to a new peak.

Figure 3: Value, volume and price of output produced by the agricultural industry, EU-28, 2005-2017
(index 2010 = 100)
Source: Eurostat (aact_eaa05)

The output values of the agricultural industries in all of the 'big four' producers in the EU was higher in 2017 than 2016. The sharpest rate of increase among this group was in Germany (+8.6 %). There was a similar development for the next four largest agricultural producers; the output values of the agricultural industries of Romania (+13.2 %), the United Kingdom (+12.6 %), Poland (+11.1 %) and the Netherlands (+6.3 %) all rose sharply too. Among other Member States, the steepest rates of increase were recorded in Estonia (+18.2 %), reflecting a bounce back from the decline in 2016, and Ireland (+13.6 %) where the value of agricultural output was EUR 772 million more than the value in the previous peak year of 2013 (see Figure 4).

Figure 4: Change in output value of the agricultural industry, 2017-2016 (% change)
(index 2010 = 100)Source: Eurostat (aact_eaa01)

The gross value added generated by the EU's agricultural industry reached a new peak in 2017

The strong rebound in the output value of the EU's agricultural industry in 2017 laid the basis for a sharp rise (+12.4 %) in gross value added, with the cost of intermediate consumption goods and services rising only moderately by comparison (+1.8 %). The gross value added generated by the EU's agricultural industry reached a new peak in 2017, confirming the upward trend recorded since 2010 (see Figure 5).

Figure 5: Value of output, intermediate consumption costs and value added generated by the agricultural industry, EU-28, 2005-2017
(index 2010 = 100)
Source: Eurostat (aact_eaa05)

Agricultural 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 Economic Accounts for Agriculture (EAA) can be expressed per full-time labour equivalent (measured in AWUs) as an index. As such, it is considered as 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 the total income of farming households or the income of a person working in agriculture.

To understand the development of this agricultural productivity 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 carried out in full- time work equivalents.

The volume of agricultural labour used across the EU in 2017 was 1.2 % less than in 2016

Agricultural labour input in the EU was the equivalent of 9.4 million full-time workers in 2017. These are the notional workers that are remunerated with agricultural income.

The number of people working in the primary agricultural sector has been in decline for many years; in the period between 2005 and 2016, the average rate of decline in the amount of agricultural labour used across the EU as a whole was -2.5 % per year. Although the downward trend continued in 2017, the rate of decline (-1.2 %) was slower.

Among Member States, there were considerable differences (see Figure 6); the volumes of labour used in Cyprus and Spain were sharply higher in 2017 (+5.8 % and +5.1 % respectively), which contrasted most with steep declines noted in Slovakia (-10.7 %) and Bulgaria (-6.9 %).

Figure 6: Change in agricultural labour input, 2017/2016
(%)
Source: Eurostat (aact_ali02)

A majority of the total agricultural labour input was non-salaried labour; this was the equivalent of 6.9 million full-time workers in 2017. Salaried labour input was the equivalent of 2.4 million full-time workers in 2017. Changes in the volume of salaried labour input between 2016 and 2017 were generally more pronounced than non- salaried labour input, often reflecting the hiring requirements at seasonal peaks.

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

The volume of total agricultural labour used by the agricultural industry contracted in almost all Member States during the period between 2005 and 2017 (see Figure 7); the sharpest declines were in Bulgaria (an average -7.2 % per year) and Slovakia (-6.1 % 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 +1.6 % per year on average) and Ireland (+0.6 % per year on average).

Figure 7: Change in agricultural labour input, 2017/2005
(%, average annual growth rate)
Source: Eurostat (aact_ali02)

The reduction in the volume of non-salaried labour was more pronounced than for salaried labour at the level of the EU as a whole (-3.2 % per year on average compared with -0.3 % per year). There were higher levels of salaried labour input in Ireland (+5.4 % per year on average), Luxembourg (+4.3 % per year) and Malta (+2.8 % per year) among others, but sharp declines in Slovakia (-5.7 % per year on average), Greece and Romania (both -3.6 % per year) and Czechia (-3.5 % per year).

Agricultural income as defined by factor income per AWU rose sharply for the EU-28 in 2017 (+10.9 %)

Agricultural income, as defined by deflated (real) factor income per total Annual Work Unit, for the EU as a whole was +10.9 % higher in 2017 than it was in 2016. This reflected a sharp increase in factor income (+9.6 % in real terms) being notionally shared amongst a reduced (-1.2 %) volume of agricultural labour.

There were particularly divergent developments in agricultural income among the Member States in 2017. The strongest rates of increase were in Denmark (+76.9 % higher than 2016) and Estonia (+67.6 %), reflecting rebounds from lows in 2015 and 2016 to levels that re-surpassed those of 2010 (see Figure 8).

Figure 8: Agricultural income per annual work unit (Indicator A), 2017/2016
(index 2010=100)
Source: Eurostat (aact_eaa06)

There were strong rises in the range of +20 % to +35 % in Germany, Luxembourg, Ireland and Lithuania, often to levels much higher than those in 2010 (the chosen base year). The further rise in agricultural income in Bulgaria (+19.1 % in 2017) means that it has doubled since 2010, although much of this was due to factor income being notionally shared amongst a much smaller agricultural workforce.

In contrast, agricultural income declined sharply in Malta (-9.4 % lower than in 2016), Finland (-9.2 %) and Slovenia (-7.3 %), with more moderate falls in another two Member States. The further fall in Malta means that agricultural income has collectively fallen by about one third since 2010. Similarly, the further decline in Finland means that agricultural income has fallen by about one quarter since 2010.

The upward trend in agricultural income per AWU continued for the EU-28

The 2017 figures for agricultural income for the EU as a whole continue the strong upward trend noted since 2005. Whilst much of this trend has been underlined by a shrinking labour input, the rises noted for 2016 and 2017 were more about the growth in factor income.

Figure 9: Agricultural income per annual work unit (indicator A) and key components, EU-28, 2005-2017
(index 2010=100)
Source: Eurostat (aact_eaa06), (aact_eaa05) and (aact_ali02)

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. 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 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.

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.

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 is about how successful farming is in delivering primary agricultural products and services. Why does performance matter? Well, two of the long-standing policy objectives of the Common Agricultural Policy (CAP) relate to supporting farmers and improving agricultural productivity, thereby ensuring a reasonable living for them. As well as evaluating the performance of the agricultural sector towards these policy objectives, it is clear that any economic impact on farmers not only influences future farming business decisions but also wider ecological and environmental business decisions and behaviour.

One way of carrying out this evaluation could be to look at the economic performance of individual farms but with very different farm types (from the subsistent to big agricultural enterprises) cross-country comparisons are difficult. However, 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 farming activity;
  • the structure and composition of agricultural production and the inputs used in that production;
  • the relationships between prices and quantities of both inputs and outputs.
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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)