The future of European agriculture

The European agriculture is much more regulated industry than, let's say, the U.S. one. The government has fundamental impact on the future of regulated market. The government, in this case, means the European Commission, the 'almost-federal-government' of the European Union. Its agriculture policy (called CAP, Common Agriculture Policy) will fundamentally changed after 2013, impacting the future of European agriculture and food business.

Current situation

The EU's Common Agriculture Policy (read a good summary on Wikipedia) goals "to provide farmers with a reasonable standard of living, consumers with quality food at fair prices and to preserve rural heritage." In other words: the CAP always have involved "off-business", environmental and social efforts, and this is behind the European food business protectionism. The CAP has 2 focuses: current or direct payments (DP) to farmers and the rural developments, which represent the major share of EU budget.

CAP post-2013: European Commission's proposals
The European Commission realized the need for a reform in CAP. The CAP reform has 3 objectives:

#1 enhanced competitiveness: The Commission would like to finish some old school protectionism: eliminate production limits (e.g: for sugar) and certain aid schemes, would like to improve food supply chain positions (e.g: enforcing producer organizations), and increase funding for some programmes like school milk and fruit programmes.

#2 improved sustainability: The 'almost-federal-government' proposes a redistribution in direct payments, and tries "to green" DPs. "Green payment" goals to diversify crop production, enlarge permanent grassland, and introduce some ecological focus areas. The proposal is about a 30% green share of direct payments. Improving sustainability also means a 'young farmer programme' for <40 years farmer.

#3 greater effectiveness: The Commission would like to emphasize much better the importance of effective agriculture policy. For this purpose, it tries to shorten food supply chains, implement local promotions, and support producer groups and organic farming. The advisory services and business development support for young/small farmers also goals a better usage of agruculture budget.

The following presentation is the official communication of European Commission about the CAP 2014-20 reform:

European agriculture policy 2014-2020 from Balazs Csorjan dr.

Conclusions

The European food market is one of the most (over?)regulated markets - and unfortunatelly it won't be much easier to entry to EU food market in the future. It will be greener, more organic, more effective, but, if you are a non-EU food seller, it will be challenging also in the future to entry this market. One option is to launch a new food production facility, let's say, in the low-cost Eastern Europe.

Or, if you had any better ideas, we were more than happy if you share it with us.

3 hot trends in Europe's agriculture

The European Comission ("federal government of EU") published its agricultural yearbook in March 2012. The following brief overview would like to provide a starting point to European food raw material business.

Share of agriculture in GDP (source: EC)

#1: Boosting agri-production


After the horroristic 2009, 2010 and 2011 was characterized by +10% and +3.7% increase in real agricultural income.The general agri-production was increased by 1.4% in 2011 (and the prices increased by  5.7%). Raw milk production has increased to 151.4 million tonnes, the average yield per diary cow is approx. 6,431 kg (17,230 pounds).Poultry meat production slightly increased by 0.4% in 2011, but the EU export grew by 13% (mainly to China and to Middle East). The EU beef consumption remains at 16.2 kg per capita, and the beef production increased by 1.8% in 2011. The pig sector is facing a continuing process of concentration  to larger production units, and the production increased by 1.7% in 2011.

#2: Rising prices


The increasing global demand for food has increased both production and prices of EU agriculture in 2011. The raw milk prices has increased with 11% in 2011, from 30.5€/100kg to 34€/100kg (=12.68€ per cwt). Polutry meat prices has reached the historical 194€/ 100kg (=72.38€ per cwt). Beef prices were between 333-380 €/100 kg (124-142€ per cwt), higher levels in all categories than in 2010. Average pig meat prices reached 153€/100kg (57€ per cwt), 13€/100kg higher than in 2010.

#3: Increasing efficiency 


The agricultural employment fell by 2.7% in 2011 (compared to 2010). The agricultural income per annual labour unit (practicly, the labour productivity) boosted in more Eastern European states, especially in Romania and Hungary (over 40%). Developing technologies, concentrating farms resulted a more efficient agri-business in EU.


Some background information


The following short video provides a brief guide to the EU Common Agriculture Policy, for the better understanding of European food business' sandbox: