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© European Communities, 2011. Reproduction is authorised, provided the source is acknowledged as "European Commission – EU FADN", save where otherwise stated. Where prior permission must be obtained for the reproduction, such permission shall cancel the above mentioned general permission and shall clearly indicate any restrictions on use. When data/information are adapted or modified by the user, this shall be explicitly stated at a suitably prominent place in the work. Farm Economics brief N°2 EU product ion costs overview July 2011 Contents The effect of the economic crisis on costs and margins Operating costs in the EU groups Highly contrasted costs among the Member States Total economic costs lower in EU- 10 but increasing Introduction This brief presents key findings on EU production costs for the following agricultural sectors: cereals, dairy and beef. Cost levels and their breakdown are compared between EU groups, and among Member States. The brief looks not only at operating costs, but also at total economic costs including opportunity costs for family factors. This allows the comparison of total costs for farms with different structures in terms of land, labour and capital. Cost and margin developments in recent years are analysed and the impacts of the agricultural price boom and the economic crisis are assessed. Given the contrasted trends in prices and costs, margins have been squeezed in 2008 for beef and in 2009 for milk and cereals. Looking at margins, data show that low costs do not necessarily mean high margins, and the inverse also holds. In addition, margins do not only depend on the level of prices, but also on coupled subsidies. In the EU-10 in particular, total economic costs are in general lower thanks to lower opportunity costs for family labour and capital. Differences in production costs illustrate the variety of production systems, of natural conditions, and of economic contexts in the EU. Some trends may be explained by changes in exchange rates as not all Member States are in the Eurozone. Production costs and margins were estimated based on data from the Farm Accountancy Data Network (FADN). The FADN is an annual sample survey collecting structural and accountancy data on farms. This brief gives a glimpse of the latest sector reports available on this website: http://ec.europa.eu/agriculture/rica/publications_en.cfm This publication does not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein. Contact: DG Agriculture & Rural Development, Microeconomic analyses of EU agricultural holdings E-mail: [email protected] Internet: http://ec.europa.eu/agriculture/rica/index.cfm

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Page 1: Farm Economics brief - European Commissionec.europa.eu/agriculture/rica/pdf/Brief201102.pdf · Farm Economics brief N°2 EU production costs overview July 2011 Contents ... Cost and

© European Communities, 2011. Reproduction is authorised, provided the source is acknowledged as "European Commission – EU FADN", save where otherwise stated. Where prior permission must be obtained for the reproduction, such permission shall cancel the above mentioned general

permission and shall clearly indicate any restrictions on use. When data/information are adapted or modified by the user, this shall be explicitly stated at a suitably prominent place in the work.

Farm Economics brief

N°2 EU production costs overview July 2011

Contents The effect of the economic crisis on costs and margins

Operating costs in the EU groups

Highly contrasted costs among the Member States

Total economic costs lower in EU-10 but increasing

Introduction This brief presents key findings on EU production costs for the following agricultural sectors: cereals, dairy and beef. Cost levels and their breakdown are compared between EU groups, and among Member States. The brief looks not only at operating costs, but also at total economic costs including opportunity costs for family factors. This allows the comparison of total costs for farms with different structures in terms of land, labour and capital.

Cost and margin developments in recent years are analysed and the impacts of the agricultural price boom and the economic crisis are assessed. Given the contrasted trends in prices and costs, margins have been squeezed in 2008 for beef and in 2009 for milk and cereals.

Looking at margins, data show that low costs do not necessarily mean high margins, and the inverse also holds. In addition, margins do not only depend on the level of prices, but also on coupled subsidies. In the EU-10 in particular, total economic costs are in general lower thanks to lower opportunity costs for family labour and capital.

Differences in production costs illustrate the variety of production systems, of natural conditions, and of economic contexts in the EU. Some trends may be explained by changes in exchange rates as not all Member States are in the Eurozone.

Production costs and margins were estimated based on data from the Farm Accountancy Data Network (FADN). The FADN is an annual sample survey collecting structural and accountancy data on farms. This brief gives a glimpse of the latest sector reports available on this website:

http://ec.europa.eu/agriculture/rica/publications_en.cfm

This publication does not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein.

Contact: DG Agriculture & Rural Development, Microeconomic analyses of EU agricultural holdings E-mail: [email protected] Internet: http://ec.europa.eu/agriculture/rica/index.cfm

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1. The effect of the economic crisis on operating costs and gross margins

Box 1: Definition – operating costs

Operating costs cover all cash expenditures necessary to operate, for example feed and veterinary costs, energy, seeds, fertilisers, pesticides (wages, rent and interest paid are not included here). Gross margins correspond to the total receipts from the product (including possible coupled payments) minus the operating costs. The costs and margins are expressed per unit of product.

For the products analysed, EU-15 operating costs (see Box 1) increased steadily in nominal terms over the period 2000-2007.

The main drivers of the increase depend on the sector.

For milk, the rise was mainly driven by energy and labour costs. For cereals, it was mostly explained by fertilisers, machinery, seeds and crop protection. Milk costs have risen mainly since 2007.The average annual growth was and 4.6 % for beef breeders and fatteners (farms combining both breeding and fattening).

In the EU-10, the rise in operating costs over the period 2004-2007 was more significant: from 2.5 % average annual growth for beef breeders and fatteners to 25 % for cereals (Figure 1).

Figure 1: Trend in EU operating costs (nominal terms)

Operating costs - EU-15

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008estimate

2009estimate

Cereals and milk - €/t

0

200

400

600

800

1 000

1 200

1 400

beef

- €/

cow

or €

/mal

e ca

ttle

sold

Cereals Milk Beef - breeders Beef - fatteners Beef - b&f

Operating costs - EU-10

0

50

100

150

200

250

300

2004 2005 2006 2007 2008estimate

2009estimate

Cereals and milk - €/t

0

200

400

600

800

1 000

1 200

1 400

beef

- €/

cow

or €

/mal

e ca

ttle

sold

Cereals Milk Beef - breedersBeef - fatteners Beef - b&f

Operating costs - EU-2

0

50

100

150

200

250

300

2007 2008estimate

2009estimate

€/t Cereals Milk

Source: EU FADN — DG AGRI, Models for the allocation of costs.

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In the livestock sectors, operating costs rose abruptly in 2008 (from +12 % to +26 %, depending on the EU-group and on the product). This was primarily due to the increase in feed costs (+38 % between 2007 and 2008 for milk in the EU-15). In 2009, feed costs decreased significantly and so did operating costs; yet they remained higher than their 2007 level.

On the other hand, 2008 cereals operating costs decreased by 10 % in comparison with 2007 (average for the EU-27) thanks to better yields. But they increased significantly, by 17 %, between 2008 and 2009. The main items contributing to this increase were fertilisers, machinery costs, seeds and crop protection.

For beef, prices did not change dramatically between 2007 and 2009, so gross margins diminished in 2008 (Figure 2). Given the developments in prices (peak in 2008 and dramatic drop in 2009), milk and cereals gross margins were squeezed in 2009 (Figure 3).

Figure 4 below illustrates the disruption in the pattern of output and input price developments in recent years. A rather steady pattern of real price declines in output and input prices, with the former decreasing faster, was observed until 2005.

However, since 2006, the gap between input and output prices has widened faster, driven mainly by factors outside agriculture: energy prices, exchange rates, and financial events.

Figure 2: Trend in beef revenues and costs

Beef

600

800

1 000

1 200

1 400

1 600

1 800

2007 2008 estimate 2009 estimate

breeders and b&f- €/cow

fatteners - €/male

cattle sold

breeders revenuesbreeders operating costsfatteners revenuesfatteners operating costsb&f revenuesb&f operating costs

Source: EU FADN — DG AGRI, Models for the allocation of costs.

Revenues include coupled subsidies.

Figure 3: Milk and cereals revenues and costs

Cereals and milk

0

50

100

150

200

250

300

350

400

2007 2008 estimate 2009 estimate

€/t

Cereals revenuesCereals operating costsMilk revenuesMilk operating costs

Source: EU FADN — DG AGRI, Models for the allocation of costs. Revenues

include coupled subsidies.

Figure 4: Development in agricultural output and input prices

Source: Eurostat — price statistics — Elaboration DG AGRI.

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2. Operating costs in the EU groups

Box 2: Terminology

The following terminology is used with regard to costs. Total economic costs comprise of:

- operating costs:

o specific costs (seeds, fertilisers, crop protection, or feed, veterinary costs)

o non-specific operating costs (machinery and buildings, power (fuel and electricity), contract work, taxes and other dues, taxes on land and buildings, insurance for farm buildings and other direct costs);

- depreciation;

- external factors (wages, rent and interest paid);

- opportunity costs for unpaid family factors (family labour cost and own capital cost).

Operating costs for cereals in 2007 do not differ much between EU groups (Figure 5): they remain between -7 % and +10 % around the EU-27 average. The only exception is the EU-10 average operating costs for grain maize, which are 20 % higher than the EU average. The grain maize yield was indeed exceptionally low in 2007 in the EU-10. We look indeed at the development of costs per tonne, so in the case of cereals, the fluctuations of yield play a major role in the development of the cereals costs per tonne.

For milk, beef fatteners and beef breeders and fatteners, the contrast between EU groups is more marked: the EU-10 and EU-2 have significantly lower operating costs than the EU-27 average (-18 % and -27 % respectively for milk). Beef breeders’ operating costs are similar for all EU groups.

The breakdown of operating costs depends primarily on the sector considered. In cereals, fertilisers, crop protection and energy represent the bulk of the operating costs (around 50 - 60 % on EU average). For milk, the most important cost item is feed (around 50 %). Energy represents between 9 % of the average milk operating costs in the EU-15 and 14 % in the EU-10 and EU-2.

Feed is also a major cost item for beef breeders and fatteners in the EU-15 (40 %); however, in the EU-10, it represents only 20 % of the operating cost given the lower price for feed.

In the EU-10, the beef non-specific costs are considerably higher because of the substantial costs of building and machinery upkeep, and energy costs.

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Figure 5: EU groups' operating costs by product - 2007

Cereals operating costs - 2007

119110

125118

107 106118

107

0

20

40

60

80

100

120

140

EU-15 EU-10 EU-2 EU-27

€/t

Wheat operating costs - €/t Barley operating costs - €/tGrain maize operating costs - €/t Cereals operating costs - €/t

Cereals €/t - operating costs - 2007

38 4335 38

1522

24 17

5442

59 52

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EU-15 EU-10 EU-2 EU-27

Fertilisers and crop protection Fuel and energyOther operating costs

Milk operating costs - 2007

201

162143

196

0

50

100

150

200

250

EU-15 EU-10 EU-2 EU-27

€/t

Milk €/t - operating costs - 2007

9489 76 93

18

22 2018

8951 47

85

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EU-15 EU-10 EU-2 EU-27

Feed Fuel and energy Other operating costs

Beef operating costs - 2007

944

1 196 1 188

723682726

1 1051 106

941

0

200

400

600

800

1 000

1 200

1 400

EU-15 EU-10 EU-2 EU-27

Beef - breeders operating costs - €/cowBeef - fatteners operating costs - €/male cattle soldBeef - b&f operating costs - €/cow

Beef breeders & fatteners €/cow - operating costs - 2007

426198

419

299

195

295

71

147

73

401401

400

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EU-15 EU-10 EU-2 EU-27

Feed Animal purchaseFuel and energy Other operating costs

Source: EU FADN — DG AGRI, Models for the allocation of costs.

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3. Highly contrasted operating costs among the Member States

Box 3: Methodology

The production costs and margins analysed in this brief are estimated based on the Farm Accountancy Data Network (FADN) database. The FADN is a European system of sample surveys that take place each year and collect structural and accountancy data relating to farms; their aim is to monitor the income and business activities of agricultural holdings and to evaluate the impacts of the Common Agricultural Policy (CAP).

Costs available in the database are for the whole farm. Models are used to allocate farm costs to a particular product. They use different ratios: for example, product output to total output. They are calculated based on samples of specialised farms (for example, farms for which more than 40 or 50 % of the output comes from the product considered). For 2007 production cost estimates, the samples of specialised farms studied represent 28 % of the cereals area, 71 % of dairy cows and 74 % of the suckler cow herd. It should be underlined that the presented EU or Member States average figures are not weighted by volume or value of EU or Member State production, but by number of farms represented in the population. In certain cases, there are not enough specialised farms in the EU-group or in the Member State to allow calculating an estimate. This is why there are some blanks in certain tables or graphs.

For 2008 and 2009, operating costs and gross margins have been estimated on the basis of agricultural price indices and input price indices (source DG AGRI and ESTAT). Farm structures were assumed to remain unchanged.

Figure 6 on the following page shows the difference between the national average operating costs and the EU-27 average for each analysed product. This difference ranges from -63 % (Portugal, for beef breeders and fatteners) to +84 % (Belgium, for beef breeders and fatteners) of the EU-27 average, reflecting the variety of production systems in the EU and the cost aspect of the national competitiveness for the product in question.

For these products, Member States can be ranked according to their level of operating costs:

- Spain, Estonia, Lithuania, Poland and Slovenia have low operating costs in comparison with the EU-27 average.

- Denmark, Greece, Finland, Sweden, the United Kingdom, Cyprus, the Czech Republic, Hungary, Malta and Slovakia have high operating costs in comparison with the EU-27 average.

- France, Luxembourg, the Netherlands and Austria are close to the EU-27 average operating costs for the products studied.

- Belgium, Germany, Italy, Ireland, Portugal, Latvia, Bulgaria and Romania provide a mixed picture based on the product in question. For example, Belgium has low operating costs for milk, but very high ones for beef, especially for breeders and fatteners. Portugal has very low operating costs for beef, but not for cereals. Bulgaria has low operating costs for milk, but not for grain maize.

It should be underlined that since not all Member States are members of the Eurozone, changes in the exchange rate may explain some differences between Member States. The value of labour, land, and buildings decreases in euro terms when the value of a non-euro currency falls. On the other hand tradable inputs (fertilisers, pesticides, energy) get more expensive.

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Figure 6: Member States' operating costs in comparison with the EU-27 average - 2007

-80% -60% -40% -20% 0% 20% 40% 60% 80% 100%

BE

DK

DE

EL

ES

FR

IE

IT

LU

NL

AT

PT

FI

SE

UK

CY

CZ

EE

HU

LT

LV

MT

PL

SK

SI

BG

RO

Wheat Barley Grain maize Cereals

Milk Beef - breeders Beef - fatteners Beef - b&f

Source: EU FADN — DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State.

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Figures 7 and 8 illustrate the average operating costs and the gross margin by Member State for 2007 and by analysed product. It should be underlined that there is no systematic negative correlation between operating costs and gross margins, as these depend on the price level and on the possible coupled subsidies applied in the Member State.

Therefore it should be kept in mind that low operating costs do not necessarily mean high profitability or vice versa. For example thanks to high prices and coupled subsidies, Finland has a good average milk gross margin despite its very high operating costs (Figure 7). Similarly, thanks to strong prices, Belgian beef breeders and fatteners have one of the highest gross margins in spite of their extraordinarily high operating costs (Figure 8).

For cereals, Cyprus and Finland have the highest operating costs. However, high operating costs are not driven by the same factors in the two countries. In Cyprus the high operating costs are mainly driven by very high fertiliser and crop protection costs. In Finland they are explained mainly by machinery and building upkeep and other direct costs (insurance, taxes, etc.).

Poland, Estonia, Lithuania and especially Spain have very low operating costs in most products. The main drivers of these low costs likewise differ according to the Member State and to the sector.

For milk, the lowest average operating costs are for Lithuania, Romania and Poland. Malta and Finland have the highest costs.

Figure 7: Operating costs and gross margin by Member State — 2007 (cereals and milk)

Cereals - 2007

132 138

121

74

111 112 117133

155

120 126

172

124

94

126119

94

124108

122

81

103

0

20

40

60

80

100

120

140

160

180

200

DK DE EL ES FR IE IT AT PT FI SE UK CY CZ EE HU LT LV PL SK BG RO

€/tonneoperating costs - €/t gross margin - €/t

Milk - 2007

197223

202

166189 201 194

278

234

196223

166

229

190

146

219

163 157139

161

112

187170173

309

0

50

100

150

200

250

300

350

BE DK DE ES FR IE IT LU NL AT PT FI SE UK CZ EE HU LT LV MT PL SK SI BG RO

€/toperating costs - €/t gross margin - €/t

Source: EU FADN — DG AGRI, Models for the allocation of costs. Gross margins include coupled subsidies (but not decoupled payments, included in income). Data are not displayed when there are not enough specialised farms in the region.

the lowest operating costs the highest operating costs

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When considering costs and margins for the beef sector, the reader should keep in mind that results are expressed per cow or male cattle sold. The final product is not always homogeneous (i.e. quantity of meat produced per cow), particularly between Member States, thus comparisons should be interpreted with caution.

In beef, national average operating costs reflect natural conditions and/or the existence or non-existence of quality-oriented systems for cattle breeding and fattening. The highest total operating costs were found in Belgium (specific high quality production), Finland and Sweden (extreme climatic conditions) (Figure 8).

The lowest costs are observed in Portugal, Spain and the Czech Republic.

It is also interesting to note that some Member States have a very different level of operating costs depending on the system (breeder/breeder and fattener/fattener).

For example Italy appears to have on average low operating costs for breeders and for breeders and fatteners but it has the highest operating costs for fatteners. However, this does not prevent Italy from having a good gross margin for all production systems thanks to good prices. On the other hand, Spain and Portugal have very low operating costs for all production systems.

Figure 8: Operating costs and gross margin by Member State — 2007 (beef) Beef breeders - 2007

890

1 130

650552

835644

492

788 785

353

1 232

990

784 793

529

-400-200

0200400

600800

1 000

1 2001 400

BE DK DE ES FR IE IT LU AT PT FI SE UK CZ SI

€/cow operating costs - €/cow gross margin - €/cow

Beef fatteners - 2007

1 096

800

1 107

1 307

1 118 1 075913

0

200

400

600

800

1 000

1 200

1 400

BE DK DE EL ES FR IE

€/male cattle sold operating costs - €/male cattle sold gross margin - €/male cattle sold

Beef breeders and fatteners - 2007

2 185

1 147

656

1 2691 016 935

1 346

437

1 9231 721

1 539

-500

0

500

1 000

1 500

2 000

2 500

BE DE ES FR IE IT LU PT FI SE UK

€/cow operating costs - €/cow gross margin - €/cow

Source: EU FADN — DG AGRI, Models for the allocation of costs. Gross margins include coupled subsidies (but not decoupled payments, included in income). Data are not displayed when there are not enough specialised farms in the Member State.

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The structure of operating costs can be very different from one Member State to the other (Figure 9). Fertilisers and crop protection represent almost 45 % of cereals operating costs in Cyprus, Lithuania, Latvia and Poland, and only 21 % in Austria. Energy accounts for a large share of cereals operating costs in Portugal, Hungary and Latvia, and a relatively limited one in Ireland, France and Denmark.

For milk production feed can represent a widely varying share of the operating costs, ranging from 36 % in Luxembourg to 80 % in Malta.

Feed is a major component of operating costs for milk and beef production in Italy, Spain, Portugal and Malta: Southern countries have greater recourse to purchased feed, which is more expensive.

In Finland and Austria other operating costs represent a large share of total operating costs for all the products presented, mainly because of the weight of the machinery and building upkeep cost in these countries.

Figure 9: Breakdown of operating costs by Member State and product — 2007

Cereals €/t - operating costs - 2007

3557 42 22

46 4633 26 36 40 41 46 76 46 40

4037 52 43

47 36 34

11

1922

1311 7

22

18

3527

20 14

1822

18

28

17 25 19

20 30

22

62 57 38 55 50 5773

59 66 78 56 3659

27 42 3157 42

8762

8565

0%

10%

20%

30%

40%

50%60%

70%

80%

90%

100%

DK DE EL ES FR IE IT AT PT FI SE UK CY CZ EE HU LT LV PL SK BG RO

Cereals - €/t Fertilisers and crop protection Cereals - €/t Fuel and energy Cereals - €/t Other operating costs

Milk €/t - operating costs - 2007

77 90 94

110

85 78

124

64 74 80

117

108 107 9893

91 12852 89

247

85109 74

110

66

1311 27

11

1411

19

18 14 19

17

2623 13 36

25 2720 34

26

1841

22

17

21

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BE DK DE ES FR IE IT LU NL AT PT FI SE UK CZ EE HU LT LV MT PL SK SI BG RO

Feed Fuel and energy Other operating costs

Beef breeders & fatteners €/cow - operating costs - 2007

892269

342432 313

441390

186523 527 473

703

200

141

287 272

245

43582

306427 474

65

153

39

66 55

95

7657

163

18398

525 134376

155444 112

931526484 584 495

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BE DE ES FR IE IT LU PT FI SE UK

Feed Animal purchase Fuel and energy Other operating costs

Source: EU FADN — DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State.

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4. Total economic costs lower in EU-10 but increasing

In this chapter, we look at total economic costs, which take into account operating costs and all other costs (see Box 2). They allow comparing total costs for farms with different structures in terms of land, labour and capital and to explain some differences of competitiveness among Member States.

For the sectors analysed, EU-15 and EU-2 total economic costs are in general very close to the EU-27 average (Figure 11). The exception is with the EU-2 grain maize total economic costs, which are 25 % higher than the EU-27 average as a result of the exceptionally bad yield in 2007.

Expressed in EUR/ha, EU-2 cereals costs are significantly lower than EU-15 ones.

In contrast, for all products studied, EU-10 total economic costs are more or less lower (from -9 % to -20 % in comparison with the EU-27 average). This is in particular due to lower imputed family factors (Figure 11). However, it should be noted that both external and imputed family factors have been steadily rising since 2004 in the EU-10 (Figure 10), driving the increase in total economic costs.

Such increases (in wages, family labour costs, rent, etc.) probably reflect a mix of increasing living standards and the strengthening of currencies of those Member States.

In the milk sector, EU-10 external wages increased faster than the net margin (amount available to remunerate own factors). This explains the increase in the total economic costs of the EU-10 for cereals and milk (Figure 10). In the EU-15 the trend in total economic costs is quite flat over the period 2000-2007 or very slightly increasing depending on the product.

The breakdown of total economic costs shows that operating costs represent between 40 % and 55 % of total economic costs (Figure 11). On average, the share of operating costs is a little higher for livestock sectors. In the EU-10, they represent the highest share (55 %) for all the products studied given the lower costs for external and family factors explained above.

Depreciation is generally lower in the EU-10 and EU-2 groups due to older buildings or equipment and/or the longer average life of assets and/or lower prices of assets.

In the EU-2 external and imputed family factors represent a large share of the total costs. This is mainly due to the high labour input in Bulgarian and Romanian farms. In spite of very low wages per hour the total labour cost is high.

The shares of external and family factors differ greatly between cereals and milk. This is because on average in the EU-2 farms specialised in cereals rely heavily on paid labour whereas milk specialised farms rely heavily on family labour.

Figure 10: Trend in EU total economic costs (nominal terms) EU-15 total economic costs

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007

Cereals and milk - €/t

0

500

1 000

1 500

2 000

2 500

beef

- €/

cow

Cereals EU-15 Milk EU-15 Beef - b&f EU-15EU-10 total economic costs

0

50

100

150

200

250

300

350

2004 2005 2006 2007

Cereals and milk -

€/t

Cereals EU-10

Milk EU-10

Source: EU FADN — DG AGRI, Models for the allocation of costs.

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Figure 11: EU groups’ total economic costs by product — 2007

Cereals total economic costs - 2007

252

193

248 242244 235

191

241

0

50

100

150

200

250

300

EU-15 EU-10 EU-2 EU-27

€/t

Wheat total economic costs - €/t Barley total economic costs - €/tGrain maize total economic costs - €/t Cereals total economic costs - €/t

Cereals €/t - total economic costs - 2007

107106 118 107

31

2928 31

28

19 5629

7837 39

69

0%10%20%30%40%50%60%70%80%90%

100%

EU-15 EU-10 EU-2 EU-27

Operating costs Depreciation

External factors Imputed family factors

Milk total economic costs - 2007

373

294

361 366

0

50

100

150

200

250

300

350

400

EU-15 EU-10 EU-2 EU-27

€/t Milk €/t - total economic costs - 2007

201 162143

196

46 37

26

44

42 26

22

40

84 69

170

85

0%10%20%30%40%50%

60%70%80%90%

100%

EU-15 EU-10 EU-2 EU-27

Operating costs DepreciationExternal factors Imputed family factors

Beef total economic costs - 2007

2 320 2 304

1 512

1 3141 519 1 258

1 4581 4601 874

0

500

1 000

1 500

2 000

2 500

EU-15 EU-10 EU-2 EU-27

Beef - breeders total economic costs - €/cowBeef - fatteners total economic costs - €/male cattle soldBeef - b&f total economic costs - €/cow

Beef breeders & fatteners €/cow - total economic costs - 2007

1 196 1 196 1 188

254245

254150

110149

719 577 714

0%10%20%

30%40%50%60%70%

80%90%

100%

EU-15 EU-10 EU-27

Operating costs DepreciationExternal factors Imputed family factors

Source: EU FADN — DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State.

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Farm economics brief Page 13 / 14

The difference between the national average total economic costs and the EU-27 average is presented in Figure 12. It can range from -56 % (Portugal, for beef breeders and fatteners) to +98 % (Cyprus, for cereals) compared to the EU-27 average. It allows Member States to be classified according to their level of total economic costs:

- Spain, Estonia, Lithuania, Latvia, Poland and Bulgaria have low total economic costs for the products studied.

- Denmark, Greece, Austria, Finland, Sweden, Cyprus, Malta and Romania have very high total economic costs.

- France, Luxembourg, the Netherlands, the Czech Republic (except barley) and Hungary are close to the EU-27 average total economic costs for the products studied.

- Belgium, Germany, Ireland, Italy, Portugal, the United Kingdom and Slovakia have a contrasted situation according to the product studied. For example, Belgium has low total economic costs for wheat and milk, but high ones for beef. Portugal has low operating costs for milk and beef, but not for cereals.

The main drivers of high or low total costs may differ considerably among Member States. For example, Denmark’s high total economic costs are mostly driven by very high amounts of interest paid, whereas in the case of Romania it is due to a low yield for cereals and to high family labour input for milk.

Finally, it should be underlined that the national average may conceal wide disparities across farms within the country.

You can find more details in the sector farm reports, available at:

http://ec.europa.eu/agriculture/rica/publications_en.cfm

Cereal farms report 2010

http://ec.europa.eu/agriculture/rica/pdf/cereals_report_2010.pdf

Dairy farms report 2010

http://ec.europa.eu/agriculture/rica/pdf/dairy_report_2010.pdf

Beef farms report 2010

http://ec.europa.eu/agriculture/rica/pdf/sa502_beefreport.pdf

Page 14: Farm Economics brief - European Commissionec.europa.eu/agriculture/rica/pdf/Brief201102.pdf · Farm Economics brief N°2 EU production costs overview July 2011 Contents ... Cost and

Farm economics brief Page 14 / 14

Figure 12: Member States’ total economic costs in comparison with the EU-27 — 2007

-80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120%

BE

DK

DE

EL

ES

FR

IE

IT

LU

NL

AT

PT

FI

SE

UK

CY

CZ

EE

HU

LT

LV

MT

PL

SK

SI

BG

RO

Wheat Barley Grain maize Cereals

Milk Beef - breeders Beef - fatteners Beef - b&f

Source: EU FADN — DG AGRI, Models for the allocation of costs. Data are not displayed when there are not enough specialised farms in the Member State.