A new EU report looking at support measures for farmers and their effectiveness confirmed how farmers’ incomes have been squeezed across Europe since 2022 as margins were eroded by high input costs. With the key farm inputs of fuel and fertiliser again impacted by war, the study’s release comes at an opportune moment.
Ireland was one of the countries most affected by the spike in input costs following Russia’s invasion of Ukraine, the report concluded, while the Netherlands, Belgium and Portugal fared best.
The report was commissioned by the European Parliament’s Committee on Agriculture and Rural Development.
It was prepared by economists from Teagasc and the Netherlands’ Wageningen Social and Economic Research, with Teagasc’s Trevor Donnellan, Fiona Thorne, Jason Loughrey and Emma Dillon contributing. The study analysed the recent evolution of farm incomes and the effectiveness of policy support measures.
CAP focus
The report highlights that the focus of the Common Agricultural Policy (CAP) in the last century was to keep farm incomes stable. But changes to the CAP, trade policy liberalisation, coupled with “geopolitical shocks” meant that income volatility was increased in the 2000s.
It shows the extent of natural gas price increases in 2022, and the suddenness of prices shooting from less than $10 per million British thermal units (MBTU) to over $70. This directly led to the spiking in fertiliser prices, something that is again being experienced today.
It notes that “farmers are price-takers and therefore have weak market power in the negotiation of farm output prices with food and drinks processors”.
The report highlights that the impact of increased costs and squeezed margins “was most acutely felt on small farms, where income levels are normally already low. The importance of the support payments received by these farms became critical.” It also notes that “however, in percentage terms larger farms tended to experience larger income reductions, given that support payments are typically a smaller share of income on those farms.”
Trevor Donnellan, Teagasc
Main findings
Increasing fertiliser, feed and energy costs from 2021 onwards put pressure on farm margins across the EU.The study highlights Ireland’s farming sector’s strong exposure to global commodity markets, the significance of direct payments for beef and sheep farms and the increasing influence of environmental policy constraints on production decisions.The report has found that risk-management tools such as insurance schemes, mutual funds and income stabilisation instruments could play a much bigger role in protecting farm incomes. However, uptake across the EU remains low.Direct payments provide stability and predictability. However, the study has found that they are often not well targeted to those farms most in need. A large amount of support is still linked to farm size rather than income vulnerability, environmental constraints or structural disadvantage.The study confirms that income inequality within agriculture remains significant, with a relatively small proportion of farms generating a large share of total farm income.More timely and detailed data is required for faster policy responses to sudden changes in market conditions.
A new EU report looking at support measures for farmers and their effectiveness confirmed how farmers’ incomes have been squeezed across Europe since 2022 as margins were eroded by high input costs. With the key farm inputs of fuel and fertiliser again impacted by war, the study’s release comes at an opportune moment.
Ireland was one of the countries most affected by the spike in input costs following Russia’s invasion of Ukraine, the report concluded, while the Netherlands, Belgium and Portugal fared best.
The report was commissioned by the European Parliament’s Committee on Agriculture and Rural Development.
It was prepared by economists from Teagasc and the Netherlands’ Wageningen Social and Economic Research, with Teagasc’s Trevor Donnellan, Fiona Thorne, Jason Loughrey and Emma Dillon contributing. The study analysed the recent evolution of farm incomes and the effectiveness of policy support measures.
CAP focus
The report highlights that the focus of the Common Agricultural Policy (CAP) in the last century was to keep farm incomes stable. But changes to the CAP, trade policy liberalisation, coupled with “geopolitical shocks” meant that income volatility was increased in the 2000s.
It shows the extent of natural gas price increases in 2022, and the suddenness of prices shooting from less than $10 per million British thermal units (MBTU) to over $70. This directly led to the spiking in fertiliser prices, something that is again being experienced today.
It notes that “farmers are price-takers and therefore have weak market power in the negotiation of farm output prices with food and drinks processors”.
The report highlights that the impact of increased costs and squeezed margins “was most acutely felt on small farms, where income levels are normally already low. The importance of the support payments received by these farms became critical.” It also notes that “however, in percentage terms larger farms tended to experience larger income reductions, given that support payments are typically a smaller share of income on those farms.”
Trevor Donnellan, Teagasc
Main findings
Increasing fertiliser, feed and energy costs from 2021 onwards put pressure on farm margins across the EU.The study highlights Ireland’s farming sector’s strong exposure to global commodity markets, the significance of direct payments for beef and sheep farms and the increasing influence of environmental policy constraints on production decisions.The report has found that risk-management tools such as insurance schemes, mutual funds and income stabilisation instruments could play a much bigger role in protecting farm incomes. However, uptake across the EU remains low.Direct payments provide stability and predictability. However, the study has found that they are often not well targeted to those farms most in need. A large amount of support is still linked to farm size rather than income vulnerability, environmental constraints or structural disadvantage.The study confirms that income inequality within agriculture remains significant, with a relatively small proportion of farms generating a large share of total farm income.More timely and detailed data is required for faster policy responses to sudden changes in market conditions. 
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