The future of farming in changing rural economies

New research indicates that the number of EU farms will continue to decline in the next decade. It suggests that the EU Common Agricultural Policy (CAP) will have to re-specify its objectives, consider regional or farm differences and improve the evaluation of policy impacts in order to continue to support farmers and benefit society as a whole. This major survey of European farm-households indicates that the intention to continue farming is dependent on the CAP and that, without the CAP, the number of farmers abandoning the agricultural sector could double.

European rural areas are undergoing significant changes, as is the structure of farming. Currently there are about 12 million full-time farmers in the EU but an increasing number are abandoning farming. The CAP now accounts for 43 per cent of the EU budget and is hence a major driver of rural area economies and one of the main components of EU budget discussion. The aim of the CAP is to ensure a fair standard of living for farmers whilst providing a stable food supply, protecting the environment and preserving rural communities. In 2003 the CAP reform cut the link between subsidies and production to prevent food surpluses, and in 2008 the CAP health check further modernised policy so farmers could better respond to the market and started addressing new challenges, such as climate change. The CAP will continue to develop and evolve in the future; a new CAP is expected to come into force in 20141.

By analysing the changes in rural areas, the CAP-IRE project aims to develop concepts and tools to inform future CAP design. Eleven case studies, involving a consultation with stakeholders from national agricultural institutions and local farming communities, as well as a survey of around 2400 farm-households were conducted in nine EU countries between April and September 2009.

The stakeholder consultation indicated that the relationship between farm households and rural areas has changed in two major ways. Firstly, the concept of a ‘rural area’ is less easily defined than before due to demographic shifts and the growing interaction of rural households with urban areas. For example, there are now more people living in rural areas than in the past who commute to urban areas to work. Secondly, there has been a shift from household farms to legal entities, sometimes producing a grey area between the two. For example, a farm may be a company although all its employees are from the same household.

Consultation with stakeholders highlighted a number of key issues for the CAP:

  • The changes in the nature of rural areas and the links between farming and rural areas.
  • The major differences in how farms are run between the different EU regions.
  • The differences in the institutional form of farms, for example farms can be companies, co-operatives, partnerships, households or hybrids of these.
  • The increasing entrepreneurial character of farms or farm management.
  • The emergence of different levels of farm governance, for example at the regional, company or household level.
  • The difficulty in identifying common European policy when local choices are becoming increasingly important.

The initial results of the survey of around 2400 farm-households indicated that the trend in the abandonment of farming will continue into the next decade and about a fifth of the current households are likely to stop farming. The intention to continue farming is dependent on the CAP and the results indicate that, without the CAP, the number of farmers abandoning the agricultural sector could double. The main reason for agricultural abandonment is a result of ageing rural populations; many of the current farmers will reach retirement age in the next decade. If CAP support was abolished, the lack of public funding would reduce the profitability of farming, encouraging additional farmers to leave the agricultural sector.

The CAP-IRE project is continuing to analyse data and further results will be released later in 2010. However the intermediate outcomes suggest there will be three major challenges for policy:

  • Re-specifying policy objectives and role. More attention should be given to supporting innovation and entrepreneurship rather than only offering income support. The connection between productive agriculture and environmental and social issues should be re-worked as smaller, less productive farms may struggle to incorporate environmental issues into farming. Finally there should be greater consideration of non-agricultural contributions to local economies such as farm workers with additional employment elsewhere and non-farming activities on the farm such as leisure/tourism etc.
  • Accounting for regional or farm differences. Policy should consider the social differences between rural areas, also using indicators such as long-term unemployment and low education levels. Differences in farm management and the local or national institutions that deal with farming also need to be taken into account. Finally the weight of agriculture in the economy of rural areas should be considered and the possible vulnerability this may cause if there is a decline in farm production.
  • Improving policy evaluation. If abandonment of farming does continue, the changes will require improved tools to analyse the effect of policy. For example, in many evaluations the potential of farmers abandoning the agriculture sector is not considered. Successful evaluation of the CAP must also include effects of other forces such as innovation or changes in the world market.

1 http://ec.europa.eu/agriculture/cap-post-2013/index_en.htm

CAP-IRE - Assessing the Multiple Impacts of the Common Agricultural Policies (CAP) on Rural Economies (duration: 01/01/2008 – 31/12/2010) was a Specific Targeted Research Project funded under the 7th Framework Programme for Research of the European Union, Thematic Priority 2 – Combining economic, social and environmental objectives in a European perspective.

See: http://www.cap-ire.eu

Contact: Davide Viaggi, davide.viaggi@unibo.it