Archive:EU agricultural prices — a robust field with a long record
This Statistics Explained article is outdated and has been archived - for recent articles on agriculture see here.
- Published in Sigma - The Bulletin of European Statistics, 2007/02
The common agricultural policy first saw the light in 1962 and from the outset it was designed to meet two objectives. The first was to guarantee the food supply in the European Union (EU) at lowest possible prices to the consumer. The second was to secure farmers’ incomes with guaranteed prices, which required harmonised statistics on agricultural prices. Eurostat has therefore collected data on agricultural prices since the beginning of the 1960s to analyse price developments and their effect on agricultural income.
Introduction
The agricultural price indices (API) cover a wide range of products coming in and out of the farm. The output products range from cereals, vegetables and meat to milk and eggs and the input products from animal feed, fertilisers and seeds to energy and pesticides.
‘The output price indices reflect the variations in the level of prices received by farmers when they sell their products. As most agricultural products are processed before they are consumed and almost always change hands more than once before they arrive at the consumer’s table, they are different from the consumer price indices which measure the change of price directly paid by consumers’, says Fausto Cardoso, Head of the Crop Statistics Section in Eurostat.
‘The input price indices on the other hand reflect what the farmer has to pay to feed his animals and fertilise his land’, he continues.
Impact on farmers’ income
In the last five years, prices for agricultural products have decreased in almost all countries of the European Union. In the case of input prices, the decrease is not as sharp as for output prices and in 2004 and 2005 input prices rose again. This means that farmers had to pay relatively more for the input products needed to run their farms than they received from selling their products.
‘The decline in producer prices that has been affecting the sector for years and the growth in prices of input products and services, are having a negative impact on income from production in almost all Member States’, says Iulia Pop, who is responsible for agricultural price and account methodology in Eurostat.
‘The impact on farmers’ income is, however, “diluted” as the average size of farms is continuously growing and labour force productivity (most of which is the holding’s family) is increasing. Due to the greater role of market mechanisms in the reformed common agricultural policy, the EU agricultural sector is becoming more competitive as EU agricultural prices are closing in on world market prices’, says Mr Cardoso.
Gentlemen’s agreements
Agricultural prices are collected through so called ‘gentlemen’s agreements’, which means that collection is not based on EU legislation. Despite this, methods are harmonised and based on the Handbook for EU agricultural price statistics and there are no major problems with delays or coverage, as Members States need the data for their own use.
‘The handbook is being updated, as the present one covering both agricultural price indices and absolute prices dates back to 2002. The updates have been discussed with Member States and we will present the new edition by the end of the year’, says Ms Pop.
Variety of uses
The quarterly agricultural price indices are used by the Commission’s Directorate-General for Agriculture to form and evaluate agricultural policy. Farming organisations such as the European Committee of Professional Agricultural Organisations (COPA), are also users.
Eurostat also collects annual absolute prices for a number of limited products as well as data on agricultural land prices and rent. The absolute prices are used mainly by Agriculture DG to observe the variation in prices for a product in different countries. However, the absolute prices are also an important input in OECD’s producer support estimate indicator, which is used in international agricultural and trade policy negotiations to measure gross transfer to producers.
Simplification
From 2006, the frequency and details in some agricultural price data collection have been reduced. For example, the API is now produced quarterly instead of monthly, and collection of monthly absolute prices is now an annual collection. The list of variables for the collection of annual absolute prices has also been reduced to half — from 414 products to 201. This follows the European Commission’s approach to simplifying and reducing the administrative burden for respondents.
Legislation possible
Although no legislation is planned for the near future, Mr Cardoso says that it is quite likely that agricultural price statistics will also be regulated. ‘The trend at Eurostat is to base data collection on legislation and there are also many Member States who would appreciate such a move. In these days of scarce resources, it is easier to collect data that are mandatory rather than voluntary. Whether there will be legislation or not has still not been decided, but as far as methodology is concerned, it will be based on the Handbook for EU agricultural price statistics’, says Mr Cardoso.