agricultural capital and land value · in the czech republic, farms in north-western europe are...

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Agricultural capital and land value

Content 1. Structure of farms in the FADN sample .............................................................................................................................................................................. 3

2. Assets and liabilities in EU farming .................................................................................................................................................................................... 4

3. Net investment ................................................................................................................................................................................................................... 10

4. Gross Fixed Capital Formation in Agriculture .................................................................................................................................................................. 12

5. Land value and land rents .................................................................................................................................................................................................. 13

This document does not necessarily represent the official views of the European Commission

Contact: DG Agriculture and Rural Development, Unit Farm Economics

Tel: +32-2-29 91111 / E-mail: [email protected]

© European Union, 2018 - Reproduction authorised provided the source is acknowledged

mailto:[email protected]

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Figures

Figure 1: Average farm size 2004 – 08 – 12 - 15 (Utilized Agricultural Area/farm) ................................................................................................................. 3 Figure 2: Average farm size 2015 (Livestock Units/farm) ......................................................................................................................................................... 3 Figure 3: Share of owned and rented land in EU farming 2015 ................................................................................................................................................. 4 Figure 4: Assets and liabilities in EU farming 2015 (Euro/farm) .............................................................................................................................................. 4

Figure 5: Total assets in EU farming 2004-2008-2012-2015 (Euro/farm) ................................................................................................................................. 5 Figure 6: Total liabilities in EU farming 2004-2008-2012-2015 (Euro/farm) ........................................................................................................................... 5

Figure 7: Assets and liabilities per category of farming in the EU 2015 (Euro/farm) ............................................................................................................... 6 Figure 8: Assets and liabilities per age bracket in the EU 2013 (Euro/farm)* ........................................................................................................................... 6 Figure 9: Assets and liabilities per AWU and type of farming in the EU 2015 (Euro/AWU) ................................................................................................... 7

Figure 10: Assets and liabilities per AWU and size (turnover) of farming in the EU 2015 (Euro/AWU) ................................................................................ 7 Figure 11: Return on Assets in EU farming, 2015 (per cent) ..................................................................................................................................................... 8 Figure 12: Return on Assets by type of farming in the EU, 2015 (per cent) .............................................................................................................................. 8

Figure 13: Return on Assets by economic size (turnover) of the farms in the EU, 2015 (per cent) .......................................................................................... 9 Figure 14: Average net investment in EU farming 2013-15 (Euro/farm) ................................................................................................................................ 10

Figure 15: Net investment in EU farming 2010-15 (Euro/farm) .............................................................................................................................................. 10 Figure 16: Net investment in EU farming 2015 (Euro/farm) ................................................................................................................................................... 11

Figure 17: Net investment in EU farming 2015 (Euro/AWU) ................................................................................................................................................. 11 Figure 18: GFCF in agriculture in 2015 and its average annual growth rate 2009-2015 ......................................................................................................... 12

Figure 19: GFCF in agriculture (as % of GVA in agriculture), 2014 ....................................................................................................................................... 12 Figure 20: Land value in the EU 2015 (Euro/ha) ..................................................................................................................................................................... 13

Figure 21: Land rent in the EU 2015 (Euro/ha) ........................................................................................................................................................................ 13

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1. Structure of farms in the FADN sample

Farm structures differ widely within the EU (see the chapter on farm structures). The Farm Accountancy

Data Network (FADN) collects data from market-

oriented farms above country-specific thresholds,

thereby excluding the smallest holdings which are

covered in the Farm Structure Survey (FSS);

structural averages therefore differ between these two

data sources. In the following, FADN data are used.

The average UAA (Utilised Agricultural Area) of the FADN farms is 34 ha (it is 16 ha for all farms covered

in the FSS). The largest farms are in Slovakia and the

Czech Republic. The smallest farms are in Malta,

Greece and Cyprus. In general, farms are bigger by

size in the northern parts of the Union compared to

the Mediterranean Member States.

The farm structure is often linked to historical developments in the different Member States. A

change of the farm structure is a long-term process

and therefore changes from one year to another are

small. The longer term trend is showing a continuous

consolidation, with fewer and larger farms.

The number of livestock per farm, expressed as Livestock Units (LU), is not fully correlated with the

area. Besides the relatively big farms in Slovakia and

in the Czech Republic, farms in north-western Europe

are also relatively big when measured as LU/farm.

The farm structure in terms of owned versus rented farmland differs widely, also dependent on historical

decisions and national legislation. The ratio, at EU-

level, between owned and rented land is half – half.

Figure 1: Average farm size 2004 – 08 – 12 - 15 (Utilized Agricultural Area/farm)

Source: DG Agriculture and Rural Development, based on FADN.

* The size (UAA) for SK is 608 ha for 2004, 585 ha for 2008, 475 ha for 2012 and 529 ha for 2015.

Figure 2: Average farm size 2015 (Livestock Units/farm)

Source: DG Agriculture and Rural Development, based on FADN

0

50

100

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SK*

CZ

UK EE SE FR DK

DE

LU LV HU FI IE BE ES LT AT

NL

PT

BG PL IT HR SI RO CY EL MT

EU

2004

2008

2012

2015

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80

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140D

K SK UK

NL

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LU CZ

DE SE FR IE EE ES FI AT LV HU IT

MT

PT PL LT BG SI HR CY EL RO EU

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2. Assets and liabilities in EU farming

The total assets per farm depend on the size of the operation and type of farming. The biggest asset is

often land when the farmer owns his/her farm.

Member States with a high share of specialised

animal production (DK, NL, IE) or with relatively

large farms (UK, LU, SK, CZ) have the highest total

assets per holding. Member States with smaller

farms and with more labour intensive production

(wine, horticulture) have lower assets per holding

(EL, PT, BG, RO).

The share of liabilities in relation to assets differs widely between Member States. Farms with a high

ratio become less resilient in case of falling output

prices, higher production costs or higher cost of

financing. Farms in DK, FR, SK and EE have the

highest ratio while farms in EL, IT and IE have a

lower share.

A rapid expansion of the business operation based on external financing is probably one of the most

common reasons for a high debt ratio.

Overinvestment in production buildings and

machinery can result in lower resilience to price dips

and lower return on investments over a longer

period. In the past, necessary investments in

production quotas for development of the operation

led to higher debts. Production quotas often

represented a considerable share of the farm assets,

and debts. When milk quotas were phased out, the

quotas lost value while debts remained.

Figure 3: Share of owned and rented land in EU farming 2015

Source: DG Agriculture and Rural Development, based on FADN. * For PT land under sharecropping is declaread as owned land

Figure 4: Assets and liabilities in EU farming 2015 (Euro/farm)


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

Owned Rented

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

DK

NL

UK

LU SK SE IE DE

BE

CZ FI IT AT

FR ES

EE SI

MT

HU PL

CY

HR LV EL LT PT

BG

RO EU

Total Assets Total Liabilities

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Assets and liabilities – development 2004-15

The trend in assets per farm during the period 2004-15 is slightly positive. Farmland represents a

large share of the total assets and the volatility in

land prices is generally relatively low. Further, the

value of land is calculated out from average

rents. Rental contracts for farm land have often

long duration and conditions are often regulated. In

some cases clauses apply preventing rents to rise

quickly when renewing contracts.

The development of the amount of assets per farm differs widely between the Member States. The

total value of assets per farm has increased with

more than 20% between 2012 and 2015 in SK, ES

and UK. On the contrary, the amount of assets per

farm has declined during the same period in BG,

CZ, CY, MT, PT, RO, AT and FR.

The total value of liabilities per farm differs widely between Member States. Farmers in NL and DK

have rather high liabilities on average, while

farmers in CY, PL, BG, ES, SI, IT, MT, PT, LT,

HR, RO and EL have very low liabilities. In several

Member States with already low liabilities per farm

the amounts have gone down during the period

(EL, PT, MT, PL, CY). During the analysed period

the economic situation and growth in general has

been weak in the Mediterranean countries.

Figure 5: Total assets in EU farming 2004-2008-2012-2015 (Euro/farm)

Source: DG Agriculture and Rural Development, based on FADN * The values for DK are 2644 k€ for 2008

Figure 6: Total liabilities in EU farming 2004-2008-2012-2015 (Euro/farm)


* The values are: for DK 716 k€ for 2004, 1316 k€ for 2008, 1475 k€ for 2012, 1461 for 2015, for NL 496 k€ for 2004, 656 k€ for 2008, 860

k€ for 2012 and 818 k€ for 2015

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

SK NL

DK

* UK

LU DE

CZ IE SE BE

AT

FR IT FI ES MT SI CY

HU EE HR PT EL PL

LV LT

BG

RO EU

2004

2008

2012

2015

0

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450 000

DK

NL

SE LU CZ

FR BE

DE

UK FI SK AT

HU EE IE LV CY PL

BG ES SI IT

MT

PT LT HR

RO EL EU

2004

2008

2012

2015

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Assets and liabilities per type of farming and per

age bracket

The need for external financing differs between farm types. Farmers producing granivores (pigs/poultry),

dairy, arable crops and cattle have higher assets and

liabilities than the average farm. These specialised

enterprises are often relatively big and investments

in housing for animals bind more capital. The larger

livestock farms are often located in areas with a high

concentration of agricultural activities where land

prices are also often higher.

If the amount of assets are analysed per age category, farmers in the middle of their career (45-

50 years) have the highest assets but also the highest

liabilities. Older farmers and farmers beyond normal

retirement age tend to have relatively high assets and

lower liabilities1.

Young farmers have on average lower assets but also lower liabilities. The ratio between liabilities

and assets is 11% and 9% in the two youngest

categories while the corresponding figures for the

two oldest categories are 11% and 4%. The

difference in liabilities/assets ratio between the

youngest and older farmers is relatively small. A

possible reason for this is that many younger farmers

own less land than older farmers2, which often

represents the biggest amount of capital, and need

for external financing.

1 As mentioned earlier, country-specific thresholds exclude

small farms from the FADN sample. If all farms are

considered, older farmers tend to have the smallest farms on

average, with correspondingly low levels of assets. 2 See also

https://ec.europa.eu/agriculture/sites/agriculture/files/rural-

area-economics/briefs/pdf/015_en.pdf

Figure 7: Assets and liabilities per category of farming in the EU 2015 (Euro/farm)

Source: DG Agriculture and Rural Development, based on FADN. The figure for assets for specialist granivores is 769 000€

Figure 8: Assets and liabilities per age bracket in the EU 2013 (Euro/farm)*


*Due to lack of data for 2015 this graph is based on figures for 2013

050 000

100 000150 000200 000250 000300 000350 000400 000450 000500 000


0

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Assets and liabilities per AWU

The highest amount of assets but also of liabilities per AWU can be found among

specialised arable, pigs/poultry, cattle and

dairy farmers. The specialised pig/poultry

farmers have the highest ratio of external

financing to assets (34%), followed by

specialised horticulture producers with 26%.

Traditionally capital intensive types of farming

such as arable, and pigs/poultry have

significantly higher amounts of assets than

more labour- intensive types of farming, i.e.

horticulture.

If the ratio of liabilities to assets per AWU is analysed according to the turnover of farms,

the outcome is that bigger farms have a higher

share of external financing per AWU than

smaller operations. The ratio for farms with

> 500 000 euro in turnover is 34%, while for

the smallest farms the corresponding figure is

only 1%. In other words, the amount of debts

per AWU on the biggest farms is 118 590 €

while for the smallest farms it is only 289 €.

Figure 9: Assets and liabilities per AWU and type of farming in the EU 2015 (Euro/AWU)


Figure 10: Assets and liabilities per AWU and size (turnover) of farming in the EU 2015

(Euro/AWU)


050 000

100 000150 000200 000250 000300 000350 000400 000

Assets/AWU Debts/AWU

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

Assets/AWU Debts/AWU

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Return on assets

Return on assets (RoA) measures the farm's capacity to generate income. RoA is defined

as net value added minus salaries, rents,

capital costs and opportunity cost of own

labour divided by average assets.

Several Member States with relatively high RoA have low average assets per farm. The

Member States where the average asset value

per farm is the highest are in the middle of

the scale (DK, NL, UK, LU).

The RoA varies between years with commodity prices and input costs. Several

Member States with high RoA in 2015

recorded high numbers also previous years.

Likewise, some Member States with negative

figures also reported negative figures during

the period 2004-12.

The highest RoA is found among farms specialised in relatively intensive production

types such as horticulture and wine. Farms

specialised in more extensive production

activites have lower or even negative RoA.

The RoA based on type of farming varies from year to year but a similar pattern can be

seen over the years where farms specialised

in intensive production have higher RoA than

farms with extensive production.

Figure 11: Return on Assets in EU farming, 2015 (per cent)

Source: DG Agriculture and Rural Development, based on FADN. * The value for EE for 2004 is 9.1% and for SE 2004 is -7.1%.

Figure 12: Return on Assets by type of farming in the EU, 2015 (per cent)


-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

EE LV LT ES EL

BE PL

HU

BG CZ

FR LU AT

DE IT

MT

DK

NL

UK

RO IE SK CY FI SI PT

SE*

HR

EU

2004

2008

2012

2015

-4%

-2%

0%

2%

4%

6%

8%

10%

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RoA is higher on bigger farms than on

smaller holdings. The pattern has been

consistent over a longer period of time, where

the bigger farms have had a higher RoA than

the smaller holdings.

Figure 13: Return on Assets by economic size (turnover) of the farms in the EU, 2015 (per cent)

Source: DG Agriculture and Rural Development, based on FADN. Economic size is defined as total net income from the farming operations.

* The value for the interval 2 k – 8k€ is -15,1%.

-5%

0%

5%

10%

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3. Net investment

Net investment is defined as gross investments minus depreciation. The highest

net investments are on farms in Member

States where the average farm size is above

average. The net investments on farms in

Member States with relatively small holdings

are low or even negative. Some Member

States with the smallest holdings have been

affected by the financial crisis and the

following credit crunch, which made

investments for farmers more difficult.

The level of net investments per farm has been volatile over the years, with even

negative figures for the EU during the years

of the financial crisis. Investments picked up

in 2011-12 but fell during 2013-15.

According to a study of investment behaviour in six Member States3, 61% of the farmers

are willing to invest during the period 2014-

20. The most common category for future

investments is machinery. Farmers in Poland

and Germany have expressed a higher

willingness to invest than Italian and Spanish

farmers.

3

http://ageconsearch.tind.io//bitstream/182737/2/Lefebvr

e-EU_farmers_intentions_to_invest_in_2014-2020-

397_a.pdf

Figure 14: Average net investment in EU farming 2013-15 (Euro/farm)

Source: DG Agriculture and Rural Development, based on FADN. * The value for LU is 35900 €

Figure 15: Net investment in EU farming 2010-15 (Euro/farm)


-5 000

0

5 000

10 000

15 000

20 000

25 000

LU NL

CZ

SK BE

DK

DE EE SE LV UK IE AT

BG

HU LT SI

PT

MT

FR FI

RO PL

CY ES HR EL IT EU

-500

0

500

1 000

1 500

2 000

2010 2011 2012 2013 2014 2015

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The highest net investments in 2015 are on farms specialised in dairy production or wine.

These types of operations are bigger than

average in terms of net income. The net

investments on farms specialised in more

extensive types of production or production

with a high share of non-depreciable assets

have low or even negative net investments.

Specialisations with negative net investment

are largely concentrated in Member States

which were hit by the financial crisis. This

could still be a reason for the negative net

investments in 2015.

If net investment is measured per AWU, the difference between Member States is

considerable. In Member States where the

average size of the farms is relatively big, the

net investment expressed per AWU is

considerably higher than in Member States

with smaller farm structures (Finland is an

exception). Another reason for this could be

that the farming operations are to a higher

extent mechanised in these Member States

than in Member States with a smaller average

farm size. In Member States with relatively

low or negative net investments per AWU,

labour- intensive farm types such as wine,

olives or horticulture are common. The

economic potential to further mechanise the

operations differs between farm types and

this could to a certain extent explain why the

net investments vary between the Member

States.

Figure 16: Net investment in EU farming 2015 (Euro/farm)


Figure 17: Net investment in EU farming 2015 (Euro/AWU)


-2 500-2 000-1 500-1 000

-5000

5001 0001 5002 0002 5003 000

-8 000

-6 000

-4 000

-2 000

0

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12 000

NL

SE LU LV BE IE DE

AT

DK SK MT LT CZ

BG

HU CY

PT

FR EE

RO ES SI

UK PL

HR IT EL FI

EU

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4. Gross Fixed Capital Formation in Agriculture

Gross Fixed Capital Formation (GFCF) measures how much of the value added is

invested rather than consumed and it is a key

element for future competitiveness. In 2015,

the agricultural sector in the EU-28 invested

EUR 56.8 billion, unchanged compared to

2014, accounting for almost 34% of the total

agricultural GVA.

Between 2009 and 2015, GFCF in agriculture in the EU-28 faced a decrease at an average

annual rate of -3.0%.

GFCF as a percentage of GVA in agriculture

was high in 2014 in several regions of the

United Kingdom (North West, South West,

Wales and Northern Ireland), in Germany and in Luxembourg. Among the EU-N13

Member States, the highest percentage can be

found in Lithuania and Latvia.

See also Common context indicator 28: Gross

fixed capital formation in agriculture

Figure 18: GFCF in agriculture in 2015 and its average annual growth rate 2009-2015

Figure 19: GFCF in agriculture (as % of GVA in agriculture), 2014

https://ec.europa.eu/agriculture/cap-indicators/context/2017/c28_en.pdfhttps://ec.europa.eu/agriculture/cap-indicators/context/2017/c28_en.pdf

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5. Land value and land rents

Land value per hectare differs widely between Member States and can be measured

according to different methods. The

definitions in FADN builds on Utilised

Agricultural Area (arable land and pastures)

while the Eurostat definition builds on arable

land only.

The highest prices according to FADN are found in Malta with 135 000 Euro/ha and in

the Netherlands with 64 000 Euro/ha. Land is

cheapest in Estonia with 900 Euro/ha.

Agricultural land in Member States with a

high share of specialized production, high

population density and a relatively high

living standard are considerably higher than

in Member States with a higher share of

mixed production, lower population density

and lower living standards.

Like land values, land rents differ widely between the Member States and are measured

by different methods. There is no clear

correlation between land values and land

rents. The highest land rents are reported in

the Netherlands and in Denmark and the

lowest in the Baltic States. Smaller Member

States with a high population density such as

Malta and Cyprus have among the highest

land values but the average land rents are at-

or below the EU average. High land value is

not necessarily driven by high productivity of

the land itself but rather by competition from

other use than for agricultural purposes.

Figure 20: Land value in the EU 2015 (Euro/ha)

Source: DG Agriculture and Rural Development, based on FADN, Eurostat. * The value for MT is 134 600 €/ha (FADN).

Figure 21: Land rent in the EU 2015 (Euro/ha)

Source: DG Agriculture and Rural Development, based on FADN, Eurostat.

0

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50 000

60 000

70 000

MT* N

L

CY

DK IT BE IE UK

DE

LU EL

SE SI

HR PL

ES FI

PT

FR BG CZ

SK HU

RO LT AT LV EE

EU

Land Value - Avg (FADN) Arable land (ESTAT)

0

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600

700

800

900N

L

DK

BE

DE

AT IE FI SE CY

LU BG FR IT EL UK PT ES HU

MT

RO CZ SI PL

HR SK LT EE LV

Rent/ha UAA (FADN) Rent/ha UAA (ESTAT)

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