Young Farmers In The EU Structural And Economic .

Farm economics for different age groupsFarmers' age groups in the FADN sample, 2004-2013100%Farm-level accounting data from the FADN (see box) provide a wealth ofinformation about the economic performance of market-oriented EUfarmers. All of the following graphs are based on FADN data.90%Between 2004 and 2013, the share of farmers from the two highest agegroups (55 years and older) increased in the FADN sample while the shareof the two youngest age groups declined. The average age of marketoriented famers in the EU-28 in 2013 was 51 years, ranging from 59 yearsin Cyprus to 46 years in Lithuania.560%35-45 years50%45-55 years40%55-65 years80% 35 years70%30% 65 years20%10%The Farm Accountancy Data Network (FADN) is a European system of samplesurveys that are run each year to collect structural and accountancy data of marketoriented farms above country-specific economic size thresholds.It aims to monitor the income and business activities of agricultural holdings and toevaluate the impacts of the Common Agricultural Policy (CAP).Data are representative for market-oriented holdings by region, type of farming andeconomic size class in all EU Member States.0%2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Average age of farmers, FADN 2013605955YearsEU average: 51 yearsFADN data for accounting years 2004-2013 will be used for the purpose of this report.The annual sample consisted of approximately 85 000 holdings in the EU-28, whichrepresent nearly 5.0 million farms (40%) out of the total of 10.8 million farms observedin the FSS in 2013. The sample includes farmers who were born between 1930 BGLUFIFRELROBEATSIPLLT355Own calculations based on Eurostat dataThe FADN distinguishes between three categories of farmers: farmers who are both the holder and the manager of the farm, holders who are not the managers of the farm managers who are not the holders of the farm.The average age of farmers presented here is an average of all categories, weighted by theirrespective number of annual work units (AWU).Young farmers in the EU8

Middle- aged farmers have the highest agricultural income in the EUIncome developments since 2004 very clearly show the dip caused by thefinancial crisis in 2008/2009, followed by a period of recovery. This patternis common for all age groups. However, recovery has been less pronouncedfor farmers in the youngest age group, who now have the lowest incomelevels per work unit. Middle-aged farmers (between 35 and 65 years) showthe highest income levels, while the oldest group of farmers earned morethan the youngest since 2009.Direct payments account for roughly 30% of farm income, with minordifferences across age groups.Proportion of direct payments in FNVA per farm in the EU (2013)35%30%25%20%Farm income per work unit15%25 00020 000200410%20055%20062007Euro15 0000% 35 years35-45 years45-55 years55-65 years 65 years2008200910 00020105 0002011201202013 35 years35-45 years45-55 years55-65 years 65 yearsThe income situation for the various age groups is different across MemberStates. Especially in some of the older Member States, younger farmershave earned the highest income for a number of years. However, theyearned less than older farmers mostly in those Member States that joinedthe EU in 2004 or later.Young farmers in the EUFor the purpose of this brief the income of farmers by different age groups ismeasured using the Farm Net Value Added (FNVA). This is equal to GrossFarm Income minus the costs of depreciation. It is used to remunerate thefixed factors of production (labour, land and capital), whether they areexternal or family factors. As a result agricultural holdings can be comparedregardless of the family/non-family nature of the factors of production used.The FNVA is usually expressed per annual working unit (AWU) in order toavoid masking the differences in farm size, type of farming or structuraldecrease in the labour force employed in agriculture. FNVA/AWU can beseen as a measure of labour productivity.9

Land valuesLand is a key factor for most types of agricultural production. In Europe,most agricultural land has been in use for a long time, making it difficultfor new entrants into farming to find sufficient affordable land of goodquality.At country level, three different groups can be distinguished. Youngfarmers have the most valuable land in Belgium, Luxemburg, Portugal,Sweden and Ireland. In Germany, Greece, Austria and Italy, land valueincreases gradually with age. In the third group of countries there is nosignificant difference in the land value across farmers' age groups. This istrue for Hungary and Poland.Higher land values for older than for young farmersAverage land value per hectare by age classes - 2013, BELGIUM25 00020 000Euro/haOn average, one hectare of agricultural land in the EU was worth aboutEUR 10 000 in 20136. This value was lowest for the youngest farmers(EUR 6 931), while farmers older than 65 years had land with the highestaverage value (EUR 11 565). In the FADN sample, Poland, Spain andRomania have the highest share of owned land (together they account for45% of owned land in the age group 35 years). The average land valueper hectare is very low particularly in Romania, which has a big impact onthe European average.BE avg.15 000EU avg. per agegroup10 0005 0000 35 years35-45 years45-55 years55-65 yearsAverage land value per hectare in the EU by age classes - 201312 00010 000Average land value per hectare by age classes - 2013, GERMANYAverage of all FADN farms18 00016 00014 0006 000DE avg.12 000Euro/haEuro/ha8 0004 00010 000EU avg. perage group8 0006 0002 0004 0000 35 years35-45 years45-55 years55-65 years 65 years2 0000 35 years35-45 years45-55 years55-65 years 65 years6The land value was calculated per hectare and as weighted averages of the closing valuation ofowned land recorded in the Farm Return.Young farmers in the EU10

12 000Young farmers own less agricultural land than older farmersAverage land value per ha by age classes - 2013, HUNGARYEuro/ha10 0008 000HU avg.6 000EU avg. perage group4 0002 0000 35 years35-45 years 45-55 years 55-65 years 65 yearsThe average value of land has increased by 39% over the last 10 years. Thegreatest increase can be seen in the age group 45-55 years ( 43%).Among market-oriented farms in the EU (excluding small farms below acertain economic size threshold), farmers younger than 35 owned onaverage 9.8 ha of agricultural land – significantly less than the 16.5 haowned by farmers aged 55-65 in 20137. The data suggest that farmersincrease their agricultural area until the age of 65 and keep only a part of itlater in life. Since 2004 the average area owned by the farmer hasdecreased steadily for the youngest age groups. In the older age groups, theincrease of owned land between 2008 and 2013 might be related to theaccession of Romania to the EU, which brought a high number of olderfarmers into the FADN sample.Average UAA owned per farm (2004-2013)Average land value per hectare by age classes in the EU)12 00010 0008 000haEuro/ha200420076 000201020134 0002 2013 35 years35-45 years45-55 years55-65 years 65 years0 35 years35-45 years45-55 years55-65 years 65 years7Average farm sizes presented on page 6 are calculated for all farms included in the farm structuresurvey, many of which are smaller than those in the FADN sample used here.Young farmers in the EU11

Most market-oriented farmers rent (increasingly) more land than they ownLand rents make up roughly 5% of total costsMarket-oriented farms in Europe rent 54% of their land on average, withsignificant differences among countries. The two extremes are Slovakia andIreland, where the share of rented land is 95% and about 20% respectively.The share of rented land has increased since 2004 for the youngest andoldest farmers, while it remained quite stable for middle-aged farmers.Across the EU, land rents can take up as much as 13% of total costs (inBulgaria) or as little as 1% (in Malta). On average, farmers use roughly 5%of their total costs for land rents, a moderate amount that does not differmuch among age groups.14%Share of rented land in the EU by age classes (2004-2013)12%70%10%60%8%50%6%40%4%30%Share of land rent in total cost (2013)13%EU-282%20%1%0%10%BG FR DE EL RO SE HU BE LU ES DK UK CZ IT IE SK CY NL AT FI PT LT HR EE SI LV PL MT0% 35 years200435-45 years200745-55 years201055-65 years2013 65 yearsEU avg 2013In most countries, the youngest farmers have the highest share of rentedland, while the oldest farmers have the lowest share, supporting the notionthat young farmers aim to increase the size of their farms while olderfarmers are reducing their farming activities.About one-tenth of the farm net value added (FNVA) across the EU isspent on land rents, again with minor differences among age groups. Onlythe oldest farmers (who tend to have less rented land than younger farmers,see above) spend a smaller proportion.Share of land rent in FNVA by age classes - EU-28 0%2.0%0.0% 35 yearsYoung farmers in the EU35-45 years45-55 years55-65 years 65 years12

Young farmers invest more than farmers in other age groupsYoung and old farmers have the lowest farm capital on averageInvestments aim to improve a farm's productivity, competitiveness andsustainable use of natural resources, thereby preparing it for the future. Thisis particularly important for new entrants into farming, who may be startingfrom scratch or take over farms in need of modernisation.The farm capital represents the value of working capital, includinglivestock, permanent crops, land improvements, buildings, machinery andcirculating capital.In 2011-2013, farmers younger than 35 years had the highest netinvestment value per farm on average. In contrast, the oldest farmers hadnegative net investments, which means that they were not replacing theircapital stock in line with depreciation – a sign of phasing-out of productionactivities.Euro3 0002 5002 0001 5001 0005000-500-1 000-1 500-2 000-2 500Net investment per farm and by age classes in the EU(avg. 2011-2013)Average of all FADN farms 35 yearsYoung farmers in the EU35-45 years45-55 years55-65 yearsAverage farm capital in the EU by age classesEuroNet investment is defined as gross investment minus depreciation. It showshow much money an agricultural enterprise is spending on capital items(such as buildings, machinery, plants etc.) that can improve the productivecapacity of the holding. Net investments depend on the type of farmingsince they are not equally capital intensive. In countries with big averagefarm sizes, net investments per AWU are considerably higher than incountries with smaller farm sizes.The youngest and oldest farmers have the lowest farm capital on average.While for the older farmers this might be due to their small farm size,younger farmers often have only just started their farming activities andstill need to build their capital stock.200 000180 000160 000140 000120 000100 00080 00060 00040 00020 0000 35 years35-45 years2004200745-55 years201055-65 years 65 years2013However, differences can be observed between countries. Young farmersactually obtain the highest average farm capital in the Netherlands,Luxemburg, Sweden, Belgium and Poland. 65 years13

Low and declining level of liabilities for young farmers70 000200460 000200550 000Euro per farmWhile middle-aged farmers have the highest (and rising) level of liabilities(long-, medium- and short-term loans), indebtedness decreases with ageand is lowest for farmers older than 65. For young farmers, the level ofliabilities is below the EU average and has been declining over the lastdecade – a possible sign for problems in accessing credit markets, furtherexacerbated by their low level of farm capital and own land that could beused as collateral (see above).Total liabilities by age class ( 2004-2013)Medium- and long-term loans clearly dominate the structure of liabilitiesfor all age groups. The proportion of short-term loans increases for thehigher age classes, but they remain low in absolute terms (around 3 400Euros on average for farmers older than 65).2006200740 000200830 0002009201020 000201110 000201202013 35 years 35-45 years45-55 years55-65 years 65 yearsTotalThe average interest rate paid by farmers was 3.2% in 2013, regardless ofthe farmers' age.Structure of liabilities by age class (2013)100%90%80%70%60%50%40%30%20%10%0% 35 years35-45 years45-55 years% of medium & long-term loans in totalYoung farmers in the EU55-65 years 65 years% of short-term lonas in total14

Younger farmers have higher debt-to-asset ratios than older onesYoung farmers have higher return on assets than older onesThe debt-to-assets ratio shows the percentage of a holding's assets that arefinanced through debt. A high ratio indicates a high level of liabilities inrelation to existing assets and is sometimes associated with a greater risk ofthe firm's operation. It also means a reduced capacity of taking up newloans due to the already heavy debt burden. However, a high debt-to-assetsratio is not necessarily a sign of a financially vulnerable position but canalso indicate the farm's ability to access outside financial sources forinvestments.The return on assets (ROA) is a ratio which represents the total incomegenerated from the farm, divided by the total assets employed to generatethis income. The larger this percentage, the better is the return on allinvestments in the business.On average, the debt-to-asset ratio of European farmers is relatively low,not exceeding 20%. Farmers in the younger age groups are more highlyleveraged than older farmers.The ROA increases with economic farm size, suggesting greaterprofitability for larger-scale operations. The average ROA for farms inEurope was 1.5%.Operations owning a large portion of their land need higher earnings perhectare than operations renting a large portion of their land in order to haveidentical returns on assets.Return on assets by economic farm size, 2013Debt-to-assets ratio in the EU by age groups 2%2 000 - 8 000 8 000 - 25EUR000 EUR25 000 - 50 50 000 - 100 100 000 - 000 EUR000 EUR500 000 EUR 500 000EUR0% 35 years35-45 years45-55 years55-65 years 65 yearsDebt-to-asset ratios tend to be higher at the outset of one's farming career,when important investments are required to get the business off the ground.Such investments become less frequent beyond the farmer's retirement age,when farming activities are being phased out. Older farmers are also morelikely to have repaid most of their debt, leading to a lower debt-to-assetratio in the higher age groups.Young farmers in the EU-4%-6%-8%15

4%Return on assets (ROA) in the EU by type of farming in 20133%Young farmers achieved the highest ROA especially in 2007 and 2010. In2013, the overall ROA was lower for all age groups, but still above averagefor the youngest farmers.Return on assets (ROA) per farm by age classes in the EU2%4%1%0%-1%-2%3%200420072%201020131%0% 35 yearsIn the EU, farms specialised in granivores (pigs and poultry) andhorticulture had the highest ROA (these are also those farm types thatnormally have the smallest agricultural area, which reduces the overallasset value, combined with high output values), while mixed farmingsystems and cattle had the lowest ROA.Young farmers in the EU35-45 years45-55 years55-65 years 65 years-1%16

Conclusions: Not only the number of young farmers countsThe proportion of farmers younger than 35 years is indeed low in mostEuropean countries. While this reflects to a certain extent the generalageing of rural societies, it is also linked to the intergenerational transfer offarms and the fact that the oldest farmers have the smallest farms – forevery average-sized new farm, slightly more than 2.5 older farmers wouldhave to stop farming. The proportion of young farmers thus cannot beexpected to grow as quickly as the proportion of older farmers declines.Clearly, starting an agricultural business requires substantial investments,which often become productive only after a number of years. This appliesto all new entrants into farming, regardless of their age. The fact that youngfarmers have high levels of net investments shows that they see a future infarming and are willing to modernise their operations. However, given theirlow farm capital and land value, they have little to offer as collateral forloans, which may act as a limitation for even greater investments.The small share of young farmers is often seen as problematic in light ofthe future competitiveness of European agriculture and guaranteed foodproduction in the coming decades. Should we worry that there will not beenough farmers in 30 years' time to produce our food? Anecdotal evidenceshows that the number of students studying agriculture and related subjectsis growing8. Young people are thus clearly interested in careers based onagriculture.Access to land and credit are often cited as the two main constraints foryoung farmers – in fact, they are constraints for all new entrants intofarming. While land is a finite resource and land ownership is a sensitiveissue, there are various ways in which the availability of credit for farmerscan be addressed, which would certainly benefit young farmers.The fact that the utilised agricultural area has remained largely stable overthe last decades (with losses due to urbanisation but no large-scaleabandonment of agricultural land) shows that the production base ismaintained, even if most land is managed by middle-aged farmers. A newentrant into farming will often take over an existing farm, since mostsuitable land is already in use. Thus, land may be difficult to find if it is notinherited. The higher proportion of rented land among young farmersindicates a desire to increase the size of the farming operation, which isconstrained by the lack of suitable ity-in-thenetherlands-9789264238473-en.htmThis document does not necessarily represent the official views of theEuropean CommissionContact: DG Agric

bigger than the farms of the oldest farmers. The high number of farms in the hands of elderly farmers thus needs to be seen in the context of their small physical and economic size. Many such farms are in fact used for subsistence purposes or as a pension supplement. There are roughly 3.2 million farmers older than 65 years in the EU.