EUROPEAN PARLIAMENT Committee on Agriculture and Rural Development

2009 - 2014

2013/2096(INI) 14.10.2013

DRAFT REPORT
on the future of small agricultural holdings (2013/2096(INI)) Committee on Agriculture and Rural Development Rapporteur: Czesaw Adam Siekierski

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PR_INI CONTENTS Page MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION ............................................ 3 EXPLANATORY STATEMENT.............................................................................................. 7

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MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION on the future of small agricultural holdings (2013/2096(INI)) The European Parliament, having regard to the objectives of the common agricultural policy as laid down in Article 39 of the Treaty on the Functioning of the European Union, and in particular the objective of ensuring a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture, having regard to Regulation (EU) No [...] of the European Parliament and of the Council establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy, and in particular Article 28(g) and Article 47 thereof on redistributive payments and the small farmers scheme respectively, having regard to Regulation (EU) No [...] of the European Parliament and of the Council on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), and in particular Articles 8 and 20 thereof on thematic subprogrammes and farm and business development respectively, having regard to the study entitled Semi-subsistence farming: value and directions for development prepared by the European Parliaments Policy Department B (Structural and Cohesion Policies), having regard to Rule 48 of its Rules of Procedure, having regard to the report of the Committee on Agriculture and Rural Development (A70000/2013), A. whereas small agricultural holdings in Europe are subject to sustained demographic, commercial and technological pressure, which is leading to the gradual de-agrarianisation and depopulation of villages in areas in which such holdings predominate, with small livestock holdings being abandoned en masse and specific local crops no longer being grown; B. whereas the roles played by small agricultural holdings are not only production-related in that such holdings also play key roles in the delivery of public goods; whereas these include roles relating to nature and the countryside (helping maintain both the characteristic features of Europes countryside and biodiversity in rural areas), social roles (providing a livelihood for millions of people in Europe, preventing poverty and constituting a workforce reserve for industry and other sectors of the economy), and cultural roles (preserving fine traditions, customs and other non-material heritage and manufacturing regional and traditional products); C. whereas most of Europes small agricultural holdings only sell a small proportion of their
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goods on the market, or focus principally on subsistence farming; D. whereas a broader approach is needed to address the problems of small agricultural holdings, and whereas the creation of non-agricultural jobs in rural areas is vital for the development of those areas and for the future of small agricultural holdings; E. whereas small agricultural holdings are not treated fairly under the common agricultural policy, and whereas the reasons for this include: the fact that the structure of the policy is principally based on surface area and past production levels, rather than on employment and the level of income; the fact that some Member States place minimum funding thresholds in the second pillar; and the Member States failure to bring in implementing measures that meet the needs of small agricultural holdings; F. whereas it is difficult for smallholders to secure financial support because, for example, they cannot afford the contribution required to obtain support under EU programmes, or they have a low level of creditworthiness or no creditworthiness at all; G. whereas smallholders do not receive enough administrative support or good quality advice, whereas Member States create red tape, and whereas smallholders have insufficient knowledge and experience where administration is concerned; H. whereas because they are dispersed, the bargaining power of agricultural holdings in the food chain is far weaker than that of other participants in the market, and whereas this is particularly acute in the case of small agricultural holdings; I. whereas small agricultural holdings play a special role in maintaining the vitality of mountain areas, less-favoured areas and outlying regions; J. whereas the level of income and the living standards of families who make their living by working on small agricultural holdings are much lower than those of commercial farmers or farmers employed in other sectors of the economy; K. whereas not enough reliable data are available on the situation with regard to small agricultural holdings and the impact of CAP instruments on the sector; L. whereas the United Nations General Assembly has declared 2014 the International Year of Family Farming; 1. Calls on the Member States and the Commission to take appropriate action under the new common agricultural policy and draw up guidelines for the period beyond 2020 in which greater attention is paid to the specific needs of small family holdings, which are an important element of the European agricultural model and which are central to the multifunctional development of rural areas; 2. Takes the view that simply reducing the number of small agricultural holdings should not be the main objective of restructuring, as this will not boost the competitiveness of larger holdings; with this in mind, calls on the Member States to: come up with appropriate solutions and development models for smallholdings, taking account of the specific characteristics of farming in the country concerned and of regional variations; boost the
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competitiveness, viability and profitability of smallholdings; foster entrepreneurship; create jobs; and curb rural depopulation; 3. Calls for an increase in direct sales for example of traditional products on local and regional markets, and for the development on smallholdings of a simplified, responsible form of processing, but without extensive monitoring systems; calls, furthermore, on regional authorities to be more active with regard to the development of infrastructure for direct sales, including rural and urban marketplaces, making it easier for consumers to get hold of cheap, healthy, high-quality farm produce; 4. Takes the view that in the process of solving the problems of small agricultural holdings, other EU policies, including the cohesion policy, must be brought in alongside the common agricultural policy to help improve technical infrastructure and access to public services in rural areas, whilst resources from the European Social Fund should be used to finance community and social action involving social inclusion, education, training and knowledge transfer; takes the view, furthermore, that since these smallholdings do not have a significant impact on the market, permission could be given for additional support to be provided from national resources in line with rules agreed upon with the Commission and without hindering free competition; 5. Is very pleased that the support scheme for small-scale farmers has been established under the first pillar of the CAP, but takes the view, nevertheless, that it is only the form of the transfer that has been simplified, whilst the low direct payment rates allow no room for development, and that these measures are still insufficient to improve the lot of smallholdings in the EU; 6. Calls on the Member States to establish appropriate financial instruments, for example in the shape of microcredits, subsidised interest rates on loans, first instalment repayments or credit guarantees; takes the view, furthermore, that regional and local authorities should be involved in the process of providing such support; 7. calls for: free advice to be better tailored to the needs of smallholdings; procedures to be simplified; information campaigns to be mounted; the sharing of best practices where the short food supply chain is concerned; and technical assistance to be provided to help those applying for EU funding; 8. Emphasises the need for smallholdings to come together to form organisations, producers groups or cooperatives and mount joint marketing campaigns; takes the view that smallholders organisations should receive special support; 9. Takes the view that smallholdings in mountain areas, less-favoured areas and outlying regions should be able to benefit from coupled support, e.g. for sheep-breeding, where they also fulfil specific environmental functions; 10. Calls for the Member States to include, in their pillar I and II programmes, subprogrammes and measures geared towards smallholdings; 11. Recommends that the scope of the Farm Accountancy Data Network be extended in order to look into the situation of smallholdings and the impact that the CAP has on them, and
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to plan their development; 12. Instructs its President to forward this resolution to the Council and the Commission.

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EXPLANATORY STATEMENT Small agricultural holdings form an integral part of Europes countryside, providing many public goods, by helping to preserve the diversity of the landscape, providing a livelihood for millions of people, mainly in the so-called new Member States, and nurturing various centuries-old folk traditions and customs in the countryside. Many families are involved in running such small farms, often over many generations. Despite this, the CAP continues to favour large farms that meet market conditions and secure advantages solely by virtue of their size. Small agricultural holdings are characterised by lower efficiency, a larger number of employees and diversity of production. Their owners are mostly older people who are less educated than agro-industrial farmers and have trouble in finding successors to take over their farms. Often the future of small farms is decided when the new generation takes over. It is therefore necessary to support these farms so that their owners can work there until the end of their productive lives. The technological development and market orientation of agriculture are leading to a reduction in consumption on the farm, while the growing scale of production is binding farms ever more closely to the market. A small agricultural holding sector exists both at EU-12 and at EU-15 level. Within the EU-15 countries, a further distinction must be made as regards southern countries, i.e. Spain, Portugal, Italy and Greece, where the small scale of farms is a product of historical conditions and the nature of production. Even more significantly, this diversity is also found in the new Member States. In EU-12, particularly in the countries of the former socialist bloc, the small size of farms is also the result of historical and political processes. In the past (1945-48), large farms were divided by confiscating land from large landlords and assigning it to small property owners. Later, a process of forced collectivisation took place (1948-55) and during the transition process away from communism in the 90s, land was again redistributed among smallholders. Currently, a process of concentration is under way in the group of larger farms. There is no doubt that a small agricultural holding in one of the southern countries, with a fixed market position and income, differs from a typical smallholding in Poland, which often has its own traditions and practises traditional forms of farming unchanged for decades and passed on from generation to generation; but it is also different from a farm that originated in the assignment of a specific plot of land after the dissolution of a state or cooperative farm after the change of system in Eastern Europe (Romania, Bulgaria, etc.). The accession of the new Member States in 2004 and later significantly changed the structure both of agriculture in general, and of the smallholdings sector in the EU in particular. There is no doubt that smallholdings in the old EU are more stable than in the new EU. After accession to the EU, the profitability of smallholdings in EU-12 fell, but where they received support under the CAP, their incomes rose. Smallholdings face problems where farming is run-down and the soil is of poor quality.

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We are witnessing a fall in the number of agro-industrial farm holdings in Europe. The average size of farms has increased in all countries, although there are regional differences. In 2010, the average size of farms in EU-27 was 14.2 ha, broken down as follows: 50.1 ha in the North West, 12.0 ha in the South and only 7.1 ha in the new Member States. Despite this trend towards a fall in the number of small agricultural holdings, it should be emphasised that in times of crisis or during industrial restructuring, the number of employees in smallholdings increases, since, as a result of layoffs, more persons return to the countryside to farming families or agriculture. It is also fair to say that in times of economic growth and lower unemployment, the labour force is sucked out of agriculture , thereby accelerating the introduction of technologies that allow a reduction in demand for labour, as well as structural changes in agriculture. However, in times of economic recession, such as the southern EU Member States are still experiencing today, the workforce is again absorbed into agriculture, which acts as a buffer for unemployment. From an economic point of view, this is a positive phenomenon, but where migration from the countryside and agriculture takes place on a large scale and is durable due to the substitution of labour by capital, this can aggravate demographic decline and hence lead to the disappearance of villages and settlements in rural areas. Hitherto, the sector of smallholdings and semi-subsistence farms has received little attention. However, in recent years, this has begun to change, as evidenced for instance by the conference held in Sibiu, Romania, in 2010, and the three international conferences held in Krakw, Poland, between 2011 and 2013. One of the challenges addressed by your rapporteur is how to define a small agricultural holding at European level. After a thorough analysis, your rapporteur has come to the conclusion that it is not possible to provide a universal definition. While many attempts have been made to provide a more or less accurate definition of a small agricultural holding or semi-subsistence farm, the major differences between Member States or sectors of agricultural production make it impossible to deploy any of these definitions in a European context. Furthermore, the definitions vary depending on the needs for which they were designed; in addition, no uniform criteria exist. We therefore have definitions based on the economic size of the holding - the so-called ESU (European Size Unit), and on the number of persons who work in the holding, which forms the basis of the so-called AWU (Annual Working Units), and for some time a new category has been gaining in popularity - the standard output (SO), which is expressed in euros. According to the FADNs new typology, very small agricultural holdings are those with an SO under EUR 8 000 and small agricultural holdings are those with an SO of between EUR 8 000 and EUR 25 000. The most popular and at the same time most incomplete definition is based only on the area criterion, i.e. the Utilised Agricultural Area in hectares (UAA).It is thus generally assumed that small agricultural holdings are those of less than 2 or 5 ha UAA . If the criterion of 2 ha is adopted, this group includes almost half of all farms in the EU. As much as two thirds of farms in the Union meet the criterion of less than 5 ha. This method is flawed, mainly because of the enormous differences between Member States and the agricultural production areas. Thus, in Romania, for example, over 90 % of farms are smaller than 5 ha, while in Denmark, Sweden, the Benelux countries and the Czech Republic they account for only a tiny
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proportion of the total number of farms. Moreover, a 4 ha holding, for instance, engaged in the intensive production of vegetables and employing several people, cannot be compared to a typical smallholding involved in many different areas of production. Likewise, a family holding of 10 ha, located on poor agricultural land and involved in breeding animals may encounter problems which are more characteristic of agriculture practised on a small area of land. There is also the definition of the so-called semi - subsistence farm, according to which this is a holding that markets less than 50 % of its production and uses the rest for internal consumption. It is assumed that 5.8 million holdings in the EU, i.e. almost half of the total, can be characterised as semi-subsistence farms. Small agricultural holdings are in principle faced with four options: - they can develop by increasing their surface area and increasing production in order to participate fully in the market; - they can pursue their work, while introducing changes by diversifying their sources of income, i.e. through production in additional areas that provide a new source of income, or a part- employment outside the farm ; - the owners can dissolve the farm, transferring the land to development -oriented farms, and either retiring or taking up some other form of employment; - they can continue in their existing form, and are then taken over by the next generation who lack other employment opportunities and other sources of income. Your rapporteur takes the view that the measures in favour of small agricultural holdings under the CAP should take into account the above- mentioned development opportunities; in particular, the second pillar instruments should be applied flexibility and in stages, given that the selected measures will probably prove ineffective . Your rapporteur considers, for example, that a good solution would be to allow all payments to be made under the small agricultural producer system up to 2020 , together with a certain premium - for example for the insurance fee or other purposes, if the owner sells his farm to an agri-industrial or development -oriented farmer. Your rapporteur believes that small agricultural holdings have been unfairly treated under the existing Common Agricultural Policy. He therefore welcomes new forms of support for them and the degree of simplification (including the exemption from the greening requirements), which were adopted as part of the CAP reform, but he nevertheless considers that they are still insufficient. The main obstacles are the character of the first pillar (it is based on the area and historical production values and ignores the employment and income level), and the minimum requirements for eligibility under the second pillar. He believes that small agricultural holdings could take up various types of production and activity like small firms in other sectors of the economy, and are not just a transitional structure, predominantly social in character, that is typical of less developed EU states
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undergoing change. They therefore have to find particular production niches, since a small agricultural holding cannot produce the same products as a large one and generate a decent income. On the other hand, your rapporteur is aware that this can also be a way of life for people who are not fully engaged in agriculture or who produce organic food as a hobby. He is convinced that smallholdings are unable to achieve a satisfactory income without concentrating on special areas of production with great added value. The production of regional products and the direct sale of these products through short supply chains present another great opportunity. Your rapporteur also sees that smallholdings generally must become more active in addressing their weaknesses. At the same time he is aware that only a proportion of smallholdings are able to adopt special areas of production. It is therefore important, in his view, to create new jobs in rural areas in non -agricultural sectors of the economy. Already a significant proportion of owners of smallholdings derives an income from non-agricultural activities or services for agriculture and the non-agricultural sector, using the farms infrastructure. Some owners of smallholdings will certainly take up a job outside agriculture, if presented with the opportunity, and work part-time on the farm. A significant proportion of farm owners, especially in the new Member States, would take up a job outside agriculture and dissolve the farm if the labour market so permitted. Your rapporteur considers that in solving the problems of small holdings, a key role should be played not only by the two pillars of the CAP, but also by the EUs cohesion policy, which should fund the necessary infrastructure for smallholdings in rural areas and, through the European Social Fund, a number of measures in the field of social integration, education and training. Local authorities should also play a greater role. Smallholdings do not have much influence over the market, so certain forms of domestic support for smallholdings should be permitted at Union level, with due respect for the principles of competition policy. What is needed is a state-funded special advisory service. Your rapporteur also recognises the need to ensure appropriate data for analyses so that the right political decisions can be taken. He therefore calls for the FADN to be expanded in simplified form.

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ANNEX I
Table I: Number of small agricultural holdings and semi-subsistence farms in EU- 27, sub-groups of Member States and individual Member States, 2010 (in thousands) Total number of holdings and small agricultural holdings SO SO less Less Less less than than Total than 2 than 5 EUR EUR ha ha 2000 8000 12 015 5 225 1 586 3 639 6 789 150 43 370 39 23 42 20 64 516 299 723 577 140 1 621 83 200 2 13 72 1 507 305 3 859 24 75 990 71 187 5 637 1 728 119 1 609 3 909 16 4 295 29 2 1 2 1 67 14 367 413 2 819 10 32 0 11 8 355 152 2 732 9 20 270 1 4 8 056 2 728 267 2 461 5 328 46 9 325 34 3 1 6 6 129 26 551 459 10 1 177 28 117 0 12 19 823 230 3 459 15 45 503 8 13 5 132 1 167 109 1 058 3 965 21 1 254 22 1 1 5 3 42 1 236 359 18 495 39 97 0 5 0 443 117 2 717 8 16 211 6 16 8 507 2 669 388 2 281 5 838 55 6 340 32 8 6 11 20 116 34 511 496 60 995 64 170 0 8 9 1 007 237 3 632 18 51 538 29 54 SSF Less Total than 2 ha 5 842 845 20 825 4 997 0 0 177 20 2 0 6 0 20 0 119 454 0 645 59 114 0 7 0 511 57 3 590 13 44 4 0 0 4 053 660 10 649 3 393 0 0 163 19 0 0 1 0 10 0 117 367 0 485 9 24 0 6 0 171 44 2 608 7 17 4 0 0 Less than 5 ha 5 186 786 17 769 4 401 0 0 171 20 1 0 3 0 17 0 118 395 0 592 25 82 0 6 0 373 55 3 277 11 37 4 0 0 SO less than EUR 2000 3 906 501 7 494 3 406 0 0 153 16 0 0 3 0 7 0 113 323 0 343 35 65 0 3 0 195 36 2 593 6 15 1 0 0 SO Less than EUR 8000 5 487 758 16 742 4 729 0 0 176 20 2 0 5 0 16 0 117 424 0 568 51 109 0 3 0 447 55 3 438 13 42 2 0 0

Member State

EU-27 EU-15 EU-15 NW* EU-15 S* NMS-12* Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom

*The category of EU -15 NW includes all EU -15 countries, excluding Greece, Italy, Spain and Portugal; EU - 15 S includes Greece , Italy, Spain and Portugal; Category NMS -12 includes all new Member States , which joined the EU in 2004 and in 2007. Source: Semi-subsistence farming: value and directions for development, Policy Department B (Structural and Cohesion Policies) of the European Parliament, April 2013, p. 27.

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ANNEX II
Table 2: Percentage of small agricultural holdings and semi-subsistence farms in EU- 27, sub-groups of the Member States and individual Member States, 2010 (in %) % of SSF in the % of SSF in the total number of Member State agricultural holdings in each Member State total number of agricultural holdings with an area smaller than 2 ha in each Member State EU-27 EU-15 EU-15 NW* EU-15 S* NMS-12* Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom 49 16 1 23 74 0 0 48 51 9 0 30 0 4 0 16 79 0 40 71 57 0 54 0 34 19 93 54 59 0 0 0 72 38 8 40 87 0 0 55 66 0 0 50 0 15 0 32 89 0 59 90 75 0 55 0 48 29 95 78 85 1 0 0 % of SSF in the total number of agricultural holdings with an area smaller than 5 ha in each Member State 64 29 6 31 83 0 0 53 59 33 0 50 0 13 0 21 86 0 50 89 70 0 50 0 45 24 95 73 82 1 0 0 % of SSF in the total number of agricultural holdings with an SO below EUR 2000 in each Member State 76 43 6 47 86 0 0 60 73 0 0 60 0 17 0 48 90 0 69 90 67 0 60 0 44 31 95 75 94 0 0 0 64 28 4 33 81 0 0 52 63 25 0 45 0 14 0 23 85 0 57 80 64 0 38 0 44 23 95 72 82 0 0 0 % of SSF in the total number of farms of an SO less than EUR 8000 in each Member State

*The category of EU -15 NW covers all countries of EU -15 excluding Greece, Italy, Spain and Portugal; EU - 15 S includes Greece , Italy, Spain and Portugal; Category NMS -12 includes all new Member States , which joined the EU in 2004 and in 2007 Source: Semi-subsistence farming: value and directions for development, Policy Department B (Structural and Cohesion Policies) of the

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European Parliament, April 2013, p. 28.

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