European farmers' incomes fall by 22%

While wages have risen sharply in almost all sectors, the average income of European farmers has fallen. Between 2022 and 2023, the fall will be between -12% and -22%. Nor have farmers benefited from food inflation, unlike the retail and food industry sectors.

Our experts have calculated that since the fourth quarter of 2021, both producer prices and retail prices for food products have risen much more sharply than prices for agricultural products. Johan Geeroms, our Director of Risk Underwriting Benelux, highlights the weak pricing power in the agricultural sector. "Farmers have insufficient bargaining power. At the same time, they are faced with increasing regulation and rising costs for energy, fertilisers, transport, biodiversity, water quality, climate and farm workers".

Johan Geeroms explains why farmers are increasingly finding themselves in difficulty: "The sector has become very capital-intensive. Farmers are looking to achieve economies of scale because of low and volatile prices. This requires considerable investment. Because, among other things, farmland has become very expensive due to speculative purchases, and it is completely unprotected, unlike natural destinations. For a farmer, this is a radically important issue, as it affects his whole life and that of his potential successors or subsequent generations. At the same time, farmers have to contend with politicians who come and go from election to election. The volatility of legislation, legal uncertainty and the limited duration of authorisations are putting pressure on farmers' income models and their future. This makes the payback period for their investments uncertain. This situation is extremely stressful and undermines their entrepreneurial spirit.

According to Johan Geeroms, the European agricultural sector has to reconcile the impossible: "On the one hand, greening and, on the other, opening up to a globalised world that is not subject to the same strict environmental rules everywhere". The growing administrative burden, with the risk of losing subsidies, is also a disastrous development, explains Johan Geeroms.

The consequences are impressive. Agricultural productivity (output per farmer) has fallen rapidly in many European countries over the last five years. Particularly in large countries such as France and Spain.

According to Johan Geeroms, Europe will have to act. "We need to streamline and simplify the rules. To do this, Europe must not act alone, but must work closely with stakeholders and farming organisations to identify possible compromises. The EU must also be aware that it is less demanding of imported products than of those produced by its own farmers. It will also be necessary to monitor the retail sector and the food industry to ensure that farmers are fairly remunerated".

Johan Geeroms notes that Europe is increasingly prepared to act. He points out, for example, that yesterday the European Commission withdrew its proposal to halve the use of chemical plant protection products by 2030.

In Belgium, Prime Minister Alexandre De Croo has already called for greater consultation within the chain to better absorb price fluctuations. He is considering a solidarity mechanism in the form of insurance, with contributions from the various players in the market chain.