Agriculture, in particular the livestock and arable sectors, has a prominent place in the European Union’s common economy. The main producer countries – France, Germany, Spain, Italy – have been struggling for years with a number of obstacles that require a community solution, but real reforms are still to come. Meanwhile, the prospect of Ukraine’s accession leaves more and more open questions, especially for the survival of farmers and farms. In addition to the reduction of agricultural subsidies, there are also quality and other food risks, and the structure and land estate structure of Ukrainian agriculture is also problematic. In the following summary, in addition to the situation of the EU agriculture, we analyse the positive and negative consequences of Ukraine’s possible accession from the sector’s perspective.
In 2023, the EU agricultural sector produced more than €537 billion, of which €273.6 billion came from crops and €214.3 billion from milk, pigs, cattle, poultry and eggs. Agricultural services (€25.4 billion) and inseparable non-agricultural activities (€23.8 billion) accounted for the remainder (9.2%). Agriculture contributed 1.3% of EU GDP in 2023, the same as 15 years earlier. To put this in context, the contribution of agriculture to the EU economy was very similar to the GDP of Greece in 2023, the 16th largest economy among EU countries. The agricultural sector generated €223.9 billion in value added in 2023, which was thus lower than the relative peak of €0.78 in 2017 and all other years thereafter, with the exception of 2022. All this also shows that renewing the sector, changing the regulations and increasing the competitiveness of production cannot wait much longer.
The “big four” countries accounted for the clear majority (57.8%) of the total production value of the EU agricultural sector in 2023, with France being the biggest seller with €95.8 billion, followed by Germany (€76.1 billion), Italy (€73 billion) and Spain (€65.6 billion), and then the Netherlands (€41.5 billion), Poland (€36.8 billion) and Romania (€22.2 billion). Three quarters (76.5%) of the value of EU agricultural output in 2023 came from these seven EU countries.
Overall, production costs fell in 2023. Intermediate consumption in the agricultural sector in the EU as a whole totalled €313.2 billion in 2023, around €9.4 billion less than in 2022. After a rapid increase in the total price of goods and services consumed in the sector in 2022 (+31.2%), a moderate decrease (-4.7%) was observed in 2023. This decline was due to lower prices for fertilisers and soil improvers (-24.6%), energy and lubricants (-8.7%) and animal feeds (-5.2%). However, prices continued to rise for, among others, veterinary costs (+12.0%), maintenance of buildings (+8.7%), seeds and planting stock (+7.8%), plant protection products (+7.7%) and maintenance of materials (+7.5%).
Estimated agricultural output fell slightly in nominal terms in 2023, by -1.5% compared to 2022. This slight decline from the peak output in 2022 ended an upward trend that started in 2010.
Sectors and services related to agriculture and food production provide more than 44 million jobs in the EU – with the agricultural sector alone providing regular employment for 20 million people. Thanks to its diverse climate, fertile soil, the skills of EU farmers and the quality of its products, the EU is a world leader in the production and export of agricultural products. Romania (1.76 million) and Poland (1.46 million) are by far the biggest employers. However, these figures do not give a complete picture, as harvesting is a seasonal activity that employs many people on temporary, part-time contracts. If these specificities are taken into account, Eurostat puts the labour force at 17 million.
Farmers work on 157 million hectares of agricultural land, covering 9.1 million farms. However, this distribution is highly uneven: 52% of agricultural land is held by 4% of farms larger than 100 hectares. By contrast, small farms of less than 5 hectares use only 6% of the total land available, despite accounting for 40% of all farms. This concentration of land reflects the industrialisation of agriculture, where a few companies can afford to adopt advanced technology, machinery and methods for large-scale production and global marketing.
The management of the sector is dominated by men, with the vast majority of farm managers being men (68.4%) and over 55 years old (57.6%). The gender gap is most marked in the Netherlands, where only 5.6% of farmers are women, while Latvia and Lithuania are closest to achieving a 50-50 gender balance. Ageing could have serious consequences for the survival of the sector. In the two largest producer countries, France and Germany, the number of farms could halve by 2040 if the trend does not change. This also means that fewer people will be employed in the sector, production will fall and the EU’s import dependence will increase.
Another difficulty for farmers is that food security has been put at risk by extreme weather conditions. The unpredictability of the situation is leading to more and more farmers stopping farming as rising costs and weather conditions combine to reduce their profits.
In recent years, the Common Agricultural Policy (CAP) has come under fire from farmers mainly because of its inflexibility and asymmetry. The CAP has a budget of €264 billion for the period 2023-2027, which will be mainly allocated to two main strands of action: €189.2 billion for income support, i.e. direct payments to farmers, and €66 billion for rural development, to address the challenges of impoverished areas. The CAP is one of the most talked-about elements of EU policy and is constantly criticised for, among other things, its unbalanced distribution (around 80% of the budget goes to 20% of farmers), its questionable efficiency (farmers’ incomes are 40% lower than average EU wages) and the trade distortions it creates with regard to the World Trade Organisation (WTO). In addition, EU farm subsidies often fail to take account of the production potential of a given area, leading to a decline in the diversity of crops. While support for cereals is relatively broad, traditional horticultural products such as tomatoes, peppers and cucumbers can benefit from a much narrower range of support. The reform of the CAP was already formulated during the Hungarian presidency, and the next budgetary period will prove whether the Hungarian objectives can be achieved.
Looking at the difficulties and problems, and the overall situation, many may rightly believe that Ukraine’s accession to the EU could be a solution to the challenges facing EU agriculture. However, the picture is more nuanced than that, and the following is a brief reflection on the problems already presented with regard to Ukraine’s accession.
Risks and opportunities of Ukraine’s EU accession
Ukraine’s accession to the European Union would open up a market of nearly 40 million people to European companies. The end of the war would not only mark the beginning of reconstruction, but also the beginning of reorganising and putting the country’s economy on a new footing. There is no doubt that many SMEs as well as large companies would benefit from this, which would stimulate the current economic situation in the EU. Agriculture could also help to improve EU competitiveness, as Ukraine has already become the EU’s third largest source of agri-food imports, exporting almost half of its cereals, 80% of its sunflower oil and 25% of its poultry meat. Ukraine’s membership would increase the EU’s arable land by about one third, which would significantly increase the European region’s international weight as a guarantor of global food security. The EU’s share of global wheat exports would rise to 30%, making it the world’s largest grain exporter, overtaking Russia’s 23% share.
After the positives, let’s look at the disadvantages of accession, especially for agriculture. One of the most pressing problems currently facing EU agriculture is ageing. The majority of farms are run by farmers over 55-60 years old, and younger generations have no plans to build a career in the sector. The often 10-12 hour working hours or more, the constant on-call work and the slow return on investment do not offer them prospects that make it worth continuing to run farms. While there are constant innovative solutions to this issue in most large farming countries, they require a level of investment that small, family farms cannot afford. If Ukraine joins the EU, the position of family farms will be permanently weakened, as they will not be able to compete with such a large number of competitors. The ageing of the population will not be solved by extended integration either, as this social problem is also pronounced in Ukraine, and has even been exacerbated by the war, with young people emigrating.
Another open question is what impact the inflow of Ukrainian cereals would have on the markets of the major producing countries. Since the start of the war, Ukraine has been able to export cereals and nuts, vegetable fats and oils to the EU on easier terms, and this has started to reduce the purchases of the goods produced here since 2022. The quality and health risks of Ukrainian cereals are often raised, given that the Commission has not asked Ukraine to comply with the quality standards that member states must meet in production. In recent years, there have been several farmers’ demonstrations, mainly in the countries of Central and Eastern Europe, but also in Western European countries, because of the cheap grain.
The graph shows that Ukraine was able to export less cereals and other agricultural products before the war than after 2022. While the figures are much lower compared to the two largest agricultural producer countries, both the French and German figures have shown a sharp decline in recent years. In addition to the factors already mentioned, the fall in production is also due to the inflow of cheap Ukrainian imports on preferential terms from 2022. The Ukrainian figures for 2023 suggest that, either with the continuation of the war or its conclusion (which could also lead to an acceleration of the accession negotiations), Ukrainian grain exports to Europe could gradually increase under current conditions.
It is also worth briefly touching on the issue of agrarian structure and farm size. The agricultural structure and the size of agricultural holdings in Ukraine do not fit into the EU model as it stands. The EU model aims to strengthen small and medium-sized farms, whereas Ukraine is characterised by export-oriented large farms. The average size of Ukrainian farms is over 500 hectares, compared to 30 hectares in the EU. Nearly a third of Ukrainian land is used by a few agribusiness giants, each holding hundreds of thousands of hectares. Some of the land is still owned by the Ukrainian state but is awaiting sale, while the remaining land is shared by no less than 8 million small Ukrainian farmers. With a few exceptions, the giant companies operating in Ukraine are owned by Western European and American companies, registered as Ukrainian companies with Ukrainian managers. From 1 January 2024, the possibility for Ukrainian companies to buy land has been opened up. The current maximum size of ownership is 10,000 hectares, but it is highly doubtful whether this will be a real limit in practice, as this size can be exceeded many times over by setting up subsidiaries or groups of companies.
Finally, let us briefly consider the impact the accession of Ukraine would have on the current agricultural support system. Forecasts based on data for the budget period up to 2027 agree that the accession of Ukraine would fundamentally change the distribution of agricultural support. After accession, the country would have one fifth of the EU’s agricultural land – making Ukraine the biggest beneficiary of the EU’s Common Agricultural Policy, as the current system allocates CAP funds on the basis of the amount of agricultural land cultivated. According to Brookings’ calculations, only Portugal and Greece would receive more money from EU funds than they pay in, while many central European countries would become net contributors. With Ukraine’s accession, Spain’s share of EU funds would fall from 9.6% to 0%, Poland’s from 30.2% to 12.6%, Hungary’s from 7.6% to 3% and Romania’s from 18.4% to 7.2%. Meanwhile, Ukraine’s share of EU funds would reach 41.7%. However, the calculation is based on the current budget cycle and if Poland and Hungary continue to grow at the same rate as in previous years, they will also become net contributors by the end of the decade. This therefore underlines the need for Brussels to restructure not only the CAP but all other aid funds before Ukraine’s accession to ensure that all member states have fair access to resources.
Overall, while Ukraine’s accession could bring positive elements for the EU, new regulations would be needed in a number of areas. On the one hand, it would already be appropriate to apply the same agricultural rules to Ukraine as are applied to member states’ farms. On the other hand, the distribution of resources and aid would have to be rethought in order to maintain the principles of the previous system. Finally, in order for the Ukrainian economy to be able to fulfil the conditions of a functioning market economy and not to need international financial support, peace should be established in the country. The fulfilment of this last condition can determine the implementation of all the others.
