Financial relevance of organic farming payments for Western and Eastern European organic farms

Summary

Organic farming in the European Union has been supported widely since 1994. Against the background of discussions concerning the design and level of organic farming support, and the relevance of organic payments for the economic success of organic farms, the question emerges as to the impact of support payments on the sustainable development of organic farming in Europe. Different databases and methodological approaches have been chosen to demonstrate the role of organic farming payments for the viability of organic farms for selected Western and Eastern European study countries. Economic analyses are based on national farm accountancy data (FADN) in the Western European countries and on ‘typical farms’ in the Eastern European group. As a supplement to the modelling analyses, a detailed survey of 50 organic farms was carried out in each of the study countries. Organic farming payments were assessed to be ‘important’ or ‘very important’ to the economic situation on farms by the majority of the farmers surveyed. The outcome of the economic analyses shows that organic farming payments contribute on average 4-6% of gross output in Western European countries and 4-19% in the Eastern European countries studied. The results put the level of specific support for organic farming into perspective, as other support payments and market returns contribute larger shares of total farm revenue in all the countries analysed. Organic farming payments account for 10-30% of family farm income plus wages in Western European study countries and - after EU accession - up to three-quarters in some of the Eastern European countries, thus highlighting the considerable vulnerability of organic farms to changes in organic farming policy. As a general trend in both the West and the East, it can be observed that the policy dependency of farms has increased over recent years. Changes in organic area support, which are actually under discussion in some countries, must be carried out with a sense of proportion, since support payments will continue to play an important role in the profitability of organic farms. Nevertheless, in order to reduce dependency on area payments, organic farming support should follow an integrated approach, using a mix of support measures including, e.g., the improvement of processing and marketing facilities, support for farm cooperation and activities designed to enhance demand.