One Decade of EU Membership: Lessons Learned and the Road Ahead

for the Agro-Food Sector in Central and Eastern European Economies

AKI 60th Anniversary Conference

Budapest, 7 October 2014

The future of the agro-food

sector in CEE economies

Krijn J. Poppe - LEI Wageningen UR

My introduction

Economist and Research Manager at

LEI Wageningen UR

My links with Hungary and AKI:

• First visit in 1992: Dutch project on

private farms in Hungary

• 2000/01 - Helping AKI to create the

FADN and other information systems

• Currently collaborating in the work of

the SCAR strategic working group AKIS

and in the EU project FLINT on

sustainability data in the FADN

Congratulations !

Content

• Characteristics of agri-food in CEE

• New technologies: ICT

• Can value be added, e.g. by meat

production based on cereals

• What does this mean for the future CAP ?

• And for research institutes like AKI ?

Characteristics agro-food

in CEE• Very large, efficient farms (buying even

bigger machines), and many small farmers

and ‘farmers’ (struggling to be included).

– Due to history:

• Yes/no land reform before 1940

• Choices made in the transition after 1989

• Food industry often not competitive for

western-European retailers

• CEE: a big commodity producer with

subsistence farming around.

Concentration in production in some European

countries. Source: FADN

0

20

40

60

80

100

120

0 20 40 60 80 100 120

percen

tag

e s

tan

dard

ou

tpu

t

percentage farms

France

Germany

UK

Spain

Italy

Poland

Sweden

0

10

20

30

40

50

60

70

80

90

0 5 10 15 20 25

percen

tag

e s

tan

dard

ou

tpu

t

percentage farms

France

Poland

Romania

Strong ICT Trends

• Satellite and (remote) sensing technology, geo-informatics

• Sensor technology, robotica in tractors and machines;

computer vision;

• Bio-sensors and bio-informatics

• Internet of Things: ‘everything’ gets an IP-address

• Cloud computing: service delivery via (broadband)

infrastructures

• Smart phones and tablets with data ‘in the cloud’

• Social media (Facebook, Twitter, Wiki, etc.)

• Web of data, Linked Open Data, Big Data

• E-knowledge, E-science

App store

Smart Farming in the Cloud

Services

sensorsactuators

data sources(‘Internet of Things’)

LocalFMS

Spraying Advisory Services

MeteorologicalService

State and PolicyInformation Service

FMIS

E-agriculturist Service for spraying potatoes

FI-Ware enabled Cloud Platform

Machine Breakdown Service

User’s devices

Other sources

CloudFMS

Data exchange by ABCDEF’s

• Large organisations mostly have gone digital, with ERP and other systems

• But between organisations (and especially with SME) data transfer and information exchange is often on paper

• While more data exchange to monitor business processes in the chain would be welcome

There is a need for ABCDEF’s:

Agri-Business Collaboration and Data Exchange Facility

FIspace is such a collaboration facility, built in the FI-PPP

How more data contributes to current business models

Transport

loyaltySmall Cost priceGRIN

Transport Transport

Input industriesFarmer Food processor Retail / consumerSoftware

Provider

Logisticssolution providers

Service cope with retail

Sustainability HealthFood SafetyFeed the growing world

Precision Farming: better control

Better management decision

SophisticatedTechnology,More advise

Segment products and

input suppliers;Benchmark with

competitors

Consumer decision support (pre- and after

sales)

Better service concepts, e.g. in store replenishment

Development pig industry EU-15 versus EU-12N [2001= 100 (production); 2005 =100 (breeding)]

50%

60%

70%

80%

90%

100%

110%

120%

130%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f

Production EU-15 Production EU-12N Production EU-27

Breeding herd EU-15 Breeding herd EU-12N Breeding herd EU-27

Source: GIRA

Relocating pig production?

LabourFeed Meat

?

Decreasing pig

production in CEE

• Bad structure of primary pig industry: a lot of

backyard production especially in Romania;

• Lack of good infrastructure: genetics, feed,

veterinarians, equipment, traders, transport,

slaughterhouses, processing industry;

• Continuous increasing demand regarding

quality, hygiene standards, labelling,

endemic diseases and contagious diseases

from government and retail;

However...

• Good external circumstances for pig fatting

in Central Eastern Europe;

• Pig meat is a highly competing and

saturated market in EU;

• There are barriers to expand in Central

Eastern Europe (finance, knowledge, chain

cooperation).

• With Western management and equipment

competing cost prices can be realised.

Average share direct farm payments in Net Value Added.

Farms with direct farm payments, 2009-2011. Source:

FADN

Expectations CAP after 2020

• Further conversion of farm payments on a hectare base

over Europe

• More greening

• Part of the money goes to land owners

• More and more questions will be raised on the need to pay

big farms big amounts of money.

ALTERNATIVE:

• Fixed budget for income support and restructuring– Focus on small farms

• Fixed budget for risk and innovation management– Focus on large farms

Restructuring fund needed to support income towards

level of national minimum income.

-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

0,0 20,0 40,0 60,0 80,0 100,0

gezin

sin

ko

men

percentage bedrijven

gezinsinkomen

minimum inkomen

Y-axis gives family income from agriculture. X-axis gives percentage of farms. Bleu line is family income. Black line is minimum income. Red area gives necessary budget

Distribution of budget over restructuring and

risk and innovation managementBudget (*mio €)

Pillar II Pillar I % Pillar I

Total Total Restructuring Risk fund Restructuring Risk fund

Czech Republic 306 873 42 831 5 95

Denmark 90 880 189 692 21 79

Germany 1.169 5.018 1.284 3.735 26 74

Greece 598 1.947 1.064 883 55 45

Spain 1.182 4.893 1.096 3.798 22 78

France 1.428 7.437 1.459 5.978 20 80

Hungary 491 1.269 221 1.048 17 83

Ireland 312 1.211 774 438 64 36

Italy 1.500 3.704 2.193 1.511 59 41

Netherlands 86 732 441 291 60 40

Austria 567 692 630 62 91 9

Poland 1.556 3.062 1.397 1.664 46 54

Portugal 582 599 241 359 40 60

UK 366 3.592 285 3.307 8 92

Remaining countries 3.056 6.539 2.545 3.994 39 61

EU27 13.289 42.450 13.859 28.591 33 67

Distribution Pillar I budget over

restructuring and risk.

Per ha. Average EU27

EU27 USPillar I (€/ha) 228Restructuring/Income goal (€/ha) 74Risk premium (€/ha) 153 50Production value (€/ha) *) 2.500 653Risk premium (% production value) 6,1 7,6

*) Average production value per ha UAA in 2020 in EU27, CAPRI baseline; Average production value corn in the US in 2011

Alternative CAP

• Within Pillar I it is possible to allocate budget

specific for risk management on large farms and

social security / restructuring on small farms

• Taking into account normal standard of living

(assuring minimum income) in agriculture results

in a budget distribution of 2/3 risk management

and 1/3 social security

• Further research and underpinning is necessary

The future of AKI

• Is in doing this type of policy research

• As agri-food becomes more and more a

business, sustainability is a licence to

produce and sell, not a source of additional

income.

• FADN will help to check sustainability (we’re

happy to collaborate in the FLINT project)

• Public-private partnerships will become

more common with the agri-food industry

The future of AKI

• Is more and more in European consortia:

ERAnets and JPI pool national funds

• New issues will arise in new policy areas

like:

– the biobased economy

– rural poverty

– the relation between food and health.

– food and geo-politics

Thanks for

your

attention

krijn.poppe@wur.nlwww.wageningenur.nl/lei

Slides will be available on

Slideshare