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09/12/2016

Commission ready to give more aid to young farmers

Agriculture & Food

Commission ready to give more aid to young farmers

Despite EU initiatives, the future of farming still seems uncertain.

[James Emery/Flickr]

SPECIAL REPORT / Over 160,000 young European farmers will start their own businesses thanks to aid provided by the 2014-2020 rural development programmes. EurActiv Italy reports.

These are the initial estimates of the European Commission, based not only on programmes that have already been adopted, but also those awaiting approval. If confirmed, this would mean an increase of 16,000 enterprises in comparison with the 144,000 started during the previous period of 2007-2013.

Thanks to the CAP reform, the direct payments that each state has decided to allocate to young farmers will be added to the so-called second pillar of the CAP.

Of the approximately €44 billion made available by Brussels through direct payments in 2015, the CAP reform obliges member states to assign “up to 2%” of the total to youth schemes, for a total investment of roughly €1 billion.

However, not everyone has decided to allocate the full amount: Italy, Ireland and Sweden have taken advantage of the full 2%, while others, such as Germany, Hungary and the Czech Republic have only made available 1% or less. These countries are, however, obligated to increase the percentage if the number of requests outstrips the funds that have been made available.

The fight against an ageing sector

The CAP reform 2014-2020 reinforced public support for young farmers. This had become necessary because the European agricultural industry is ageing quickly, and therefore has become less innovative.

The difficulties associated with reinvigorating an ageing sector are a shared problem among developed European economies, the USA and Australia. The last agricultural census, published by USDA in 2012, found that the average age of farmers is increasing, continuing a trend that began 30 years ago. In the meantime, the Australian Bureau of Statistics indicated that between 1981 and 2011 the percentage of people over 55 in the sector has grown from 26% to 47%. Conversely, the number of individuals under 35 shrunk from 28% to 13%.

In the EU, the problem is also particularly evident. According to Eurostat, only 7.5% of European farmers are under 35, nearly a third (29.6%) are over 65, practically retired, and the majority (53.2%) are over 55. The demographic balance is even more tilted in other member states, like Portugal, where the under 35 only make up 2.6% and Poland, where the figure is much larger, at 14.7%.

What the reform means

The CAP reform approved in 2014 provides an increase in resources to promote the industry among younger generations and, in a break from the past, also provides the possibility to support the initiatives of young farmers with funds from the so-called first pillar, through direct payments. The negotiations on the issue were long and complex, but the reform has provided young farmers with the option of receiving a supplementary 25% on their direct payments for a period of five years. As part of the rural development programmes, states and regions can also grant special aid for start-ups and enterprises launched by the younger generation. 

“This is an important step by the EU, because the will of young people to return to farming is strong,” said Matteo Bartolini, an Umbrian farmer born in 1976.

Bartolini, who is also the outgoing president of CEJA, the European Council of Young Farmers that represents two million people across Europe, points out two obstacles to resolving the generational imbalance. “The first is access to credit and the second is the land.”

To improve the access to credit, the EU has promoted programmes run by the European Investment Bank (EIB), for which local creditors can act as intermediaries to provide loans to farmers at reasonable cost.

However, Bartolini argues that “it’s not enough to offer credit to banks to facilitate loans for young farmers.” He added that, “what needs to be addressed is the question of guaranteeing access to credit by the banking system. Young people making their way in the farming profession quite often do not have any collateral, especially if they do not come from farming stock.”

This is an issue which is directly related to his second concern, the land. “In Europe, land is quite often an inaccessible commodity. It’s true that one does not need to own land to farm it, but it is also true that if one is renting land, it cannot be used as collateral to guarantee a loan,” explained Bartolini.

According to one of two reports produced by the European Parliament relating to family agriculture, agricultural land trading in the EU is weak. Only 2 to 3% of Utilised Agricultural Area (UAA) is traded every year and prices are frequently much higher than eventual returns. These limitations are also seen in the rental market.

The land conundrum

Solutions at a European level regarding land are difficult to come by though. In 2014, the Italian presidency tried to find one, by proposing a measure that would allow member states to grant national aid to cover the interest of young farmers’ loans when purchasing land.

The proposal, which also contained references to the EIB scheme and an Erasmus programme for young farmers, passed with a majority. The result has turned out to be a mostly empty victory, as the measures have not transferred into reality.

Each state has its own specific programmes for establishing a balance between supply and demand of land for young farmers, as highlighted by another report by the European Parliament. France has SAFER, the UK has the Fresh Start Initiative while Germany runs the Hofgründer programme. In Italy, ISMEA offers help and there is also the “Terre Vive” plan that allows for the sale or lease of 5,500 hectares of public agricultural land, with priority given to the under 40’s.

But all these programmes merely facilitate land transactions, without actually addressing the problem of financial resources. They rarely act as an incentive for young people.

Tommaso Romagno, who set up the Land2lend start-up in 2014, wanted to “create the necessary trust needed to convince individuals to loan or rent out land that isn’t being used”.

However, during the transition from beta to full launch, the Land2lenders had to adjust their focus. Romagno noted that “acting as an intermediary in this field is too complex, but we will provide mapping of all available agricultural land. Land2lend will instead focus on what we like to call crowdfarming, online fundraising efforts for community-based projects relating to on-demand, small-scale production or opening up access into the sector for newcomers”.

The risk of being a farmer

As if access to credit and land were not enough, there is also a general lack of incentive for young people to move into agriculture.

The farming profession is becoming tougher by the day, requiring theoretical and practical knowledge in many areas. Nowadays, the industry has changed beyond recognition. But in most cases, the sector cannot match the level of income offered in other professions. In certain parts of Europe, it is still the only economic activity available in areas that lack infrastructure and which do not offer much else to its younger generation.

Bartolini believes that “beyond the barriers that have always been there – access to credit and land – today there is a third obstacle, the permanence of the market”.

This is in reference to the volatility of prices, a fairly new, global element in the agricultural market. Even agriculture, which at one time was considered to be fairly resistant to price fluctuations and changes in demand, has experienced volatility that has contributed to increased corporate risk. The weather is no longer the only risk that farmers have to manage. Now, they must contend with the market, heightened health concerns, global warming and geopolitics, as evidenced by the Russian embargo on European imports.

In such a complex and hostile landscape, one should not wonder why the younger generation of farmers is looking for new pastures.

Further Reading