Agricultural Economics Research Institute (LEI-DLO)
P.O.Box 29703, 2502 LS The Hague, The Netherlands
Phone: 31.70.3308353, Fax: 31.70.3615624, E-mail: firstname.lastname@example.org
The positive role of High Nature Value (HNV) livestock production
systems in maintaining valued habitats and landscapes is achieving wider
acceptance. The main threats to these HNV livestock production systems
are an increase in productivity in order to improve their farm incomes
and abandonment of agricultural land. The viability of some livestock production
systems in HNV areas in Europe is investigated to see whether additional
income is required to stay (or become) economically viable. Income can
be improved by support provided by the Common Agricultural Policy or by
producing superior quality products. The impact of future developments,
like expansion of the European Union (EU) with the Visegrad countries and
further trade liberalisation, on HNV livestock production systems is investigated.
Agriculture plays an important role in the maintenance of biological
and landscape diversity (Baldock & Beaufoy, 1993). For example, the
'montados' and 'dehesas' systems in Portugal and Spain and their grazing
systems with black pigs have high environmental importance. Semi-natural
habitats (including semi-natural grassland) also are very important to
biodiversity. The majority of semi-natural grasslands, however, have disappeared
in the lowlands of Northwestern Europe due to the intensification of agriculture
(Brouwer & Van Berkum, 1996). Abandonment of agricultural land could
increase in areas with marginal agriculture with subsequent deteriorating
effects on landscape and biodiversity (Baldock et al. 1996). Marginalization
of agricultural land is presently observed in parts of Europe (e.g. Spain,
France, Italy and Greece) with their negative effects on ecosystems. Mitigating
marginalization processes requires policy measures towards rural development
in Europe. This applies especially in areas with high natural values (Baldock
& Beaufoy, 1993). Intensification of agriculture and abandonment of
agricultural land are main threats to areas with high natural values. Processes
of intensification of the most productive land are coupled with the extensification
(or abandonment of farming) of poorer lands. This development, which reflects
the transition from subsistence agriculture to a market-oriented one, has
been assisted by changes in policy measures. Intensive production practices
have been largely assisted by CAP price subsidies, which concentrate support
on the more productive farms, rather than to those, which contribute more
to environmental or social goals. The same support measures induce extensification
i.e. abandonment and marginalisation. Processes of intensification and
extensification have been further strengthened by the EU's commitment to
a free internal market in agricultural production. Removing barriers to
trade has stimulated intensification in areas with comparative advantages
and extensification in less competitive regions (Caraveli, 1998).
The so-called High Nature Value (HNV) livestock production systems and
their traditional management practices are important in their maintenance
of biodiversity and landscape. The economic viability of these HNV livestock
production systems is of crucial importance. In this paper the economic
viability of some livestock production systems in HNV areas in Europe will
be investigated to see whether additional income is required to stay (or
become) economically viable. In section 2 some HNV livestock production
systems in a number of study areas will be selected for further investigation.
The economic viability of these livestock systems in HNV areas will be
investigated in section 3. Possibilities to improve farm income in order
to maintain HNV livestock production systems are discussed in section 4.
Environmental requirements, which can be attached to income support, are
discussed in section 5. The impact of future developments, like the impact
of the Agenda 2000 proposals and expansion of the European Union (EU) with
the Visegrad countries and further trade liberalisation, on HNV livestock
production systems is described in section 6. Finally, some concluding
remarks will be drawn in section 7.
2. HNV livestock production systems in the study areas
Some study areas are selected for further investigation. The selection
is based on the literature, with the aim of covering a range of geographical
locations and most characteristic landscapes with HNV livestock production
systems and practices in both southern and northern Europe. The location
of the selected study areas with a high natural value is shown in Figure
Figure 1. Location of the study areas
The selection of the livestock systems in the study areas considered
to be responsible for the maintenance of the high natural value of the
areas is also based on the literature (Beaufoy et al., 1994) and
on the availability of data. Attention is paid to the share of the farming
types in the total area of land, since it is important to continue traditional
forms of management practices on agricultural land in HNV areas. The farming
types selected in the study areas for further investigation are i) specialist
dairying farms in the Black Forest, Asturias, Jura, Valle d'Aosta and Dutch
Peatlands, ii) sheep, goats and other grazing livestock farms in the Pindos
Mountains, Asturias, Dehesas, Lozère and Scottish Highlands and
iii) specialist cattle-rearing and fattening farms in Limousin and Lozère.
These farming types are all specialized farming types. Mixed farming types
are less important in the study areas selected. Specialist farms cover
the largest part of the UAA in the study areas. The share of specialist
farms in the total UAA and the total number of holdings has increased or
remained constant over time in all study areas selected. The extensive
nature of the HNV livestock production systems selected in this research
is reflected in the relatively low share of these systems in the final
production of EU 12 in relation to the share of area they cover (Hellegers
& Godeschalk, 1998).
3. The economic viability of the livestock production systems in
As explained in section 1, intensification of agriculture and abandonment
of agricultural land are main threats to livestock systems in HNV areas.
Farms may increase their productivity in order to improve their income
and stay or become viable. In case income is too low agricultural land
may be abandoned. So, a sound economic base is important for the maintenance
of livestock systems in HNV areas. The economic viability of the livestock
systems in HNV areas in Europe is investigated, to see whether additional
income is required to stay (or become) economically viable and maintain
traditional forms of management practices. The consideration to continue
farming is, however, not only based on the economic viability of the farm.
Social and regional circumstances and demographic and political developments
are important as well. Social aspects like farming as a way of living and
the value of living in a rural area can also play a role. Farmers practising
low intensity agriculture are often under-employed and therefore see intensification
as a means of seeking full employment and, of course, a higher income.
The availability of off-farm employment can allow low intensity farming
to continue on a part-time basis rather than as the sole source of income
and activity. Whenever solutions are proposed to sustain the economic viability,
this has to be done under the restriction of viability of the habitat.
In general farms are considered viable if full factor remuneration is
assured. However, in practice farms continue farming even if this is not
the case. To define longer-term economic viability in this research, the
development of the own financial resources has been used as a yardstick.
Farms are considered viable when the development of the own financial resources
of the farm is positive or if the own financial resource losses are less
than the depreciation relating to replacement-cost value. Farms are considered
to be at risk when the own financial recourse losses exceed the depreciation
relating to the replacement-cost value (Zeddies, 1991). On the basis of
this concept farms in the study areas are divided into two groups: the
viable farms and farms at risk. The individual farms of the Farm Accountancy
Data Network (FADN) of the European Commission (CEC, 1989) has been used
as a data source for this analyses. In the study areas selected over 70%
of all farms is classified as viable. Farm characteristics of both groups
are compared, to find out why farms are at risk or viable. Differences
in the size of the farm (UAA) between both categories are modest. Viable
farms did not turn out to be larger than the farms at risk. The intensity
of farming seems to be a more determining factor for the viability of farms.
The viable farms are often the relatively more intensive farms (Hellegers
& Godeschalk, 1998).
Farm income can be improved by support provided by the Common Agricultural
Policy (CAP) or by producing superior quality products. To produce superior
quality products, small-scale local and on-farm processing is crucial,
coupled with quality labelling schemes that emphasis the region of origin,
or the production system (e.g. organic farming). Dairy farms in the Jura
produce for example specialist local cheeses. The accompanying measures
of the Common Agricultural Policy can provide support to the production
of this kind of products. Mainly the agri-environmental measure aid scheme
(Regulation 2078/92) encourages farmers to introduce or continue on agricultural
production methods compatible with the requirements of protection of the
environment and the maintenance of the countryside and provides income
support to those farmers. The measure must compensate farmers for any income
losses caused by reductions in output and/or increases in costs for the
part they play in improving the environment. It requires Member States
to draw up programmes under which farmers are paid to farm in an environmentally
friendly way. The agri-environmental programmes include for example aid
to introduce or maintain organic agriculture in some Member States like
Austria, Ireland and the Netherlands. These kinds of programmes seem to
be very suitable to support the environmentally friendly production of
superior local quality products.
The agri-environmental schemes available in the study areas are rather
diverse (de Putter, 1995). With many schemes only coming into operation
in 1996 it is too early to estimate the area of land affected or the extent
to which schemes under the Regulation assist the viability of farms in
HNV areas or promote environmentally sensitive practices. Some assessments
with different basis and levels of payments (derived from existing programmes)
show that agri-environmental payments could potentially be a big source
of support in most study areas, although these payments are mainly compensations.
These payments seem to be very suitable to support HNV livestock production
systems (Hellegers & Godeschalk, 1998).
Farm income can also be improved by other CAP measures. Some of the
CAP measures affecting HNV livestock production systems will be described
below. The CAP is a system of agricultural policy measures, including market
and price support measures, direct payments, intervention (purchasing surpluses),
export subsidies, production control (quotas, set-aside) and accompanying
measures. In addition, LFA payments and horizontal structural measures
can also be reckoned to be part of the CAP (Van Dijk, 1996). While many
CAP measures have a negative effect on HNV livestock production systems,
two kinds of measures are directed towards handicapped and environmentally
sensitive areas; the LFAs and agri-environmental programmes (like described
above). The compensatory allowances farms are eligible for on the basis
of some measures is assessed, to provide insight into the support the livestock
systems in the study areas selected are eligible for.
The amount of direct subsidies farms received before the 1992 CAP reform
is available from FADN. There are large differences in the share of direct
subsidies in the Family Farm Income (FFI) among study areas. In some study
areas the FFI only remains positive because of the direct subsidies received.
So, in these study areas direct subsidies are essential for HNV livestock
production systems. Ewe premiums make a considerable contribution to the
FFI, mainly at sheep, goats and other grazing livestock farms (Hellegers
& Godeschalk, 1998). LFA payments have also significantly contributed
to the survival of low-intensity systems in many areas, as on many farms
such payments contain more than half of a farm's total income and are crucial
to the survival of a big number of holdings (Caraveli, 1998). The share
of direct subsidies in the FFI is higher at the category farms at risk
compared to the category viable farms. Whereas, the total amount of direct
CAP agricultural subsidies is higher at the category viable farms compared
to the category farms at risk. Most viable farms also receive a higher
level of indirect government support. Viable farms have a higher production
value than the farms considered being at risk (Hellegers & Godeschalk,
Market and price policy changes of the 1992 CAP reform do not assist
the viability of the HNV livestock production systems in the study areas
selected or only to a limited extend, in terms of support provided. At
specialized dairy farms the total beef premium payments are not sufficient
to compensate the decrease in the production value of beef. In total market
and price policy changes of the 1992 CAP reform have a negative impact
at all specialized dairying farms selected in the study areas (Hellegers
& Godeschalk, 1998).
5. Attach environmental requirements to income support
Most direct subsidies received at HNV livestock production systems are
not subject to environmental requirements. For example there are no requirements
attached to the ewe premiums, whereas these premiums are considerable mainly
at sheep, goats and other grazing livestock farms. Beef and ewe premiums,
may have encouraged overstocking and local overgrazing (Baldock & Beaufoy,
Environmental conditions, based on regional circumstances can be attached
to direct subsidies in order to receive premium. It is important to take
care of the way environmental aspects are incorporated in policies; they
can provide wrong incentives. For example the livestock density at the
farm might increase in case the livestock density threshold required for
premium exceeds the actual livestock density at the farm.
Any reform of the LFAs payments systems will not be effective unless
environmental conditions are imposed (Caraveli, 1998). For example, the
substitution of the present system of headage payments by payments per
hectare should be followed by appropriate environmental conditions. LFA
payments should be more focused on those parts of LFAs, where most high
nature value conservation is found.
A possibility to integrate ecological viability is to take account of
the 'carrying capacity' of the area in the development of policies. Farmers
can be encouraged to maintain appropriate grazing pressures by means of
premiums attached to some management requirements. For example minimum
and maximum livestock density limits, based on the 'carrying capacity'
of the area can be set, which need to be met to receive payments. This
kind of tailor made requirements have to be defined on a very local level,
based on specific characteristics. The 'carrying capacity' can not be derived
so straightforward. A 'carrying capacity' derived from the roughage production
per hectare seems to be inappropriate, since the 'carrying capacity' of
the area will increase in case mineral fertilizer is used (whereas the
natural value will decrease). It is recommended to determine the 'carrying
capacity' of the area on the basis of indicators like climate conditions,
length of the growing season and livestock occupation during the year or
in the case of agreed low-input management on drymatter production per
soil type on a regional and local basis.
Where production quotas are tradable, it is likely that quota will be
transferred to areas with the most advantageous production conditions.
It is possible to set quotas at a regional level. This does occur in some
Member States like in France; a proportion of the milk quota is reserved
for the LFAs. Environmental elements should be incorporated into quota
regimes. For example for milk quota redistribution, a ceiling per hectare
could be used for quota allocation (Baldock & Beaufoy, 1993).
6. Future developments and HNV livestock production systems
The impact of future developments on HNV livestock production systems
is described in this section. First of all the possible impact of the Agenda
2000 proposals is described. Furthermore, the impact of expansion of the
European Union (EU) with the Visegrad countries and the impact of further
trade liberalisation, on HNV livestock production systems is discussed
(see Hellegers & Godeschalk, 1998).
It is likely that HNV livestock production systems will benefit from
the proposed adjustments in the CAP, described in Agenda 2000. These systems
are often the more extensive systems, which will be eligible for headage
premiums since they fulfil the livestock density requirements. Losses due
to the termination of the maize for silage premium will be modest, since
the area under this crop is limited. Besides it is likely that HNV livestock
production systems will benefit from the increase in the budget for agri-environmental
measures. Finally, Agenda 2000 also proposes to transform the support scheme
of LFA into an instrument to maintain and promote low-input farming.
The situation in the Visegrad countries is changing rapidly. Traditional
relatively extensive agricultural systems in the Visegrad countries still
occur in part of these countries, they have in general high natural values.
Currently, the support for HNV livestock production systems is limited
in the Visegrad countries; there exists some support for LFAs and organic
farming. However, these countries are gaining valuable experience in developing
initiatives that aim to maintain the natural value of agricultural land.
Working groups are established which develop agri-environmental programmes.
The future funding of agri-environmental programmes is still under discussion.
The Visegrad countries face budgetary constraints and there is no guarantee
yet that the EU will provide financial assistance for agri-environmental
schemes in the Visegrad countries. The share of real HNV areas in the Visegrad
countries does probably not exceed the share in the EU significantly. This
could imply only modest budget consequences in case the EU is funding agri-environmental
programmes in these countries.
On the basis of the relatively high trade barriers which presently surround
the EU and the large production potential in the Visegrad countries, it
could be expected that trade liberalisation between the EU and Visegrad
countries may have a considerable impact on agriculture. However, it is
not likely that removal of the trade barriers between the EU and the Visegrad
countries will increase the production in the Visegrad countries drastically
at once. Production in the Visegrad countries will recover gradually from
the transition. Currently, these countries are not able to produce large
quantities of homogeneous quality. The time path is an important aspect
in this respect. The impact on the three farming types mainly responsible
for the maintenance of HNV areas in the EU (namely: specialized dairy farms,
specialized cattle-rearing and fattening farms and sheep, goats and other
grazing livestock farms) will be limited. Whereas, the impact of removal
of trade barriers between the EU and Visegrad countries on production in
the Visegrad countries will have consequences for the further intensification
of agricultural practices. HNV areas may be threatened by a loss of nature
and landscape values in the absence of adequate agri-environmental policies.
On the basis of the relatively high trade barriers which presently surround
the EU, it could be expected that trade liberalisation between the EU and
the world market will affect EU's agriculture considerably. Estimations
indicate that trade liberalisation will decrease the EU production of ruminant
meat and dairy products. The question raises whether this will encourage
extensification. It is also possible that only the intensive farms will
survive. A considerable drop in ruminant meat and dairy sector prices can
be a major threat to HNV livestock production systems. Production will
be less profitable. The dairying product price will, however, probably
not change drastically. Besides, the 1992 CAP reform and Agenda 2000 make
farmers less dependent of prices, a shift to direct payments can be observed.
7. Concluding remarks
The aim of this paper was to investigate the economic viability of some
livestock production systems in HNV areas in Europe to see whether additional
income is required to stay (or become) economically viable
The main livestock systems responsible for the high natural value of
the area are specialist dairying farms, sheep, goats and other grazing
livestock farms and specialist cattle-rearing and fattening farms. Over
70% of all farms selected in this paper are classified as a viable farm
in an economic sense. Farm income can be improved by support provided by
the Common Agricultural Policy (CAP) or by offering superior quality products.
Direct subsidies are important for most HNV livestock production systems.
Market and price policy changes of the 1992 CAP reform provide only limited
support to HNV livestock production systems. Agri-environmental payments
could potentially be a big source of support to these systems, although
these payments are mainly compensations. Both LFA payments and agri-environmental
payments help to focus support in areas, which need it, most. LFA payments
should be more focused on those parts of LFAs, where most high nature value
conservation is found. It is recommended to attach environmental conditions,
based on regional circumstances to direct subsidies. These recognitions
are reflected in the current proposals for the reform of the CAP, the so-called
Agenda 2000 proposals.
Prospects for further reductions in price supports within the framework
of Agenda 2000 and new trade negotiations will lead to reductions in income
and will put pressure on HNV farming systems. However, it seems that HNV
livestock production systems will not be seriously affected in case future
developments are guided by appropriate policies. Pressures can be offset
by the emphasis given in Agenda 2000 on the overlap between LFAs and HNV
areas, as well as on the maintenance and promotion of low-input systems.
Agenda 2000 advocates greater emphasis for rural development and the rural
environment. This can be considered as a step towards a more integrated
rural policy. The valuable experience the Visegrad countries are gaining
in developing initiatives that aim to maintain the natural value of agricultural
land seems to be beneficial. Nevertheless, it is recommended to guide the
development of agriculture in the Visegrad countries and provide incentives
for agricultural practices, which are beneficial for the environment. Besides
appropriate policies to meet decreasing prices are important in the light
of future developments like further trade liberalisation, which might affect
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