Alfons Balmann A new dimension of structural change in European agriculture

Starting points Understanding of “ structural change in agriculture ” Traditional definition (narrow): –Changes in the conglomeration of farms, their legal status, endowments, technologies, activities, and interactions Modern definition (broad): –Changes in the conglomeration of farms, their legal status, endowments, technologies, activities, and interactions and changes in their embedding in / interaction with (changing) agricultural value chains (changing) (rural) society, (rural) economy and landscapes (changing) policies and institutions

Starting points Boehlje (1999) on “ structural change in agriculture” New dimensions: –Supply or value chains –Biological manufacturing  Industrialization of agriculture

Starting points Boehlje (1999) on “ structural change in agriculture” Interesting issues: –Competitiveness of product and input markets –Risk and value chains –Industrialized agriculture and externalities –Intellectual properties and innovation

Starting points Meanings of “structural change in agriculture” “Change” as a term is neutral … but the term can have various meanings in reality  External drivers of structural change –price changes –new opportunities –technological changes –institutional changes –legal changes –policy changes

Starting points Meanings of “structural change in agriculture” “Change” as a term is neutral … but the term can have various meanings in reality  Internal changes –start-ups -> goal-oriented and initiative –innovations -> goal-oriented and initiative –adaptations -> goal-oriented and responsive –inactivities -> goal-oriented passivity or inflexibility –exits -> goal-oriented adaptation or forced

Starting points Meanings of “structural change in agriculture” “Change” as a term is neutral … but the term can have various meanings in reality  Critical issue: Can the internal changes keep up with external drivers?  This is not just a technical question!

Starting points Meanings of “structural change in agriculture” Many stakeholders –affected in very different ways  not necessarily win-win-situation! (“creative destruction” is hardly Pareto superior) –with very different perceptions and views e.g. Confédération Paysanne / Via Campesina versus WTO  societal and economic dimensions within and outside the agricultural sector

Starting points  Critical issue: Can the internal changes keep up with external drivers?  This is decisive considering upcoming challenges new policy dynamics within the EU competition of value chains new opportunities (bio-technology, energy, fibers,…)

Starting points Meanings of “structural change in agriculture” Research issues on economic and societal dimensions –efficiency e.g. rational expectations equilibrium versus path-dependence –distribution e.g. subsidization versus liberalization –multi-functionality added value, employment, landscapes, cultural heritage, … –sustainability What means “sustainability” for agricultural structures like those in e.g. south-east Poland or Romania?

Starting points Question: Do we really understand “structural change in agriculture” Complex high-dimensional dynamic process –in the broad and narrow definition –not very well understood –no comprehensive theory, rather a collection of stylized facts

Some “(stylized) facts” Problems of structural change Productivity deficits Structural deficits Factor immobility –labor –capital Treadmills and ruinous competition –Inelastic demand for products –Inelastic supply of factors The subsidy trap –Illustrated with some figures for German and EU agriculture regarding the traditional definition of structural change in agriculture Sunk costs

Farmers should … –recognize structural deficits –understand structural change –explore and recognize opportunities new markets (energy, fibers, …) vertical and horizontal integration –doubt in policy incentives Conclusions

General needs for research but also policy  Self-responsibility and market orientation of farmers Entrepreneurial thinking Research gaps in farm management  Integration of agriculture in value chains … to enable innovation, investment and market access … to explore new markets … for rural development

Conclusions General needs for research but also policy  Open societal discussion … on structural change … on new technologies (e.g. bio-tech)  Rural development Particular issue: outmigration … loss in human capital … loss in critical masses