Sunday, 18 May 2014

The “Troika” and the Portuguese agriculture

During the nineties of last century a new concept emerged in the agricultural economics literature: rural renaissance. In a simplified way this new concept can be defined as a specific phase in the economic development process of affluent societies, in which the rural world gains higher relative importance. The rural world now includes not only the traditional agricultural activity, but also many of the economic activities usually located in the large urban communities. In other words it means the migration of industries and services from large centers to rural areas. And this movement is also accompanied by the renaissance of agriculture itself, both in terms of new farmers and new technologies.

References to renewed agricultural practices have recently been made in Portugal. More specifically it has been said that a few subsectors within agriculture have witnessed important rates of growth in production. 

In order to test the existence of such evolution, we looked at the main economic indicators for agriculture in the twenty first century, namely the Output of Agricultural Industry (OAI), the Gross Value Added (GVA), the Gross Fixed Capital Formation (GFCF) and Agricultural Labor Input (ALI). Moreover we tried to identify the subsectors where a notorious production growth could have taken place.

 In Table 1 it is not possible to detect clear tendencies of growth or contraction either for OAI or GVA. The fluctuations observed must be due to weather randomness rather than any other factor. On the contrary GFCF registers a fall of 2.3% during the period.

These same performances are well illustrated in Figure 1.

Table 1 - OUTPUT, VALUE ADDED, FIXED CAPITAL FORMATION AND LABOR USE IN AGRICULTURE, Portugal, 2000 -2013
Year
Output of the Agricultural Industry
(basic prices)
Gross Value Added
Gross Fixed Capital Formation
Agricultural Labour Input
Constant prices of 2006
Total
Salaried
Non-salaried
 106 Euro
103 AWU
2000
5,926.0
2,684.0
869.5
496.8
80.8
415.9
2001
5,971.9
2,585.6
951.4
500.1
81.5
418.7
2002
6,272.9
2,897.2
914.0
473.7
77.2
396.5
2003
5,986.5
2,666.0
840.9
472.6
78.2
394.4
2004
6,429.5
2,967.3
891.4
446.8
78.8
368.1
2005
5,908.2
2,529.2
769.2
437.3
79.4
357.9
2006
6,040.3
2,713.9
751.6
425.9
77.8
348.1
2007
6,031.3
2,616.0
772.4
416.1
73.4
342.7
2008
6,189.0
2,735.4
727.5
409.8
72.7
337.1
2009
6,150.8
2,642.5
635.5
403.5
69.6
333.9
2010
6,116.4
2,613.8
658.1
371.3
70.8
300.5
2011Po
6,036.6
2,556.3
648.5
356.8
68.0
288.8
2012Po
6,021.0
2,494.9
642.5
355.8
65.2
290.6
2013f
6,048.8
2,585.2
x
354.1
62.4
291.6
Source: INE
AWU – annual work units; Po – provisional data; f - forecast






In Table 1 it can also be seen that, contrary to output, total labor input, suffered a fall of about 2.6% annually. Curiously, and has in Figure 2 shows, there is a slowdown in the fall of labor input in the last three years of the period (2011-2013), which has to be attributed to the light increase in non-salaried labor in those years.





Can it be the case that the increase in self employed labor denotes some renaissance in the Portuguese agricultural sector? And if yes is it a reaction to the unemployment increase in other sectors of the economy as a consequence of the policy measures of the “Program of Economic and Financial Adjustment” imposed by the Troika?

The empirical evidence above does not seem enough for a clear cut positive answer, even because the level of total agricultural output did not show significant changes. At most it can be said that the effects of the policy measures had a positive indirect impact on the establishment of new farmers. And this new blood (both in terms of entrepreneurs and technology) may be responsible for the growth dynamics felt in some subsectors of production.

Table 2 shows the performance of some of the most important subsectors of crop production, as well as the three classic subsectors of animal production.

Table 2 – EVOLUTION OF AGRICULTURAL OUTPUT IN SELECTED SUBSECTORS,
Portugal, 2000-2013

Year
Crop Output
Animal Products
Total
Fresh Vegetables
Fresh Fruits (except citrus, subtropical, grapes and olives)
Wine
Olives
Olive Oil
Total
Meat
Milk
Eggs
  106 Euro (constant prices of 2006)
2000
3,192.3
502.7
446.5
401.3
136.5
5.2
2,455.8
1,603.9
741.5
91.0
2001
3,243.1
505.5
433.1
449.2
93.2
3.5
2,442.1
1,607.5
717.8
96.6
2002
3,442.0
567.0
513.5
357.5
106.2
3.1
2,523.0
1,652.9
752.4
97.5
2003
3,267.8
579.7
460.2
356.5
108.9
2.8
2,424.5
1,600.3
706.8
99.0
2004
3,478.7
581.7
479.5
384.0
132.7
5.2
2,645.9
1,799.0
728.0
102.9
2005
3,014.6
539.6
474.7
385.7
114.1
4.5
2,594.9
1,736.7
750.9
90.5
2006
3,317.2
534.5
506.3
398.5
147.8
3.9
2,417.7
1,582.4
727.0
91.5
2007
3,274.4
552.9
454.0
383.6
227.4
6.4
2,464.0
1,637.1
717.3
91.9
2008
3,348.1
563.2
492.3
372.7
254.4
7.0
2,517.9
1,676.1
731.8
93.3
2009
3,425.0
585.1
573.8
365.8
336.0
13.9
2,442.0
1,607.2
725.7
92.4
2010
3,450.3
600.5
526.5
419.4
376.4
15.3
2,398.6
1,572.0
708.1
98.8
2011P
3,421.6
597.3
569.4
345.6
419.9
18.8
2,355.2
1,538.9
704.9
92.9
2012P
3,435.6
607.5
512.5
372.1
380.3
14.9
2,332.4
1,516.5
710.5
90.6
2013f
3,583.7
592.5
580.9
376.2
462.8
17.9
2,242.0
1,444.1
682.1
95.4
Source: INE; P – provisional data; f - forecast

The table shows that total crop production growth is almost entirely matched by the decrease in animal products, thus confirming the above mentioned stagnation of total agricultural output. But it is also evident that vegetables, fresh fruits and olive trees production have sizable increments (from1.3% annually for vegetables to 9.9% for olive oil).
These results definitely helped the good performance of the trade balance in recent years. It was in fact in the crop subsectors of Table 2 that exports grew more significantly. Figures in Table 3 cannot be compared with the above data because the lack of direct information on exports in national and EUROSTAT Statistics forced us to use FAO figures. Besides being expressed in US dollars, product typology does not coincide.

Table 3 – EVOLUTION OF EXPORTS OF SELECTED AGRICULTURAL PRODUCTS,
Portugal 2000-2011
Year
Wine
Olive Oil
Preserved vegetables
Frozen vegetables
1000 US dollars
2000
468,958
58,326
13,145
13,188
2001
435,559
50,101
16,548
15,335
2002
480,770
46,478
18,027
19,157
2003
602,619
55,582
X
20,516
2004
660,693
94,474
24,361
26,919
2005
653,608
117,959
24,411
30,026
2006
665,775
144,378
X
41,044
2007
818,494
151,790
35,831
53,422
2008
851,038
191,323
55,578
70,473
2009
760,776
168,612
55,187
57,269
2010
806,723
211,555
51,446
43,955
2011
907,464
271,056
57,341
55,571
                                   Source: FAO

The information in the table entirely confirms what was said. To point out only the fact that the value of olive oil exports in 2011 allowed for a first positive trade balance.

We can then conclude that the policy measures in the “Program of Economic and Financial Adjustment” did not directly affect the Portuguese agricultural sector. On the contrary the dynamic behavior of some subsectors of crop production definitely fitted one of the objectives of such program:  the improvement of the Portuguese trade balance.

Author: Fernando Brito Soares

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