Focus on Spain
November 01, 2005
Agricultural production in Spain is diverse, thanks to varied climatic and soil conditions. The country produces cereals, coarse grains, pulses, oilseeds and fruits and vegetables, the latter accounting for half of agricultural production value.
The country is the world’s largest producer of olive oil, supplying one-third of world output. Of the E.U.’s production of about 2 million tonnes of olive oil, Spain accounts for about 1.5 million tonnes.
The country is divided into 16 autonomous regions. The regions of Castilla and Leon in north central Spain specialize in the production of cereals, oilseeds and sugar beets. Livestock farming is concentrated in the northern regions of Cantabria, Galicia and Asturias, in Catalonia in the northeast and in Madrid in central Spain.
One of the top agricultural producers in the E.U., Spain ranks fourth, after France, Germany and Italy, in production measured in value. In terms of volume, Spain’s production accounts for 12% of E.U. production.
But as is the case in most European countries, agriculture in Spain has been accounting for a shrinking share of the gross domestic product (GDP). In the 21st century, agriculture contributes about 6% of GDP.
The services sector has grown rapidly over the past 35 years, and today it accounts for 65% of GDP. Industry accounts for the remaining 29%.
According to E.U. figures, utilized agricultural area amounts to 24.8 million hectares. There are 1.7 million farmers, and nearly 1 million of them are small if measured by gross margins.
These E.U. figures put the richest farms — those earning more than €120,000 annually — at 24,000, with 65,000 earning between €40,000 and €100,000.
Farming in Spain is modern and sophisticated, especially among the large holdings that have the resources to increase efficiency. Employment in the sector accounts for nearly 6% of the workforce.
Reflecting what is happening in other European countries, Spanish agriculture is undergoing change and becoming more market oriented.
Spain’s Ministry of Agriculture views the process of modernization as having "drastically" altered agriculture’s role. It envisages agriculture’s new role as meeting the demand of E.U. industry and services sectors, in particular the huge food industry.
The E.U. food and beverage industry is viewed as a strategic sector of the manufacturing industry in value terms, standing at €593.7 billion in 2001. Spain’s food industry, which accounts for 17.2% of national production, spends 20.4% of national expenditure on raw materials.
As a member of the E.U., Spain’s agricultural policies and programs are closely tied to the E.U.’s Common Agriculture Policy (CAP). In 2003-04, the E.U. reformed CAP and introduced direct payments to farmers based on historical payments.
The payments were decoupled from production to make farmers base decisions on market signals. Members are implementing the change at their own pace, with Spain agreeing to be in compliance by 2006.
Under the reform, guaranteed payments comprising price support and direct payments are in a budget subject to limits. Guidance payments, designed for rural development projects, are not.
Spain’s agriculture ministry estimates that E.U. payments account for about 25% of the country’s total farm earnings. The cereals sector, including rice, receives the largest proportion of assistance, followed by olive oil.
Spain will receive nearly €9 billion in E.U. payments on rural development programs for the period 2000-06, with the Spanish government meeting the remaining €14.2 billion cost of the programs.
This crop year, Spain is experiencing drought, estimated to be the worst in 30 years. The U.S. Department of Agriculture (USDA) estimates grain and maize production will be 30-40% down from 2004-05. In some areas, production could be down by 50% or more.
Reservoirs are estimated to be at about 50% of capacity in the hardest hit areas. This could further cut the production of rice, pulses, irrigated orchards and vegetables, in addition to grain and maize.
The government has established committees to monitor the drought, work out ways to help farmers and also asked the E.U. for help.
The area most affected by the drought is central Spain. Producer organizations have asked for tax breaks, early subsidy payments and exemptions from certain CAP provisions.
The European Commission has approved use of set-aside land for pasture in several regions.
WHEAT AND FLOUR MILLING
The drought Spain is experiencing has dashed hopes of a good wheat and durum harvest this 2005-06 crop year. The drought has cut yield potential for durum wheat by 75% and for soft wheat by nearly 50%, according to the E.U.
Last season, wheat production was just over 7 million tonnes, the second highest in the past 10 years after the 2000-01 harvest of 7.2 million tonnes. For this 2005-06 harvest, the USDA estimates production at 3.5 million tonnes. This means that Spanish imports of wheat in 2005-06 are going to be higher than usual.
Spain is already a big importer of wheat, bringing in 3 million to 5 million tonnes of wheat and durum annually during the past five years to meet demand from the domestic baking and feed markets.
The flour milling industry in Spain is modern and efficient. It comprises many small mills and a few large ones, which are able to incorporate the latest technology. These bigger mills, with capacities exceeding 50,000 tonnes of wheat annually, account for most of the flour production.
As with any dynamic sector, there has been a consolidation of the Spanish flour milling industry during the past 35 years. In 2005, there were 219 mills, down from 310 in 1995, 619 in 1980 and 1,674 in 1975.
Production in 2005 was 2.6 million tonnes, with average mill production at 11,872 tonnes. Larger mills accounted for 81% of total flour production.
Spain is among the E.U.’s top five producers of flour. Production has stabilized since the mid-1990s after slipping for a 24-year period, beginning in 1970. In 1994, production hit a low of 1.973 million tonnes.
One reason for this shift is the increase in the consumption of bread and other flour-based products. The 2003 per capita bread consumption was 56.97 kg, down from consumption in the late 1990s but still above the trend through the early 1990s, when it went as low as 55kg.
The Spanish agriculture ministry has attributed consumption pattern changes to major economic, demographic, social and cultural changes, such as urban development and industrialization, changes in working patterns and the inclusion of more women in the workforce.
The Spanish agriculture ministry’s studies on Spanish food patterns since 1987 show that changes include an increased consumption of processed foods and a widespread shift to shopping in superstores and supermarkets.
This seems to be reflected in the increased consumption of other flour-based products. The 2003 per-capita figures were 13.7 kg for biscuits, pastries and cakes and 4.47 kg for pasta, both up by about 3.5% over 2002.
LIVESTOCK AND COARSE GRAIN
The livestock industry, which accounts for 35% of Spanish agricultural production, has undergone many changes during the past 30 years. There are now more beef cattle than dairy cattle, more sheep and double the pig population. The poultry industry also has expanded sharply.
In 2004, pig meat production was 3.2 million tonnes, poultry production was 1.3 million tonnes and beef production was 714,000 tonnes, according to E.U. figures.
As a result of an expanding sector, the livestock industry has to meet a large animal feed demand. For this, it relies heavily on imports for its raw material. This year, the drought will cause imports to jump even higher. Poor wheat and feed grain production prospects and inadequate pastures are expected to leave livestock operators more dependent than last year on compound feeds made with imported ingredients.
In 2003, animal compound feed production amounted to 19.3 million tonnes, of which 9.8 million tonnes of cereal grain was used.
Feed production is mostly concentrated in Catalonia (25.8%), Castilla and León (14%), Andalucía (12.5%) and Aragon (11.3%).
Animal feed is the biggest expenditure item in livestock production, costing €6.5 billion in 2003 and accounting for 46% of all expenditures.