Distinct climatic differences dictate agricultural patterns, with grains, dairy and livestock areas located in the north and Mediterranean crops such as olives and citrus fruits grown in the south. Average farm size is about seven hectares.
Agricultural policy. Because Italy is a member of the European Union, virtually all of its agricultural sector is governed by the Common Agricultural Policy. But Italian agriculture groups repeatedly have voiced complaints about some E.U. policies.
An on-going issue has been what is termed Italy's disproportionate contribution to the CAP. Italy is responsible for 19.1% of E.U. production, but has received as little as 10.4% of the funds. E.U. decisions on "green rates" of exchange with the lira also have been contested, as they affect the amount of E.U. payments to Italian farmers.
Another issue is continued delay in reforming the CAP for Mediterranean products. In addition, Italian farmers are concerned about potential E.U. trade agreements with Mediterranean countries that produce agricultural products in competition with Italy. The level of E.U. compensation to the Italian cattle industry for bovine spongiform encephalopathy also raised complaints.
Flour milling. The Italian flour milling industry is characterized by strong competition related to continuing overcapacity. Although the number of flour mills has dropped by nearly half since 1985, many of the remaining mills are old and small — fewer than 100 tonnes per day of capacity — leading to inefficiencies. Consolidation has been very gradual, and one industry observer estimated industry rationalization could continue for another 20 years.
In 1994, Italy had 647 mills, down from 1,771 in 1967 and 1,234 in 1985. In addition to the shrinking number of mills, another noticeable trend has been the increasing share of durum capacity in the past 30 years.
In 1993, about 72% of Italy's total number of mills were non-durum facilities, but they represented only about 60% of total milling capacity. In 1967, Italy's non-durum capacity accounted for about 70% of the total. About 56% of non-durum wheat millers are located in northern Italy, while 88% of durum millers are based in the south.
Non-durum wheat grind in 1995 was 6.3 million tonnes, with wheat flour production put at 4.66 million, according to data reported to the International Milling Association. Wheat flour exports in 1995 were estimated at 600,000 tonnes. Flour exports in 1996-97 are expected to advance slightly, supported by good demand from eastern Europe and the former Soviet Union, as well as increased shipments to Algeria.
The Italian flour milling industry is highly regulated. To deal with overcapacity, the government beginning in 1987 required that all new or expansion projects be tied to a corresponding absorption of an equal amount of existing milling capacity. They enforced this system through production licenses.
The government also regulates labeling, packaging and distribution of flour, as well as maximum ash content for specific flour classifications. Until two years ago, all flour additives were prohibited; even though the ban has been eased, additives in flour remain uncommon, as millers are concerned about continued consumer distrust and resistance.
Italian millers are extremely conscious of quality, both in the wheat ground and the flour produced. Traders and millers demand wheat with specific characteristics from a reliable supply source. Wheat stability is considered to be as important a feature as protein quality, and the Chopin Alveograph is used as a traditional quality measure.
About 76% of domestic flour is consumed by retail, industrial and small bakers, with the remainder going to biscuit, confectionery and household uses. Mills sell 65% of flour direct to users, with the remainder sold to distributors.
Italy's non-durum per capita flour consumption in 1991 was 73 kg, the highest in Western Europe. Since then, reports indicate consumption has been relatively stable, although a slight increase in pasta consumption has been noted, probably at the expense of bread and pizza consumption.
Livestock and feed. Italy's livestock sector felt mixed effects in 1996 from the B.S.E. crisis that spread fear and panic through much of the E.U. Although no B.S.E. outbreaks were reported in Italy, domestic beef consumption declined by about 20%, many cattle operations ceased, and the herd dropped to an estimated 6.7 million head.
Italian beef consumption during 1997 should recover to about 90% of its pre-B.S.E. level, based on a beef consumption survey of 2,000 Italian families conducted by a prominent economic institute.
Conversely, Italy's poultry and pork industries benefited somewhat from the "mad cow" crisis, as pork exports alone increased by about 10%. But the future of the Italian poultry industry is very uncertain because the market is extremely sensitive to changes in supply; prices fluctuate continuously in relation to small production increases or decreases.
This cyclical trend is due in part to industry fragmentation, although a concentration process has been underway for several years. The industry also is under pressure from what it says are unfair E.U. export policies.
Of particular concern are E.U. measures abolishing refunds for certain poultry meat parts that Italy produces and provisions for higher export refunds to certain countries that are not traditional Italian markets.
Feed in Italy generally contains at least 60% cereals, mainly maize and barley. The use of non-grain feed ingredients in Italy, always marginal, decreased from 1995 to 1996, with imports of corn gluten feed and other ingredients down 50%. Large domestic coarse grain supplies are likely to restrict future non-grain feed ingredient import and use.
Trade. E.U. trade policies and provisions again dominate, but Italy has a few distinct issues.
These include the implementation of U.S. antidumping and countervailing duties on Italian pasta. The Italian pasta industry is pressing the E.U. to file a request with the World Trade Organization to have the U.S. action revoked because it reportedly disrupts trade patterns and competition among the various Italian pasta makers.
Italy's rice industry, Europe's largest, also is concerned about trade provisions regarding E.U. rice imports. The industry maintains the provisions would favor rice from countries with less transparent marketing systems. Italy also has opposed the implementation of tariff rate quotas for rice imported from the United States.