A new report prepared for the European Parliament by economists from Teagasc and Wageningen Social and Economic Research finds that farm incomes across the European Union have become more volatile in recent years and that existing support measures need to be better targeted if they are to protect the long-term viability of farming.
The authors will present the findings of the study to Members of the European Parliament at a briefing in Brussels on Thursday, 19th March, as part of ongoing discussions on the future direction of EU agricultural policy.
The study examines how farm incomes have evolved over the past decade, with particular focus on the period from 2020 to 2024, when farmers faced sharp increases in input costs, high inflation, and significant fluctuations in output prices. Using EU-wide data and detailed case studies for Ireland, the Netherlands, Spain, Poland and Hungary, the report assesses how current policy supports perform, and how they could be improved to respond more effectively to the challenges facing farmers.
Input costs, price swings, and income pressure
The report shows that rising fertiliser, feed, and energy costs from 2021 onwards led to a squeeze on farm margins across the European Union (EU). Output prices increased later in many sectors, but not to the same extent everywhere, and by 2023 farm incomes had fallen in several Member States as costs remained high while prices weakened.
Income developments differed greatly between countries and sectors. Dairy and tillage systems were particularly affected by recent market changes, while horticulture and some intensive livestock sectors performed more strongly. The study also confirms that income inequality within agriculture remains significant, with a relatively small proportion of farms generating a large share of total farm income.
For Ireland, the analysis highlights the strong exposure of the farming sector to global commodity markets, the importance of direct payments for beef and sheep farms, and the growing influence of environmental policy constraints on production decisions.
CAP payments remain a major part of farm income
Across the EU, Common Agricultural Policy (CAP) payments continue to make up a substantial share of farm income, averaging around one-third of total income. However, the report notes that these payments are mostly fixed in nominal terms and their real value has fallen in recent years due to inflation.
Direct payments provide stability and predictability, but the study concludes that they are often not well targeted to those farms most in need. A large proportion of support is still linked to farm size rather than to income vulnerability, environmental constraints, or structural disadvantage.
Measures such as voluntary coupled support, eco-schemes and supports for young farmers and disadvantaged areas have improved targeting, but they represent a smaller share of the overall budget.
Risk-management tools underused
The report also finds that risk-management tools such as insurance schemes, mutual funds and income stabilisation instruments could play a much bigger role in protecting farm incomes, but uptake across the EU remains low.
Farmers often see these schemes as complex, costly or difficult to access, while in some Member States the necessary data and administrative systems are not fully developed. As a result, governments frequently rely on ad-hoc crisis payments when market shocks occur, rather than on pre-planned risk-management systems.
Better data needed for faster policy response
One of the key recommendations of the report is the need for more timely and more complete data on farm income. Current indicators often become available too late to allow policymakers to respond quickly to sudden changes in market conditions.
The authors suggest that broader measures of farm household income, combined with improved use of farm survey data, could help design support schemes that are more responsive to real economic pressures on farm families.
Future policy should focus on targeting, resilience and competitiveness
The study evaluates a range of possible policy options for the future CAP and concludes that no single measure can address all income challenges. Instead, a balanced mix of supports will be needed.
Among the options identified are:
- linking payments more closely to farmer need rather than farm size,
- expanding the use of risk-management tools,
- indexing payments to inflation to protect their real value,
- maintaining crisis reserve mechanisms for severe shocks,
- and combining income support with measures that improve environmental performance and competitiveness.
The report stresses that viable farm incomes are essential not only for food production, but also for meeting wider EU objectives on climate, biodiversity, rural development, and generational renewal.
Importance for future CAP discussions
The findings come at a time when discussions are beginning on the future direction of EU agricultural policy after 2027. The authors note that farmers will continue to face economic, climatic, and geopolitical uncertainty, making the design of income supports a central issue for the next CAP reform.
The study concludes that better targeting of support, improved risk-management systems and stronger data for policymaking will be key to ensuring that farm policy delivers both economic stability for farmers and value for taxpayers.
The full report is available at: https://www.europarl.europa.eu/RegData/etudes/STUD/2026/759349/CASP_STU(2026)759349_EN.pdf
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