Farmer protests: This is what farmers in Germany deserve

2024-01-08 18:18:00

Analyse

Nationwide farmers’ protest despite record profits? What farmers really deserve

Farming is not a run-of-the-mill job

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Farmers are protesting against cuts in subsidies. They have just achieved record operating results. How does that fit together? Look into the profit balances of an industry.

Across the country, farmers are currently getting on their tractors to protest against the government’s austerity plans. These provide for the current tax reduction on diesel for agricultural vehicles to be gradually reduced. The government has already dropped its further plan to completely abolish vehicle tax exemptions on agricultural machinery. Nevertheless, the farmers are angry because the disappearance of the subsidies is likely to cost the companies a few thousand euros a year, depending on their size and diesel consumption.

But how poor are the people who are protesting in their tractors? Do farmers really belong to a subsistence class or could they do without a few state subsidies?

Answering income questions like this is more difficult than in other professions because farming is not a classic nine-to-five job. Many farmers are self-employed entrepreneurs – from small family businesses to large businesses that cultivate many times as much land. The range of profits and income is correspondingly large. However, there are a few average figures that show the dimensions in which farmers are moving.

Strongly increased operating results

The 2022/2023 marketing year went very well for the farmers. On average, full-time agricultural businesses generated an operating profit of 115,400 euros last year. That was 45 percent more than a year earlier and a new “all-time high”, as shown in the situation report by the German Farmers’ Association. Dairy farms, fodder production and processing companies were able to increase their profits particularly strongly. Arable farms also earned significantly more. Only for fruit and wine growers things didn’t go so well; on average they recorded a weaker result than in the previous year. Companies in the north Some people in Germany earn significantly more than in the south, which is largely due to the larger company sizes.

When presenting the figures at the beginning of December, farmers’ president Joachim Rukwied said that the economic recovery was urgently needed after weak previous years. At the same time, he warned that the situation would worsen in the coming year. It is important to note that operating results cannot be equated with a person’s income. Many businesses feed entire families. So what does the individual deserve?

Poorly paid employees

According to the Federal Statistical Office, there are more than half a million people employed in agriculture. 62 percent of them are employed. This group is comparatively poorly paid. The annual gross wage in 2021 was just 18,509 euros. That was just under half of the average employee wage across all professional and collective bargaining groups in Germany. And this despite the fact that, on average, 46.7 hours per week are worked more than in other professions. Since employees do not have to buy or refuel tractors, the reduction in subsidies only affects them indirectly.

High-earning self-employed people

What self-employed farmers earn is more difficult to quantify. One thing is clear: on average it is significantly more than for employees with large fluctuations. Since the profit of an agricultural entrepreneur is not comparable to the gross wage of an employee, the Federal Ministry of Agriculture has developed a comparison wage that takes into account an interest rate for the equity and a farm manager’s surcharge. In the 2020/2021 financial year, this comparative wage was around twice as high as for employees.

However, this calculation also has weaknesses, as the Federal Information Center for Agriculture notes. Only income from agricultural activity is considered here. However, more and more companies are now generating additional income through renting holiday apartments, generating energy with photovoltaics or biogas or other things.

Average income

In many companies, several family members work without each of them being paid a specific salary. The Federal Ministry of Agriculture last calculated how high the income per worker is in April 2023. Accordingly, the companies earned around 43,500 euros per worker in the 2021/2022 financial year (i.e. before the current record year). This is an average value across all types of business.

If you only look at full-time businesses, the income is 46,118 euros per worker. For companies that only practice agriculture on a part-time basis, it is 19,120 euros. In companies run by legal entities such as cooperatives or AGs, it was 48,083 euros per worker. In addition to regional differences, there is also a difference between conventional and organic companies: organic companies earned an average of 40,392 euros per worker, conventional companies 49,059 euros.

Government subsidies

The figures also make it clear why farmers are reacting so alarmingly to the removal of subsidies: in 2020/2021, state direct payments and subsidies across all types of farms accounted for 48.5 percent of total income, i.e. almost half. However, the tax discount on agricultural diesel, which is now being gradually abolished, only accounts for five to six percent of the subsidies.