Portugal's Entry into the EC: The Challenge for Small Farmers

Abstract

Portuguese farmers face price declines for several major enterprises because of the country's entrance into the European Economic Community (EC). The small farmers in Northwestern Portugal face some of the biggest adjustments. Price projections suggest that 1996 prices for their key enterprises may fall 15 to 30 percent below current levels, and their farm income may decline from 10 to 250 percent. Medium and large dairy farms will not be able to cover the fixed costs of the investments they were encouraged to make in recent years. Simulations of alternative scenarios were conducted for four farming systems in the region. Technological changes in existing enterprises will be adequate to recover the income lost on large farms. The smallest farms are not as affected by price declines because much of their income is earned off the farm. Medium farms face the greatest challenge. They cannot achieve the scale of large farms, and cannot earn as much off-farm income as small farms. Their future success will depend on the operation of the land market, and their ability to rent or buy more Iand.