Report from the Commission to the Council - 2001–2005 Report on the implementation of the long-term national aid scheme for agriculture in the northern regions of Sweden pursuant to Commission Decision 2004/291/EC
Date: 2007-07-31
Institutions: European Commission
Subjects: State aid, Sweden, agricultural region, aid system, aid to agriculture, regulation of agricultural production, report, utilised agricultural area

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 31.7.2007 
COM(2007) 416 final 

REPORT FROM THE COMMISSION TO THE COUNCIL 

2001–2005 report on the implementation of the long-term national aid scheme  
for agriculture in the northern regions of Sweden pursuant  
to Commission Decision 2004/291/EC 

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REPORT FROM THE COMMISSION TO THE COUNCIL 

2001–2005 report on the implementation of the long-term national aid scheme  
for agriculture in the northern regions of Sweden pursuant  
to Commission Decision 2004/291/EC 

TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

4. 

INTRODUCTION.............................................................................................................. 3 

Background .................................................................................................................. 3 

General principles ........................................................................................................ 3 

The sub-regions............................................................................................................. 4 

Administration and controls .......................................................................................... 5 

IMPLEMENTATION OF NORDIC AID 2001–2005 ............................................................. 5 

Commission decisions.................................................................................................. 5 

Aid disbursed in Sweden.............................................................................................. 5 

Community aid............................................................................................................. 6 

Supported production volumes .................................................................................... 6 

DEVELOPMENT OF THE AGRICULTURAL ECONOMY IN THE NORDIC AID REGIONS .......... 7 

Supported volumes....................................................................................................... 7 

Development of key production in sub-regions ........................................................... 7 

Development of the land use and farm structure ......................................................... 8 

Socio-economic impact................................................................................................ 9 

Impact on state of the environment............................................................................ 10 

Impact on the food chain............................................................................................ 10 

CONCLUSION............................................................................................................... 10 

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1. 

INTRODUCTION 

1.1. 

Background 

Pursuant  to  Article  142  of  the  Act  of  Accession  to  the  European  Union  of  the  Republic  of 
Austria, the Republic of Finland and the Kingdom of Sweden, the Commission has authorised 
Sweden to grant long-term national aid to ensure that agricultural activity is maintained in the 
northern  regions.  This  aid,  referred  to  as  the  Nordic  aid  is  granted  in  particular  to  maintain 
traditional  primary  production  and  processing  naturally  suited  to  the  climatic  conditions,  to 
improve  structures  for  the  production,  marketing  and  processing  of  agricultural  products,  to 
facilitate the disposal of such products and to ensure that the environment is protected and the 
countryside preserved. 

The regions covered by the Nordic aid scheme are situated north of the 62nd parallel and some 
adjacent  areas  south  of  the  parallel  affected  by  comparable  climatic  conditions  rendering 
agricultural  activity  particularly  difficult.  The  following  factors  have  been  taken  into 
consideration  when  determining 
(maximum 
10 persons/km2), Utilised Agricultural Area (UAA) as a proportion of the total area (less than 
10 percent)  and  agricultural  area  used  for  the  cultivation  of  crops  intended  for  human 
consumption as a proportion of UAA. The current area covers a total of 355 017 hectares of 
UAA, which corresponds to 11 % of Sweden’s total UAA1. 

low  population  density 

the  areas; 

The Commission shall submit to the Council one year after accession and subsequently every 
fifth year a report on the authorisations granted and the results of the aid granted under such 
authorisations according to Article 143. Previous reports were made in 1996 and 2002. 

This report is based on information provided by the Swedish authorities. Conclusions are not 
drawn  on  whether  the  objectives  of  the  scheme  have  been  met.  The  Commission  has 
commissioned a separate study to address this point. 

1.2. 

General principles 

The  Nordic  aid  is  differentiated  by  regions  and  granted  on  the  basis  of  production  units, 
taking  into  consideration  the  restrictions  established  by  the  common  organisations  of  the 
market.  The  limitation  of  the  authorised  production  volumes  are  totalled  on  national  total 
level  while  the  regional  levels  are  set  for  the  purpose  of  clarity.  Aid  may  not  be  linked  to 
future  production  or  bring  about  an  increase  in  production  or  an  increase  in  the  level  of 
combined aid in relation to the aid granted during a reference period.  

Nordic aid has been disbursed to agricultural and horticultural producers for cow's milk, pigs, 
goats, piglets, eggs, berries and vegetables. In addition, support is granted for the transport of 
cow's  milk  between  the  place  of  production  and  the  collection  centre  or  the  place  of  first 
processing. Aid is granted either for the number of animals or for the number of hectares. In 
the case of subsidies for milk production and transport, the aid is provided for quantities of 
milk (kg) supplied and collected. 

1 

Due  to  changes  in  the  definition  of  UAA  this  figure  has  decreased  from  previous  report.  Only  farms 
with more than 2 ha are included in the UAA. 

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The  levels  of  support  as  well  as  the  production  quantities  were  calculated  based  on  the 
available national statistics of  1994  for  cow's  milk  production and the production of  berries 
and  vegetables.  This  period  was  considered  to  be  unaffected  by  consequences  of  the  future 
accession  and  at  the  same  time  represented  the  situation  in  Sweden  after  the  reform  of  the 
agriculture sector in the beginning of the 1990ies. This year was also the first year in which 
support was granted for berries and vegetables. 1993 was chosen as the reference period for 
the other sectors of production. Aid can be disbursed to a producer who (or whose spouse) is 
at  least  18  years  of  age  and  not  more  than  65  years  of  age.  Aid  recipients  must  be  in 
possession of at least three hectares of arable land or at least half a hectare under horticultural 
cultivation. 

1.3. 

The sub-regions 

Sweden  is  spatially  divided  into  sub-regions  for  implementing  the  agricultural  policy  supports 
and  programmes.  The  Swedish  northern  region  comprises  of  four  sub-regions,  i.e.  1,  2a,  2b 
and 3  (Figure  1).  The  regions  reflect  the  different  severity  of  the  natural  handicaps  and 
production conditions. 

1 

2a

2b

3 

Figure 1 – 

Agricultural aid areas (sub-regions 1 to 3 are included in Nordic aid) 

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1.4. 

Administration and controls 

National  support  for  milk,  pigs  and  egg  production  is  administered,  reviewed  and  decided 
upon by the Swedish Board of Agriculture. Checks that beneficiaries meet the conditions that 
apply to the subsidy are conducted under the CAP payment system. IACS and its associated 
sanction system are used for the checks. The Swedish Board of Agriculture is responsible for 
the  co-ordination  of  the  checks  performed  by  the  county  administrative  board.  Checks  are 
carried  out  on  at  least  10 %  of  the  applications  concerning  the  animal-based  subsidy  and  at 
least  5 %  of  the  area-based  subsidies.  The  inspection  anomalies  have  been  large  due  to  the 
limited  number  of  total  beneficiaries,  which  give  rise  to  uncertainties  about  the  statistical 
significance of the findings. 

Sweden has to forward to the Commission an annual report on the effects of the aid granted 
and in particular on the trend in production and the related means that are qualifying for the 
aid, the trend in the economy of the regions concerned and the effects on the protection of the 
environment. On basis of this report and other available information the Commission verifies 
the compatibility of the implementation with the relevant provisions. 

2. 

IMPLEMENTATION OF NORDIC AID 2001–2005 

2.1. 

Commission decisions 

The  Swedish  Nordic  aid  scheme  was  approved  by  Commission  Decision  96/228/EC  of 
28 February 1996. This decision has been amended three times.  

During the first reporting periods the amendment 97/557/EC corrected some material errors, 
allowed  aid  for  milk  at  farm  level  to  be  paid  to  the  total  amount  of  milk  in  accordance  of 
Article 2(1) of Regulation (EEC) No 3950/92 and increased slightly the aid for pig meat (as a 
result of more accurate data).  

The  amendment,  2000/411/EC,  transferred  part  of  the  aid  for  milk  to  transport  aid,  hence 
reducing  the  total  aid  to  milk  though  still  retaining  total  budget  neutrality.  The  reference 
levels for fattening pigs, sows and laying hens were merged in terms of comparing reference 
levels and results. 

In Decision 2004/291/EG, which entered retroactively into force the 1 January 2003, the total 
reference level was increased to 318.67 MSEK. The support to piglets was increased in all aid 
areas and the support to milk production and goats was increased in aid area 1. The reference 
levels for production in terms of kilogram or heads were abolished, and from this date on only 
one reference level in million SEK per year is valid for the Swedish decision. 

2.2. 

Aid disbursed in Sweden 

Table  1  shows  a  summary  of  the  Nordic  aid  granted  in  2001  and  2005  compared  to  the 
reference level. At the end of the period 92 % of the authorised aid was used. In all sectors the 
granted aid amount has been under the permissible aid. The exception is support to the egg 
production, which has been exceeding the levels in 2003, 2004 and 2005. This is a response to 
the increased aid levels that were introduced in 2002. The excess is however diminishing and 
was in year 2005 only 10% (Table 1). 

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Table 1 – Summary of the Nordic aid amounts, 2001–2005 

Product 

Total aid granted 2001, 
MSEK 

Total aid granted 2005, 
MSEK 

Permissible Nordic aid 
2005, MSEK 

Milk* 

Fattening pigs  

Sows 

Laying hens 

Goats 

Transport of cow's milk 

Berries and vegetables 

TOTAL  

265.29 

11.96 

1.43 

1.80 

0.99 

17.48 

1.05 

300.00 

256.97 

12.63 

1.85 

2.64 

0.96 

16.51 

1.25 

292.81 

275.87 

14.17 

4.40 

2.40 

1.20 

18.60 

2.03 

318.67 

* 

including milk with direct sale quota 

2.3. 

Community aid 

Agriculture in the support areas of the Nordic aid scheme is also benefiting from instruments 
financed by the EU, for example the two pillars under the common agricultural policy. Of the 
second  pillar  measure,  supports  for  less-favoured  areas  (LFA)  and  agri-environmental 
measures (AEM) are of particular importance for the agricultural sector in the support areas. 
These subsidies have increased by 10 % from 2001 to 2005 (Table 2). 

Table 2 – Summary of LFA and AEM supports in 2001 and 2005 

Year 

2001 

2005 

Compensatory allowance, 
LFA, MSEK 

Agri-environmental 
payments, MSEK 

292.66 

305.88 

372.32 

428.2 

Total 
MSEK 

664.98 

734.08 

2.4. 

Supported production volumes 

The  produced  volumes  of  milk  have  declined,  which  also  affects  the  level  of  transport  aid. 
Goat  production  as  well  as  sows  and  piglets  face  the  same  development.  The  production 
fattening pigs and laying hens has gradually increased from 2002. The supported acreage with 
fruit and berries has also increased, implying increased production, but is again far under the 
reference levels. 

Table 3a – Summary of the total volumes in 2001 and 2005  

Product 

Number of animals/ha 
with subsidy, 2001 

Number of animals/ha 
with subsidy, 2005 

Reference levels 
2005 

Milk (t)* 

Slaughter pigs  

Sows 

Laying hens 

Total LU pigs, sows and hens 

Goats 

Berries and vegetables 

458 670  

97 940 

3 706 

208 256 

13 100 

2 299 

387 

437 496  

99 691 

3 235 

243 522 

13 472 

2 090 

445 

NA 

NA 

NA 

NA 

16 532 

2 577 

750 

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Table 3b – Transport aid paid 2001 and 2005 

Product 

Paid transport aid, 2001, 
MSEK 

Paid transport aid 2005, 
MSEK 

Reference levels 2005 

Transport aid, cow's milk 

17.48 

16.51 

18.60 

3. 

DEVELOPMENT OF THE AGRICULTURAL ECONOMY IN THE NORDIC AID REGIONS 

The results are based on information from the Swedish authorities pursuant Article 143(2) of 
the Act of Accession. 

3.1. 

Supported volumes  

The  total  production  volumes  decreased  in  the  support  area  up  till  2004,  when  the 
development reversed. Milk production evened out and production of slaughter pigs and fruit 
and berries increased. However, the total production volumes decreased in 2005 compared to 
the previous year mainly due to a decrease in milk production. 

3.2. 

Development of key production in sub-regions 

Milk 

The key agriculture product in the Swedish northern regions is milk with a share of 70 % of 
the total agricultural production value in the area. Table 4 shows the development of the milk 
production  volume  (t)  in  the  different  sub-regions.  Production  is  in  total  declining  slightly, 
mostly due to smaller producer leaving the sector. The support area's share of Sweden's total 
milk  production  is  14 %.  An  area  adjustment  carried  out  with  effect  from  1 January 2005 
changed  the  area  affiliation  for  a  number  of  parishes,  where  these  were  transferred  from 2b 
to 2a.  This  led  in  turn  to  the  reference  level  in  subsidy  area  2a  in  2005  being  breached  by 
MSEK  7 million,  which  equals  2,6 %  of  the  total  milk  production  in  the  support  area.  This 
re-designation of areas explains the variations in production in 2a and 2b (Table 4). 

The decrease in milk production has been much less than the decrease in the number of farms, 
which reflects the structural adjustment process that has been going on over the period in both 
the  region  as  well  as  in  the  country  as  a  whole.  During  the  reporting  period  the  number  of 
milk farms in the region has declined from 2 225 to 1 662 farms, which equals 25 % of the 
farms in the region compared to a decline of milk farms by 28 % for the country as a whole. If 
comparing farm size as average cows per farm, the size development is faster in the country 
as a whole than in the region. Productivity statistics are not complete, but the productivity in 
the  sector  in  the  support  region  is  estimated  to  have  decreased  despite  increased  production 
efficiency.  

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Table 4 – Sub-regions share of the milk production (t) in 1996 and 2001–2005 

Aid area / year 

1996 

2001 

2002 

2003 

2004 

2005 

1 

2a 

2b 

3 

1–3 

53930 

209498 

118 970 

88 458 

470 856 

47 179 

216 639 

116 050 

78 802 

458 670 

45 427 

217 719 

116 926 

75 136 

455 208 

43 817 

218 592 

114 797 

72 828 

450 065 

43 253 

220 676 

114 299 

71 862 

450 091 

41 703 

230 181 

90 596 

69 017 

431 496 

Sweden 

3 258 000 

3 290 000 

3 226 000 

3 206 000 

3 229 000 

3 163 000 

Change 2001– 
2005 (%) 

– 12 % 

+ 6 % 

– 22 % 

– 12 % 

– 6 % 

– 4 % 

Fattening pigs and sows 

Following  dairy  and  beef,  fattening  pigs  and  piglets  is  the  third  most  important  production 
line  in  northern  Sweden  and  support  to  fattening  pigs  is  the  second  largest  aid  within  the 
scheme.  In  comparison  with  the  rest  of  the  country,  the  level  of  the  production  is  however 
small. The number of sows in the support areas amounts to slightly more than 3 % of the total 
number of sows in the whole country over the period 1995 to 2004. The number of farms for 
fattening pigs with support is declining from 121 in 2001 to 101 in 2005, but production has 
increased  slightly  implying  a  structural  adjustment.  Sows  and  piglet  production  is  however 
declining, both in terms of number of farms as in number of animals. 

Looking  at  the  different  sub-regions,  the  numbers  of  fattening  pigs  and  sows  have 
substantially decreased in the aid area 3. In contrast, the number of pigs has increased in aid 
area 1 and 2 over the period. On the whole, the total production has stayed close to the same 
in the support region (Table 5). 

Table 5 – Number of fattening pigs and sows with aid, 2001–2005 

Aid area / year 

2001 

2002 

2003 

2004 

2005 

1 

2 

3 

1–3 

883 

82 593 

18 170 

101 646 

613 

77 431 

18 122 

96 166 

614 

73 119 

15 137 

88 870 

1 087 

83 054 

14 646 

98 787 

1 390 

86 378 

15 158 

102 926 

Change 2001–
2005 (%) 

+ 57 % 

+ 4 % 

– 17 % 

+ 1 % 

3.3. 

Development of the land use and farm structure 

The agricultural landscape in northern Sweden consists mainly of small farms where animal 
husbandry  dominates.  However,  as  in  the  rest  of  the  country,  a  continuous  structural 
adjustment  is  going  on  with  a  reduced  number  of  farms,  especially  in  the  milk  production 
sector. Though, this adjustment to economies of scale is slower in the support area than in the 
rest  of  the  country.  In  Sweden  as  a  whole,  71 %  of  the  number  of  farms  remains  in  2004 
compared with 1995. In the support region, a smaller share of the farms remains and the share 
ranges from 47 % in aid area 1 to 63 % in aid area 3. Approximately a fifth of the numbers of 
farms are situated in the support areas. 

Transports costs within the farms are increasing due to the distances between fields. It is not 
possible to create large unbroken and unified  fields due to layout of  nature. The size of the 
field plots is small and in the same time combined with a relatively small share of agricultural 
land out of the total surface area. 

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The  reduction  in  number  of  farms  reversed  in  2005  due  to  the  implementation  of  the  CAP 
reform 2005, which led to an increase in the number of farms as well as area. However, there 
is no real structural change in the farming sector; the change in figures is a consequence of 
changed definition of agricultural holdings for what areas fall under the new eligibility rules.  

Table 6 – Number of holdings in different sub-regions and in whole Sweden 

Area / year 

2001 

2002 

2003 

2004 

2005 

% change 
2001–2004  

% change 
2001–2005  

1 

2a 

2b 

3 

1–3 

Sweden 

1 661 

4 856 

3 498 

3 330 

13 345 

74 195 

1 537 

4 462 

3 180 

3 133 

12 312 

70 914 

1 400 

4 093 

2 883 

2 886 

11 262 

66 780 

1 374 

4 010 

2 786 

2 810 

10 980 

65 801 

2 106 

5 179 

3 726 

3 661 

14 672 

74 863 

– 17 

– 17 

– 20 

– 16 

– 18 

– 11 

+ 26 

+ 7 

+ 7 

+ 10 

+ 10 

+ 1 

In  Sweden,  a  tenth  of  the  agriculture  land  is  located  in  aid  areas  1–3.  The  decrease  in 
agricultural land has been less than the decrease in the number of holdings suggesting that the 
remaining  farms  have  become  larger.  In  the  support  region  between  6  and  15 %  of  the 
agricultural  land  has  been  withdrawn  from  1995  to  2004.  The  comparison  with  2005  is  not 
useful due to the consequences of the CAP reform as mentioned above.  

In the northern regions, both the cost of labour and cost of buildings in agriculture are usually 
higher  mainly  due  to  greater  labour  input  per  dairy  cow.  One  of  the  reasons  for  the  higher 
labour input is that the stockholdings are smaller and the farm layout and climatic conditions 
are more unfavourable. This in turn leads to lower crop yields and high labour intensity in the 
production of fodder on the farm. 

3.4. 

Socio-economic impact 

In the whole of Sweden, as well as in the support areas, the number of people employed in 
agriculture  is  declining  relatively  quickly.  The  differences  between  the  sub-regions  of  the 
support  area  are  moderate.  For  sectors  other  than  agriculture,  the  trend  is  slightly  more 
negative in the northern areas. The population growth in the northern regions is much weaker 
than the rest of Sweden. Over the period 1995–2004, the population in Sweden grew by 4 %, 
at the same time as it declined by 5 % in the support areas (Table 7).  

The  Swedish  economic  geography  is  really  heterogeneous  and  there  is  a  large  difference  in 
growth  patterns  between  the  strongest  and  weakest  communes.  The  combination  of  weak 
population  growth  and  low  average  wages  means  relatively  weak  purchasing  power  for  the 
interior of northern Sweden. This in turn helps to restrict trade and services, which are often 
dependent on nearby market. In certain areas, this can be compensated for by high numbers of 
visitors and tourists, for example in parts of the mountain areas. 

Table 7 – Countryside changes in subsidy areas 1–3 compared with the rest of the country 

Variables 

Subsidy areas 1–3  Rest of Sweden 

Population change 1995–2005 

Change in number employed 1995–2004 

Change in number employed in agriculture, forestry, hunting, fishing 1995–2003 

Change in Gross Regional Product 1995–2003 

–5% 

1% 

–19% 

8% 

4% 

10% 

–20% 

29% 

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3.5. 

Impact on state of the environment 

The change in the landscape expressed as the change in the area of arable land and farmland 
over the past few years is perhaps the environmental change that is most tangible and has the 
greatest  significance  for  people  living  in  Nordic  aid  areas.  Over  the  period  1999–2003  the 
area of pasture land in subsidy areas 1–3 fell by 13 %. 

The agricultural practices in the support areas are characterised by less intensive production 
and  the  main  cultivation  is  grass  land  and  pastures.  This,  in  combination  with  the 
geographical  situation  contributes  to  a  less  environmental  negative  impact  than  agricultural 
activities  in  other  areas  of  the  country.  The  main  form  in  the  cultivation  is  pasture  which 
normally  relies  on  a  low  level  use  of  fertilisers  and  pesticides.  Also  the  climatic  conditions 
favour lower use of plant protection use. A relatively high proportion of the land is used for 
organic farming, i.e. 32.6 % of the total arable land. 

Generally, it may be considered that the trend towards fewer and larger units, as also seen in 
the  support  region,  is  not  always  beneficial  to  the  environment.  Modern  systems  for  milk 
production, which are more common on larger farms than smaller one, are often based on a 
lower level of pasturing. Pasturing is an important way to maintain the biodiversity and the 
open landscape. 

3.6. 

Impact on the food chain 

The main problem in the Swedish agricultural market is high transport costs due to the long 
distances  and  relatively  small  markets  because  of  the  small  population.  This  applies  to  the 
northern  regions  even  more  notably.  In  order  to  improve  competitiveness  the  number  of 
slaughterhouses  and  dairies  in  the  support  region  has  decreased  and  production  has 
concentrated.  The  decreasing  number  of  food  industry  plants  has  increased  the  distances 
between the farms and the plants, hence also the transport cost. 

4. 

CONCLUSION 

This  report  gives  an  account  of  the  authorisations  granted  and  the  results  achieved.  It  is 
compiled  on  the  basis  of  data  supplied  by  the  Swedish  authorities  in  compliance  with 
Article 143(2) of the Act of Accession. Based on the report, main features are as follows: 

(1) 

(2) 

(3) 

Regarding most of the sectors receiving Nordic aid, total permissible production levels 
or  aid  limits  were  not  exceeded  in  the  assessment  period  except  for  egg  production 
(laying  hens)  where  production  levels  as  well  as  aid  levels  were  exceeded  in  2003, 
2004 and 2005. 

In general, the structural development of the agricultural sector does not deviate from 
the development of the sector in the country as a whole. 

The controls carried out by the Member State show some anomalies. However, it should 
be noted that there is a limited control selection that increases the statistical uncertainty in 
the results. The required reports have been submitted to the Commission as laid down in 
the Act of Accession. 

(4) 

The  objective  of  the  Nordic  aid  scheme  is  to  ensure  that  agricultural  activity  is 
maintained  in  the  region.  The  verification  whether  the  Nordic  Aid  has  achieved  this 

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objective is difficult as there are other support schemes targeting agriculture that also 
apply  in  the  region.  The  scheme,  including  the  payments  and  individual  amounts  as 
well  as  the  designation  of  the  sub-regions,  has  never  been  verified  after  its 
introduction.  The  Commission  has  therefore  commissioned  a  study  to  obtain  a  more 
detailed  picture  of  the  scheme  and  its  effectiveness,  efficiency  and  relevance  of  its 
implementation during 1995–2005. The study has also to be carried out in the light of 
the  reforms  of  the  common  agricultural  policy.  The  results  of  this  study  will  be 
available at autumn 2007 and will be used to further develop the Nordic aid scheme.  

On  the  basis  of  the  information  provided  by  the  Swedish  authorities,  the  Commission 
considers  that  in  general  the  Swedish  authorities  have  applied  Commission  Decision 
2000/411/EC and Commission Decision 2004/291/EC on aid to northern regions properly. 

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