European farmers pursue sustainability, cautious about profitability

Following record crop prices and profits in the previous seasons, European farmers say they are worried about volatile prices, high input costs, and weather events (Exhibit 1). Forty-five percent of farmers said they anticipate declining profits in the next two years, with weather and climate events as a major perceived profit risk, particularly among specialty crop growers. Concerns about the future also appear to hold back their willingness to invest. While 57 percent of US farmers surveyed intend to invest in yield-increasing products, only 31 percent of European farmers claim the same.

Ninety-eight percent of European farmers said they have adopted at least one sustainable practice. Adoption across hectares is highest for crop rotation (71 percent of farmers using it on 76 percent of their field area), followed by reduced or no-till (56 percent of farmers on 63 percent of acreage). Variable-rate fertilizer and spraying also scores relatively high (53 percent of farmers on 83 percent of acreage) (Exhibit 2). The survey results also show that more European farmers are planning to adopt on-farm renewable-energy generation as well as slow-release and variable-rate fertilizers in the next two years.

Economic upside appears to be the primary driver for adopting sustainable practices: 78 percent of farmers said they are motivated by additional revenue, lower production costs, higher output prices, and yield benefits. Participation in formal sustainability programs, however, is low, due to nonavailability, lack of knowledge about the programs, and uncertain ROI (Exhibit 3). Soil health programs have the highest participation (34 percent), while carbon programs lag behind at 9 percent. Planned adoption of carbon programs has decreased compared with 2022, with 46 percent of farmers citing availability as a barrier; a total of 66 percent said they would participate in a carbon program if it included some form of incentive payments of about €32 per hectare, on average.

The use of biologicals (biocontrol, biostimulants, and biofertilizers) varies by crop type, input prices, and regulatory outlook (Exhibit 4).¹Biologicals, specifically biostimulants, are eco-friendly solutions that improve nutrient acquisition, nutrient use efficiency, and abiotic stress management in crops. About one-third of farmers said they use biologicals, with specialty crop growers (38 percent) more likely than row crop growers (22 percent) to use them. Economic factors such as cost savings and increases in yield appear to promote adoption. Government support and regulation may influence differences in regional adoption.

European farmers lag behind in agtech adoption, with only 46 percent saying they use at least one technology, compared with 74 percent in the United States and 53 percent in Brazil (Exhibit 5). Smaller average farm sizes in Europe (180 hectares) compared with Brazil (1,300 hectares) and the United States (14,500 hectares) may account for this gap. High costs and uncertain returns deter many, with 49 percent citing implementation costs as prohibitive and 45 percent unable to justify the investment.²Global Farmer Insights Survey, McKinsey, 2024. Larger farms are more likely to adopt advanced technologies, while smaller farms are more likely to use less-scalable options such as farm management software.

Digital engagement in purchasing is gradually increasing, with an average of 26 percent of European farmers saying they prefer online channels across the buying journey, compared with 17 percent in 2022. Still, traditional methods remain favored for better customer service and recommendations (Exhibit 6). Five percent of farmers said they sell outputs online, preferring cooperatives (50 percent) and traders or elevators (46 percent). Replacement parts for equipment are the leading products bought online (30 percent).