Farm incomes in the EU’s 15 oldest member states face a 3.5% drop by 2020 while incomes for newer entrants to the union will grow by a third, according to a European Commission report.

The report, Prospects for Agricultural Markets and Income 2011-2020 said overall farm income across the EU’s 27 states would increase by 9%.

But this figure masks a 3.5% fall in the EU15 member states compared to an increase of 35% in the EU’s newest 12 countries such as Poland and Slovakia, the report says.

A steady increase in subsidies for the 12 new entrants is the main factor in the income growth, it adds. 

However, the report warns of increasingly short supply of labour across all 27 states which will ultimately add to farm business costs.

Market predictions for cereals are for prices to remain above average between 2011 and 2020. Prices will be bolstered by growth in global food demand and the development of the biofuel sector.

A tight supply of cereals caused by a relatively small increase in cereal crop yields, at just 0.5% a year, would help to ensure firm prices, it suggests.

The outlook for pig and poultry production was strong with a 3.6% increase in production driven by an increase in consumption. However, lamb production is expected to fall by 7.9% and beef production by 1.3%. EU milk production is projected to increase by 7%.