Portuguese agricultural markets, both inputs and outputs, were subjected to substantial policy intervention, particularly after the revolution. Under the old regime, agricultural pricing policy was largely oriented toward the provision of low-priced foodstuffs to urban areas, which required extensive controls over imports and marketing. Three state marketing enterprises were organized after 1974, primarily to manage trade in their respective commodity groups--cereals, oilseeds, and sugar and alcohol--in pursuit of price control objectives. Public assistance to farmers and ranchers involved subsidizing intermediate inputs, primarily fuels, fertilizers, and mixed feeds. These subsidies, however, were largely removed in June 1983. After the revolution, de facto credit subsidies for farmers (often associated with negative real interest rates) entailed very high transaction costs. As a result, only large farmers had access to the formal credit system.

As a condition of EC membership, Portugal adopted the Common Agricultural Policy (CAP), a basic instrument of the community's integration since 1962. The CAP was based on the principles of common pricing, EC preference, and joint financing. As Portugal adopted the transitional arrangements leading to full compliance with the CAP, both the locus of agricultural decision making and the level of incentives given by the system of price supports shifted from the nation to the EC. Portuguese prices of some commodities at the time of entry into the community were well above the EC levels. Cereal and dairy sectors would experience the most serious declines in real prices because they benefited most from price increases in the early 1980s and because they produced the commodities in chronic surplus in the EC. The Alentejo wheat and livestock systems, both based on poor soils, would likely become unprofitable during the transition to EC price levels. On the other hand, the prospects for rice, tomatoes, sunflowers, and potatoes, as well as Portugal's higher quality wine systems appeared to be favorable under the CAP regime.

Data as of January 1993