The average volume of Austrian agricultural production in 2000 declined as a result of severe drought-related harvest losses and lower timber removals. Agricultural prices increased, but were unable to keep pace with the steep rise of market prices for agricultural inputs. Taken together, these developments resulted in a fall of income from agriculture below the previous year's level. However, this income loss was more than made up for by higher direct payments due to the 1999 CAP reform and a reduced value-added tax burden on flat-rate farmers following the amendment to the Turnover Tax Act. Thus, income from agriculture and forestry increased for the first time since 1995. Considering the average of all Austrian Länder, the value of gross output of agriculture and forestry rose only slightly in 2000 (+0.3 percent). Losses in crop production and forestry compared with a substantial increase of output in livestock farming. The differences in the development of gross agricultural output between the Länder were higher than usual. The best results were reported by Upper Austria, Salzburg, Vorarlberg and Styria, with growth rates of between 3.6 percent and 5.6 percent. Upper Austria, the centre of pig farming in Austria, derived an above-average benefit from the speedy recovery of the pig market; a record fruit crop also contributed to the favourable situation. In Salzburg the satisfactory result was due, above all, to favourable results in dairy and cattle farming as well a higher timber harvest. Vorarlberg reported satisfactory output levels in most of the sectors of importance for the province, including forestry. In Styria the good crop production results and the substantial output increase in pig farming by far exceeded the losses of the forestry sector. Carinthia reported a stagnation of its gross agricultural output. While a severe decline was recorded in forestry, a sector of particular importance for the province, revenues from crop production as well as pig, poultry and cattle farming were on the increase. In Vienna, Lower Austria, Burgenland and the Tyrol gross agricultural output reductions of between 3.8 percent and 6.1 percent were reported. The sharp drop of forestry output had a particularly strong influence on the overall result in the Tyrol, while poor fruit and wine harvests affected the results in Vienna. The Länder in Eastern Austria, i.e., Lower Austria and Burgenland, have large crop production sectors and were therefore severely affected by the drought. Lower Austria (–3.8 percent), in particular, felt the impact of crop failures as well as poor wine and fruit harvests. Losses were also reported by the forestry sector. Thanks to the recovery of the pig market, livestock farming produced higher revenues. Agriculture in Burgenland (–4.4 percent) is dominated by wine and crop production. Farmers in Burgenland suffered most acutely as a result of the drought. Austrian farmers received a total of approximately ATS 17.8 billion in direct payments, up by 0.5 billion from the year before. Considering the average of all Austrian Länder, these subsidies accounted for about 35 percent of the total value of final agricultural production. In regional terms, the ratios of state aid ranged between 26.5 percent in Styria and 47.9 percent in the Tyrol. The figure for Vienna, i.e., 3.0 percent, is untypically low. This illustrates the great importance of these transfer payments for the profitability of agricultural production and the generation of income in agriculture under the conditions of EU agricultural policy.