puts to food retailing. Improved productivity and food security led to mature markets for staple foodstuffs and limited the opportunities for further growth. Food suppliers responded by increased differentiation and food innovation. The largest actors, including large-scale food retailing and food catering/service busi­nesses have increasing influence over the production of food. Food suppliers sought to expand the market ini­tially by increasing the range of available foodstuffs through trade in "exotic" foods, through yearround supply of fruits and vegetables, through the development of the processed food market and through the development of "quality" food products. Crop and livestock enterprises have become fewer and larger due to economies of scale; this trend is likely to continue. Changes in agricultural labor have been uneven across the region and across agricultural systems. The need for farm labor has generally decreased in con­ventional cropping and livestock system, but some farming systems, particularly fruit and vegetable production, have intensive demands for farm labor. Increases in sizes of farm and food processing entities have often led to reliance on immigrant labor.

5. Biofuels have always been a component of energy production in NAE, especially for heat, although bio-mass is generally less important as a fuel source in NAE than in other regions. In the past several years, biofuel production has dramatically increased in im­portance and application. Policy directives across much of the NAE have led to the subsidization of the use of biofu­els to replace fossil fuels, which has spurred the production of bioethanol and biodiesel, mostly from maize and oilseed rape. There is active research to generate "second-gener­ation" biofuels from other more energy-rich plant source materials, especially biomass.

6. The concerns over the application of new tools and technologies and the changed production systems resulting from them have contributed to a growing environmental, social and health awareness in NAE.
Crop and livestock production in the NAE is among the most intensive in the world and this has had serious adverse impacts on the environment. Increased awareness of these adverse effects has resulted in regulatory frameworks for the use of agrochemicals, the use of new tools and tech­nologies and the development of alternative production sys­tems, including organic agriculture. This awareness has led to changes away from production-oriented policies toward those that are market-driven or environmentally led. The recognition of the multiple roles of agriculture has emerged in political and economic agendas.
     In these agendas, agriculture is now seen as deliver­ing not only food but services that meet emerging social demands such as environmental protection (including the management of resources such as water and land, land­scape, biodiversity and natural habitat); environmentally-friendly production of food; use of land for residential needs and recreational activities; protection of local cultures and knowledge; protection of cultural heritage through the pro­duction of traditional foods; ethical dimensions of food pro­duction such as positive contributions to food security and

social justice (e.g., fair trade); and animal welfare consider­ations. These developments have been concurrent with an increasing demand for variety, including increased demand for foods that are high quality; locally produced; regionally specialized; organic; fairly traded; humanely produced; and ethnic.
     The relative peace and stability in NAE has been an important component in securing food security.

2.1 Agriculture and Food System Specialization in NAE
In the past few decades agriculture in North America and Europe has gone through dramatic structural change. There has been a decrease in the number of farms, reduction in the agricultural labor force, increased specialization geographi­cally and at the farm level, and a loss of self-sufficiency at the farm level.
     Technological change has been rapid in NAE and the introduction of any new agricultural technology has impli­cations for markets, producers and consumers (Hayami and Ruttan, 1985; Kislev and Peterson, 1986). In most of NAE, technological change has favored capital intensive technolo­gies and economies of scale. Mechanization has increased, generally allowing for larger average farm sizes although there is considerable heterogeneity in farm size and scale in NAE. Most NAE farmers have attempted a scale of op­eration characterized by the lowest cost per unit of output. The average unit cost follows an L-shape function; the unit cost at first decreases sharply with size but then reaches a plateau (Hall and Leveen, 1978; Nehring, 2005). The evi­dence for diseconomies of size is weak or non-existent. In spite of the fact that the average size of farms has increased in most of NAE, they are mainly managed by private farm families, most of which rely on off-farm income in addi­tion to income from farming activities (Hoppe and Banker, 2006).
     The decreasing number of farms, combined with in­creasing total output has led to concentration of produc­tion (Figure 2-1). The number of farms necessary to produce a particular share of output has fallen; for example, from 1989 to 2003 the fraction of US farm production by large scale family and non-family farms increased from 57.7 to 72.8%. In Western Europe the farm size in terms of land area is only one tenth of that in the US; the number of farms is much higher but rapidly decreasing. From 1983 to 2001 the number of farms decreased in EU-12 from about 9 mil­lion to 6.5 million, but farms grew larger, especially in the livestock sector. A larger percentage of the farms in Europe compared to farms in North America operate on a part-time basis because of the smaller farm size.
     Economic growth also contributes to farm structure (Heady, 1962). Other things being equal, including the labor share of inputs, the scale of farm businesses must increase in proportion to the increase in non-farm labor earnings. The growth of other sectors of the economy has driven labor from agriculture to more productive sectors in most parts of the NAE.
     Specialization,   an  important  aspect  of productivity growth in NAE agriculture, has improved the spatial or­ganization of the food chain and lowered production and transportation costs (Chavas, 2001). In Western Europe and