Farming conditions in Europe are changing substantially. The liberalisation of agricultural commodity markets is accompanied by an increasing societal demand for environmental services to be provided by the farming sector. Significant changes are necessary to enable the farming sector to cope with these challenges. The paper describes some general developments of the past and outlines perspectives for the future. Explicit consideration is given to the future of single ownership family farms on one hand, and the perspectives and structural requirements of large scale farming in crop and livestock production on the other hand. The analysis shows that the future competitiveness of the European farming sector largely depends on political decisions. Given the romantic views of the majority of the population as well as many politicians it is everything but certain that the agricultural policy will provide the basis for an economically efficient and therefore globally competitive farming sector in Europe.