Over on the excellent VoxEU site, Thomas Hertel, Roman Keeney and Alan Winters try to answer the question why agricultural policy is so difficult to reform, as illustrated by the way in which difficulties in getting agreement on reduced agricultural support and protection has been one of the factors preventing progress in the Doha Round. They take issue with one justification for preserving rich countries’ agricultural protection that it helps poor farmers in the North while the benefits of liberalisation would go only to rich farmers in the South. … Read the rest
Options for milk quota reform
How to manage the transition to the phasing out of milk quotas is one of the items on the CAP Health Check agenda. A recent study from the FAPRI-Ireland team based in the Rural Economy Research Centre, Teagasc in Ireland has examined the impacts of two alternative transition paths to phasing out milk quotas by their expected date of elimination in 2014/15. … Read the rest
More on who benefits from farm subsidies
Jack Thurston reviews some recent academic studies, including a recent paper by Stefan Kilian and Klaus Salhofer from the Technische Universität Munich, which make the point that much of the benefit of agricultural support policies does not end up in the hands of farmers who are its intended beneficiaries, but rather benefits landowners. However, my reading of the Kilian/Salhofer paper is that we need to be careful in applying this conclusion to the EU’s Single Farm Payment.
Kilian and Salhofer highlight the requirement in the EU Single Payment Scheme that a farmer must possess an entitlement in order to qualify for the payment.… Read the rest
More on capping direct payments
Much initial reaction to the Commission’s leaked Health Check proposals has focused on its renewed attempt to introduce a cap on the Single Farm Payment amount which an individual farmer can receive. In fact, the proposal does not amount to a cap in the sense of an absolute ceiling, but takes of the form of a tapered payment Farmers receiving between €100,000 and €200,000 would face a 10% cut, those receiving between €200,000 and €300,000, a 25% cut and those receiving over €300,000, a 45% cut. Jack Thurston’s blog yesterday highlights the limited impact the measure will have.
It might be useful to put the Commission’s proposal in some historical perspective.… Read the rest
Commission's CAP Health Check proposals leaked
The Commission’s draft proposals for the CAP Health Check due to be officially released in November have now been widely leaked in the agricultural press (see the UK Farmers Guardian for one summary).
Much initial reaction has focused on the Commission’s renewed attempt to introduce a cap on the Single Farm Payment amount which an individual farmer can receive. Farmers receiving between €100,000 and €200,000 would face a 10% cut, between €200,000 and €300,000, a 25% cut and over €300,000, a 45% cut.
In the longer run, however, the proposals to move towards a standardised uniform, area-based system for calculating Single Payments from 2009, to eliminate partial coupling of arable payments, as well as to increase the compulsory modulation percentage from 5 to 13% by 2013 are likely to have greater significance for farmers and the direct payments system.… Read the rest
Commission’s CAP Health Check proposals leaked
The Commission’s draft proposals for the CAP Health Check due to be officially released in November have now been widely leaked in the agricultural press (see the UK Farmers Guardian for one summary).
Much initial reaction has focused on the Commission’s renewed attempt to introduce a cap on the Single Farm Payment amount which an individual farmer can receive. Farmers receiving between €100,000 and €200,000 would face a 10% cut, between €200,000 and €300,000, a 25% cut and over €300,000, a 45% cut.
In the longer run, however, the proposals to move towards a standardised uniform, area-based system for calculating Single Payments from 2009, to eliminate partial coupling of arable payments, as well as to increase the compulsory modulation percentage from 5 to 13% by 2013 are likely to have greater significance for farmers and the direct payments system.… Read the rest
Council agrees reform of the sugar reform
The Council agreed yesterday the Commission’s proposals to improve the attractiveness of the sugar industry restructuring scheme in order to meet the Commission’s objective of a reduction in 6 million tonnes of sugar quota by the end of the four year transition period 2006-2010 for the current EU sugar reform. As noted in a previous post, this reform target had been threatened by a much lower renunciation of quota in Year 2 of the reform than the Commission had assumed.
The key elements of the ‘reform of the reform’ are
- The percentage of the restructuring aid to processors which is to be given to growers and processors is fixed at 10 percent, with an additional top-up payment to growers of €237.50 per tonne of quota renounced, payable retrospectively.
Why farmers in the New Member States love the CAP
Jerzy Wilkin of Warsaw University in a recent paper has summarised the agricultural experience in the New Member States (NMS) under the CAP since they joined the EU in 2004. One of the points he highlights is the change in attitudes among farmers to the EU particularly in Poland, the largest of the New Member States. Although ex ante studies had suggested significant gains to agriculture as a result of accession, farmers were generally fearful and negative towards membership prior to 2004. Three years later, the situation is transformed. The share of Polish farmers supporting Poland’s accession to the EU has risen from 23% in 1999, to 38% in 2002, to 66% in 2003 and to 72% in 2005.… Read the rest
Danish parliament unanimously calls for elimination of CAP support
Some Danish colleagues told me recently that the Danish Parliament on 30 May last unanimously passed a resolution requiring the Danish government to propose a strategy for how it would actively work for the elimination of EU agricultural support. The strategy should include a timeframe and plan of activities which should take into account the planned CAP Health Check in 2008 and the review of the EU budget in 2009. The strategy should be presented to Parliament before the end of 2007. … Read the rest
Prospect for milk quota increases next year
The UK Farmers Guardian reports that Mrs Fischer Boel was forced to confirm that allowing an increase in milk production would be addressed as part of the Commission’s Health Check proposals expected in November after Germany raised concerns about rising retail prices. The Commission has a number of options, including an annual market-linked increase in quota, a reduction in superlevy, or the scrapping of restrictions on the transfer of quota between member states. A number of member states have already sought a quota increase. As I argued yesterday, increasing milk quota without at the same time sending a signal that current levels of dairy protection must be reduced by lowering support prices is likely to encourage farmers into an unsustainable increase in investment with considerable pain to follow when quotas are finally eliminated in 2015.… Read the rest