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More supply management demanded in COMAGRI single CMO report

The French EPP member Michel Dantin is the COMAGRI rapporteur for the Commission’s draft revisions of the single CMO regulation. His draft report is detailed and comprehensive – he alone has tabled 434 amendments to the Commission’s draft regulation. Many of these amendments implement the two guiding principles which animate his report, namely, distrust in the ability of markets to always work satisfactorily where agriculture is concerned, and the desire to emphasise the legislative role of the Parliament vis a vis both the Council and the Commission.
Mr Dantin is a believer in the theory of ‘agricultural exceptionalism’ and that farmers require state assistance to operate in dangerous markets.

The fact that agricultural markets are, as a result, becoming more volatile implies first of all that the CAP budget, especially where the Single CMO is concerned, has to continue on its present scale if it is to cope with the crises which can, at any moment, threaten Europe’s agricultural production potential and hence jeopardise the CAP’s prime aim, namely to ensure that Europeans can enjoy food security.

Mr Dantin would like to return to the days of centralised steering of agricultural markets through high price guarantees and tight border controls but, as he recognises, “The new global context … is such that it is no longer possible for the authorities to steer the markets by means of recurrent massive intervention, as this would prove to be costly and, worst of all, not particularly effective.
His solution, reflected in his amendments, is to encourage stronger concentrations of producers and private actors and to give them a role in supply management in crisis situations. Where supply management already exists, as in sugar and wine, he proposes retaining it, at least for a further period.

Relinquishment of responsibility for day-to-day steering of the markets must not, under any circumstances, lead to a situation in which every form of management would cease altogether. It therefore follows that private sector operators, under the supervision of the authorities, have to ‘take the helm’ and play a greater role in this area.
Strengthening the power of the market in the agricultural production sector within the food supply chain, not least by encouraging concentration, constitutes a priority for the reform of the Single CMO. Establishing strong producer organisations for all sectors, with much greater freedom of action than that afforded by the Commission proposal, especially as regards the management of supply and contractual relations, is an appropriate way to achieve that aim.

The other set of issues which drives many of his amendments is the inter-institutional struggle initiated by ambiguities in the Lisbon Treaty. This concerns in part how to monitor the powers delegated to the Commission and the Council following the passage of framework legislation. The preference of the Parliament, reflected in all the rapporteurs’ reports, is for explicit description of the scope of delegated legislation and the conditions under which that delegation is subject to be included in the basic regulation.
Strengthening producer power in the food chain

Some of his proposed amendments to strengthen the role of producer organisations and to give them powers of supply management include the following.
Contracts. In the absence of Union legislation on formalised, written contracts, the Commission proposal is that Member States would have the option to make the use of such contracts compulsory. For the milk and milk products sector only, some basic conditions for the use of such contracts are laid down in the draft regulation (reflecting the agreement on the ‘milk package’).
The Dantin draft report would require all contracts for agricultural products, not just for milk, if made compulsory by a member state, to include a range of specified conditions, including the price payable, the contract duration, quantity and quality requirements, details regarding payment procedures and requirements, arrangements for collection and deliverty and rules applicable in the case of force majeure.
Price negotiations. The Commission has proposed to allow producer organisations constituted by dairy farmers or their associations to negotiate contract terms, including price, for some or all of their members’ production with a dairy. In order to maintain effective competition on the dairy market, this possibility would be subject to appropriate quantitative limits.
The rapporteur’s report sees this as a model for relationships within the food supply chain. His amendments would allow producer organisations in all sectors consisting solely of farmers or their associations to negotiate contract terms, including price, jointly for some or all of its members’ production with a purchaser. Any a priori quantitative limits on the share of the market they can control are eliminated.
Inter-branch organisations. Inter-branch organisations in all sectors, with powers likewise going beyond what is provided for in the Commission proposal, are seen as encouraging a culture of cooperation among economic operators as well as facilitating collective practices that would benefit all concerned, consumers included. Therefore, the draft report narrows the Commission’s scope for interpretation when examining agreements, decisions and concerted practices of inter-branch organisations, for example, agreements seeking to stabilise production prices and guarantee fair prices for consumers (sic) would not be deemed a contravention of the Treaty.
Withdrawals. The rapporteur argues that intervening in the supply and demand for agricultural products via the minimal ‘safety net’ mechanism cannot be enough to combat the effects of increasing price volatility. His draft report recommends that an instrument based on private supply management and the coordination of the various operators should be implemented. Specifically, the latter should have the option of withdrawing a product during the marketing year through recognised associations of producer organisations that have an appropriate size on the market.

In extreme cases, such as large-scale health crises or market crises that the use of public intervention or private storage measures have failed to resolve, operators should be allowed, for a limited period and under the supervision of the Commission and the Member States, to come together to fix prices and keep a tight control over production and marketing in order to prevent the sector from collapsing.

Competition law exception. The Dantin draft report advocates that, given the specific features of farming and the food supply chain, agriculture must to some extent constitute an exception to competition law. This reflects the need to concentrate supply and strengthen the power that farmers can wield on the market. Therefore, more account needs to be taken of the specific characteristics of the agricultural sector in implementing EU competition rules, in particular to ensure that the tasks conferred on producer organisations, associations of producer organisations and interbranch organisations can be carried out correctly and effectively.
For example, where the Commission had ruled out a situation where producer organisations could attain a dominant position in the market, the Dantin report would amend this to note that

a dominant position shall be deemed not to be present where the market shares held on a relevant market by an undertaking, or by several undertakings linked by a horizontal agreement, in the agricultural and agri-foodstuffs sector, are smaller than the market shares held by the largest undertaking on the same relevant market at the next stage down in the supply chain.

Furthermore, where competition is excluded by means of agreements, decisions or concerted practices, the burden of proof is put on the party or the authority alleging the infringement to prove such exclusion.
Milk. In the milk sector, the Dantin draft report would introduce the possibility for a dairy herd culling scheme based on individual milk production trends should the market become seriously disrupted. The Commission would be authorised to grant aid to milk producers who voluntarily cut production, and to impose a levy on milk producers who increase production over the same period and in the same proportion.
Sugar. The rapporteur argues that, to enable beet growers to complete the necessary adaptation and to continue the efforts made in the wake of the reform to become competitive, the quota system should be extended until 2020. In a gesture to developing countries, the traditional supply needs of sugar for refining are fixed for the EU at 2,500,000 tonnes per marketing year, expressed in white sugar until the end of the 2019-2020 marketing year. This is an increase from the quota of 2,489,735 provided heretofore.
Wine. The draft report notes that intense political campaigning in producing Member States has highlighted the deep-seated attachment to the planting rights system, which serves to ‘safeguard’ elements as diverse as the quality of wines, their fame, the preservation of cultivated landscapes, spatial planning, the continued survival of family production, and more besides. Experience has shown, moreover, that the system has in no way prevented the sector from adapting to the great changes that the wine market has undergone over the past few years. The draft report thus recommends continuation of this system.
Other issues

Reference prices. The draft regulation is amended so that reference price setting and the activation arrangements for private storage aid allows fully for the trend in market prices, production costs, and producers’ profit margins.
Food demand programmes. The Commission regulation provides for school fruit and milk programmes which the rapporteur would extend to include vegetables. The rapporteur proposes that the main purpose of these programmes – to improve children’s eating habits – should be stated more explicitly. At the same time, he wants such schemes to contribute to achieving the aims of the CAP and he proposes to amend the regulation to require that Member States shall give preference to products originating in the Union (the Commission version only states that they may do so).
Mid-term review of market management tools. The Commission is requested to present a report to Parliament and to the Council, no later than four years after the entry into force of this Regulation, on market trends and the future of agricultural market management tools. The report should assess the suitability of existing market management tools in the new international context and, if necessary, look into the possibility of establishing strategic stocks. The report should be accompanied by any suitable proposals on establishing a long-term strategy for the EU with a view to attaining the objectives laid down in Article 39 of the Treaty.
European Price Monitoring Tool. The Commission’s work in setting up a European Food Price Monitoring Tool within Eurostat is welcomed. However, there should be regular reporting to the European Parliament and the Council on the outcome of its work. The draft report recommends that the European Food Price Monitoring Tool shall study in particular exports and imports, farm gate prices, consumer prices, profit margins, costs of production, processing and distribution at all stages of the food supply chain in the EU and the Member States.
A note on the decision-making process

In the pre-Lisbon Treaty days, the conventional model of agricultural decision-making was that ‘the Commission proposes, the Council disposes’. This formulation highlighted the role of the European Commission as the agenda-setter. This draft COMAGRI report makes clear that this is no longer an adequate description of how legislation can be introduced, although the Lisbon Treaty procedures still confer decisive powers on the Commission.
The Dantin draft report goes beyond the Commission proposals in many ways in proposing new and extended initiatives in various areas with a view to restoring more ‘dirigisme’ and supply management to agricultural markets. The Commission is required under the inter-institutional agreement to exercise its right of initiative to make it easier to reconcile the positions of the Council and the European Parliament. To this end, the Commission may incorporate into an amended proposal the European Parliament amendments which it supports, either unaltered or suitably reworded. These amendments can then be adopted by the Council as part of its common position by a qualified majority.
However, the European Commission has the right to oppose amendments proposed by the Parliament (or the Council). In order to force the Commission to adopt amendments with which it does not agree, the Council must agree them by unanimity.
Thus, the Dantin amendments in the draft report face three hurdles – will they be approved by COMAGRI? If so, will they be approved by the full Parliament in plenary? And if so, will they be approved by the Commission and incorporated into an amended proposal to the Council? If not, then it would require unanimity in the Council to have them adopted. Only if the legislation goes to conciliation following failure to agree after two legislative readings does the Commission lose its power to prevent the Council from acting by a qualified majority without its agreement.
Photo credit European Peoples Party

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