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Production effects of moving to flatter structure of direct payments

What might be the production, consumption and trade effects of the Commission’s proposals to redistribute direct payments by moving to a flat(ter) structure of direct payments across the Member States, and to redistribute payments within Member States by moving from the historic basis of farm payments (in the majority of Member States which operate this system) to a regional flat rate system?

A silly question, some might respond, for are not the EU’s direct payments decoupled (leaving aside the continued existence of a share of coupled payments) and thus not meant to have an effect on farm production? If a direct payment is truly decoupled, then moving payments from one farm to another, or from one country to another, will affect relative incomes but not output.… Read the rest

DG Agri study: Don’t be afraid of liberalization

Farm interests routinely threaten that any reduction in support will provoke a slump in production, endangering EU food security, and threatening massive land abandonment to the detriment of rural life and biodiversity. The findings of the Scenar 2020-II – Update of scenario study on agriculture and the rural world, commissioned by DG Agri, strongly contradict such panicmongering about the looming end of EU agriculture.

The study looks at three scenarios. The reference case assumes a 20% (nominal) CAP budget reduction, reduced intervention stocks, full decoupling, a 30% direct payment reduction, a 105% increase for the second pillar, and a moderate Doha agreement (based on the Falconer paper, including the elimination of export subsidies).… Read the rest

Lessons from the 2009 EU dairy market crisis

The EU dairy market is now recovering from the severe drop in milk prices in 2009. Perhaps the clearest sign of this recovery is the setting of export refunds on dairy products to zero since mid-November, as world market prices for dairy products have strengthened in recent months.

It is thus an opportune time to evaluate the EU’s response to the crisis, and to see what lessons might be drawn for how the Union can address similar problems in other farm sectors in the future. My view is that there is a lot to be learned from the dairy crisis, and that the outgoing Commissioner deserves credit for the way she handled it.… Read the rest

US farmers want out of conservation, environmentalists resist

The current high prices for arable crops mean that farmers in the US and Europe are reconsidering whether putting their land into government-financed conservation schemes is such a good idea financially. The EU is well on the way to releasing all its set aside land back into production, and in the US Congress is considering whether to allow farmers to leave long term conservation contracts without facing any penalties. … Read the rest

New Humboldt University report on global market trends

Another study forecasting higher real food prices for the next decade has recently been published by three authors associated with the Humboldt University in Berlin led by Professor Harald von Witzke. The working paper provides a useful qualitative survey of the reasons why agricultural supply will have difficulty in keeping up with the demand for food and other products of agriculture (including bioenergy). For the more technically minded, it uses a partial equilibrium multi-market model (descended from the venerable SWOPSIM model once supported by the US Department of Agriculture) to provide quantitative estimates of price levels for the key grains and oilseeds which are the focus of the study.… Read the rest

Irish farmers: biting the hand that feeds them?

The Republic of Ireland will hold a referendum on ratification of the EU’s Lisbon Treaty on 12 June 2008. The Irish Farmers Association is urging a No vote, on the grounds that the EU’s push towards more open world markets in agriculture could expose them to competition from overseas, notably from Latin America.

Ireland gets way more than it’s fair share of EU farm handouts. And this fact will not be lost to other member states if Ireland votes to derail the Lisbon Treaty. The EU is currently engaged in a fundamental, ‘once in generation’ review of its budget. The main target for cuts appears to be the agriculture budget, which accounts for around 45% of all EU spending.… Read the rest

Farm land price boom

The cost of agricultural holdings across the EU has risen to record levels. However, this is not entirely good news for farmers. It makes it even harder for those who do not inherit to enter the industry, while only farmers wanting to retire can cash in. Tenant farmers face higher prices making life more difficult for them.… Read the rest

World Bank weighs in to ‘food versus fuel’ debate

World Bank President Robert Zoellick has warned that high food prices are threatening to undo seven years of progress in global poverty reduction. Zoellick has encouraged donor countries to take immediate action to increase funding to the UN World Food Programme and coordinate a ‘New Deal on World Food Policy’. The World Bank has released a new analysis which points the finger squarely at biofuels as the prime cause of the recent surge in global commodity prices. … Read the rest

World Bank weighs in to 'food versus fuel' debate

World Bank President Robert Zoellick has warned that high food prices are threatening to undo seven years of progress in global poverty reduction. Zoellick has encouraged donor countries to take immediate action to increase funding to the UN World Food Programme and coordinate a ‘New Deal on World Food Policy’. The World Bank has released a new analysis which points the finger squarely at biofuels as the prime cause of the recent surge in global commodity prices. … Read the rest

Food security fears mount

Fears of unrest are increasing in developing countries as shortages develop of staple foods or prices increase substantially. Governments have cut import tariffs to cope with the problem, but hoarding to take advantage of future price rises has exacerbated the difficulties being encountered.… Read the rest