Author: Alan Matthews

Alan Matthews is Professor Emeritus of European Agricultural Policy in the Department of Economics at Trinity College, Dublin, Ireland. His major research interests are agricultural policy analysis, the impact of international trade on developing countries, and computable general equilibrium analysis of trade and agricultural policy reforms. He has worked as a consultant to the European Parliament, the OECD, the Food and Agricultural Organisation of the United Nations and the UN Industrial Development Organisation, and has been a panel member in a number of WTO Dispute Settlement procedures. He is a former President of the European Association of Agricultural Economists but writes here in a personal capacity.
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More on capping direct payments

I want to revert to the topic of the capping of direct payments under the CAP, which I last discussed here and here. It is not the most important issue in the Commission’s legislative proposals for the CAP after 2020. But the issue of the fairness of direct payments was raised as an issue in the CAP Communication, and the proposed capping has been defended as a significant step in the better targeting of these payments. There is thus some interest in asking how effective it is likely to be.

The current situation

The current situation reflecting the distribution of payments in claim year 2015 is shown in the following graph. The graph shows the cumulative number of beneficiaries and their cumulative share of total direct payments in that year. What emerges clearly is the large number of very small beneficiaries. On average, at EU level, half of the direct payments beneficiaries receive less than €1,250 per year (around €100/month), corresponding to 4.5% of the total direct payments envelope.… Read the rest

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Wales charts course towards radically different farm policy

Wales is one of the three devolved government regions which along with England make up the four countries in the UK. Its agricultural sector is, in absolute terms, small. Around 38,400 holdings farm an area of 1.9 million hectares, with an average farm size of 49 hectares. Just over 15,000 of these holdings receive support under Pillar 1 of the CAP as many of them are deemed to be ‘very small’ with insignificant agricultural activity. These farms produce output valued at £1.6 billion in 2017, contributing a gross value added of €457 million and a total income from farming (TIFF) of £276 million in that year (statistics taken from Wales Statistics and Research, Farming Facts and Figures, Wales 2018 and the Aggregate agricultural output and income web page).

Total receipts under the Basic Payment Scheme (BPS) amounted to £234 million while agri-environment payments under the Glaistir scheme amounted to a further £55.7 million in 2017.… Read the rest

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The Article 92 commitment to increased ambition with regard to environmental- and climate-related objectives

Article 92 of the draft CAP Strategic Plan regulation is headed “Increased ambition with regard to environmental- and climate-related objectives”. In my previous discussion of the proposed green architecture in the CAP post 2020, I interpreted this Article as a commitment to no back-sliding on expenditure on agri-environment and climate objectives in the new CAP. For this reason, I took a more positive view of the potential of the new legislation to live up to the Commission’s declared ambition in this area than reflected in initial statements from environmental NGOs.

In the wake of further conversations with Birdlife Europe who have had the benefit of discussions with DG AGRI officials, I conclude that my initial interpretation of Article 92 as guaranteeing no back-sliding in expenditure was incorrect. On closer reading the Article says nothing about financial commitments and indeed seems hardly to bind Member States to any substantive commitments at all.… Read the rest

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The greening architecture in the new CAP

Environmental NGOs were harsh in their immediate criticism of the legislative proposals on the new CAP. Greepeace said that the EU farming plan “could spell disaster for the environment”. BirdLife Europe said that “The European Commission’s claim that the new proposal will deliver a higher environmental and climate ambition has fallen flat”, arguing that the new plan “does not guarantee any spending on biodiversity and grotesquely slashes funds ring-fenced for the environment across the board”.

Birdlife Europe has produced a detailed assessment of the Commission’s proposals in a handy tabular form, pointing out both weaknesses in the proposals themselves as well as omissions where the proposals could be strengtened (a summary of this assessment has appeared on this blog).

In this post, I review some of the issues raised by these critiques and explain some of the key differences between the proposed new greening architecture and the policy that it would replace.… Read the rest

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France’s puzzling interest in increasing the CAP budget

The Commission’s CAP legislative proposals which were published on 1 June 2018 attracted some immediate reactions from different groups of stakeholders setting out their positions. The proposals are far-reaching and complex. Together with the impact assessment, they amount to 662 pages of text. They require time and careful analysis to fully understand. In the coming weeks, I hope to examine some of the key elements one at a time.

I begin with the budgetary allocations by Member States which are included as Annexes to the draft CAP Strategic Plans regulation. This combines the current direct payments and rural development regulations into one.

This has a certain topicality because agricultural Ministers from six Member States – FR, ES, IE, PT, FI and EL – met in Madrid recently to formulate a declaration calling for the CAP budget to be maintained at its current level. This declaration – which is open to agricultural Ministers from other Member States to support – will be presented and discussed at the next AGRIFISH Council on June 18-19.… Read the rest

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By how much is the CAP budget cut in the Commission’s MFF proposals?

Unlike in its presentation of its proposal for the current MFF in 2011, the Commission on this occasion in presenting its proposal for the 2021-2027 MFF did not provide comparative details on ceilings in the last year of the earlier MFF.

There are some understandable reasons for this. The next MFF is designed for 27 Member States without the UK, and so is not directly comparable with the current MFF. Also, the Commission has proposed a different and more simplified structure for the MFF which makes direct comparison difficult.

Nonetheless, in the absence of a column showing 2020 ceilings for the various MFF headings, it is not straightforward to try to work out whether the 2021-2027 figures represent an increase or decrease in proposed commitments and by how much. The Commission did not help its case by providing briefings on what these increases or decreases might be but only in current prices, thereby mixing up the effects of inflation and real changes in the volume of expenditure.… Read the rest

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Why capping will be a mirage

Commissioner Hogan confirmed in his press conference folllowing the publication of the Commission’s proposal on the next Multi-annual Financial Framework that the Commission intends to introduce a cap of €60,000 on the maximum amount of direct payments any holding can receive in the next CAP legislative period. Commission President Juncker is reported as telling the Belgian Parliament earlier this week that “the European Commission will propose a €60,000 limit on individual direct payments to support small farm holdings instead of ‘agricultural factories’”. These statements are misleading and disingenuous, because they ignore what is likely to be the fine-print in the Commission proposal.

The problem is that this proposal is unlikely to achieve its intended objective. The leaked draft of the Commission’s legislative proposals requires Member States to first deduct (the language used is “shall deduct”) the value of salaries paid from the direct payments received before the cap is applied.… Read the rest

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Commission assaults rural development spending to protect direct payments

Please note that the key chart in this post (the third chart, comparing the CAP ceiling in 2027 with that in 2020, has been updated using Commission figures in this post.

The Commission’s MFF proposal (including both ceilings for expenditure as well as ideas on how to finance the budget) was published yesterday. The Commission claims that the proposal includes reductions of roughly 5% in both the Common Agricultural Policy and Cohesion Policy programmes, as they have the largest financial envelopes. However, another way of looking at the numbers suggests that the cut is more like 15% overall in real terms over the period of the next MFF, but with a much bigger cut in Pillar 2 rural development expenditure of around 26%. Direct payments will be maintained constant in nominal terms. In this post, I set out the analysis behind these figures.

Budget Commissioner Oettinger had been indicating for some time before the publication of the MFF proposals that the CAP budget would be cut by around 6%.… Read the rest

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Is there a particular generational renewal problem in EU agriculture?

Six years ago, I wrote a post The greying of Europe’s farmers which reviewed the evidence on the ageing of farm operators up to that point in time (the latest data available referred to 2007). The data confirmed that Europe’s farmers were getting older. However, I questioned whether this was evidence of a growing policy problem. Instead, I suggested “that what we observe is a slow upward shift in the age distribution which can be explained by general social trends (longer schooling periods and longer longevity) rather than any specific worsening of the generational transfer problem in agriculture as such.”

The greying of Europe’s farmers continues…

The recent publication by Eurostat of the first results from the 2016 Farm Structure Survey allows us to revisit this issue. The table below shows trends over the period since 2005. Because 2016 data are not yet available for four Member States (Belgium, Croatia, Italy and Luxembourg) I provide two series in the table – one for the EU-28, and the longer series for the EU-24.… Read the rest

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The CAP and migration

One of the more unexpected sections in the Commission Communication The Future of Food and Farming published in November 2017 was the very final section on Migration. This begins “The future CAP must play a larger role in implementing the outcome of the Valetta (sic) Summit, addressing the root causes of migration.” This is, to my knowledge, the first time that an explicit link has been made between the CAP and migration pressures from countries outside the EU in a Commission publication. For example, in the most recent EU Policy Coherence for Development report from 2015, the section on agricultural policy makes no reference to migration.

The root causes of migration

However, 2015 was the year in which more than one million undocumented migrants and refugees arrived in Europe, and several thousands more died in their attempt to cross the Mediterranean. In May of that year, the Commission published its communication A European Agenda on Migration.… Read the rest