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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Milk policy in the EU – a case of policy incoherence

While milk producers in the EU struggle with low milk prices, the EU and its member states struggle to come up with a coherent policy to address the issue. Milk prices will not recover until there is a better balance between supply and demand. I have previously written a number of posts (here and here) in which I have described the policy responses introduced in response to the sharp fall in milk prices since their record high in early 2014.

These responses include measures designed to reduce supply. Specifically, the Commission has activated Article 222 of the CMO Regulation which suspends competition law in the case of producer organisations, co-operatives and inter-branch organisations and allows them to voluntarily limit supply with a view to raising the price of milk.… Read the rest

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The dependence of EU farm income on public support

In spite of the substantial reforms in the structure of the CAP over the past two decades, EU agriculture remains hugely dependent on public support. The importance of public transfers, including direct payments, to EU farmers can be shown in various ways. One indicator is the importance of direct payments relative to the value of total output in the total revenue of farms (used by DG AGRI in this report on EU farm income). We can also focus more directly on the role that public transfers play in sustaining farm income. Here, there are two possibilities depending on the definition used for farm income – whether this is taken as factor income or entrepreneurial income (using the definitions in the Eurostat Economic Accounts for Agriculture, EAA).… Read the rest

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Update on market crisis measures

There were two occasions last week which provided an opportunity for an update on the market crisis measures taken by the Commission and member states. On Monday 11 April, the AGRIFISH Council was briefed by the Commissioner for Agriculture and Rural Development Phil Hogan on progress in implementation of the market support measures for those sectors that were agreed at its meeting on 14 March. The following day, Tuesday 12 April, the Commissioner addressed the plenary session of the European Parliament on the measures to alleviate the crisis in the European agricultural sector.

The measures taken at the March 2016 AGRIFISH Council were intended to be market-oriented and budget-neutral.… Read the rest

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Use of risk management tools in the CAP

It has long been recognised that greater price and income volatility would accompany the move to a more market-oriented Common Agricultural Policy (CAP). Already in the run-up to the Fischler Mid-Term Review (MTR) in 2003 which led to the decoupling of direct payments, the Commission published a working document on risk management tools for agriculture, with a special focus on insurance, in 2001. The Council MTR agreement mandated the Commission to study specific measures to address risks, crises and natural disasters that agriculture may face. This led to a Communication from the Commission in 2005 on risk and crisis management in agriculture which discussed different instruments that could be implemented in the CAP.… Read the rest

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Preparing for the MFF Mid-Term Review

The EU budget is under increasing pressure in the face of both new and unexpected expenditure demands. Already, in the first two years of this Multiannual Financial Framework (MFF) period 2014-2020, virtually all of the flexibility instruments which were put in place have been fully utilised, in part to fund the incoming Commission’s flagship project for a European Fund for Strategic Investments, and in part in response to the large number of arrivals of asylum-seekers, refugees and migrants as well as the terrorist attacks in Europe. In total, around €12 billion has so far been mobilised under the various flexibility instruments, leading one commentator to observe that “the EU budget had been flexed to the maximum”.… Read the rest

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Further note on EU farm income trends

In my previous post, I discussed recent EU farm income trends based on recently-updated Eurostat data. Earlier this week, DG Agriculture and Rural Development released an update of its CAP Context Indicators. These are part of a set of CAP Indicators linked to output, results and impact which are aimed at measuring the effects of policy measures (the value of these indicators is discussed by Koester and Loy in this post).

The Context Indicators are intended to monitor general contextual trends in the economy, environment and society which may affect the performance of the CAP. There is a wealth of useful information in the short fact sheets which accompany each indicator.… Read the rest

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Recent trends in EU farm incomes

Earlier this month, without any fanfare, Eurostat produced its estimates of farm income for 2015 (see its database domain aact_eaa06 under the Economic Accounts for Agriculture, EAA). Given the noisy campaign by the farm lobby in recent months for additional support to the sector, one would expect the figures to show a sector in dire straits, reeling from crisis. There are, of course, individual sectors in trouble. There are individual member states where farm incomes over the past two years have taken a very serious hit. And there are individual farmers in all sectors, particularly those who are heavily borrowed, who have run into financial difficulty.… Read the rest

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Council supports voluntary milk reduction scheme

Yesterday, the Agriculture Council agreed on a package of 13 measures to bring relief to agricultural markets in difficulty. Most attention has focused on the Commission’s willingness to invoke Article 222 of the CMO Regulation to permit producer organisations and recognised interbranch organisations in the dairy sector to introduce voluntary measures to reduce milk supplies, financed by member state funds. This attention is due more to the unusual nature of the measure rather than an assessment of its likely effectiveness.

The measure was put forward by Commissioner Hogan in his address to the Council. The agreement is summarised here in the Presidency Council conclusions and here in this DG AGRI press release following the meeting.… Read the rest

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Temporary supply management for milk offers no solution

The agenda for Ministers meeting at the Agriculture Council meeting tomorrow Monday 14th March includes a discussion of the difficult market situation facing a number of agricultural sectors, including dairy, pigmeat and fruits and vegetables. Ministers will assess the adequacy and effectiveness of the market support measures currently in place, and whether additional measures could be envisaged.

At last month’s February Council, member states were invited to submit concrete proposals on possible additional measures, on top of the €500 million aid package adopted by the Council last September (extraordinarily, only 10 out of 28 member states have so far introduced schemes to spend this money).… Read the rest

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Agriculture in the debate over Brexit

The European Council meets this Thursday in the hope that it will agree on a package of measures that will satisfy the UK’s demand for a renegotiation of its relationship with the EU. The details of the package and the main stumbling blocks are spelled out in the Council President Donald Tusk’s invitation to leaders to the Council meeting. The mood music leading up to the summit meeting is constantly changing. Whether this is a careful choreography to persuade voters back home that what will be achieved is a significant deal, or whether the continuing objections will derail a deal will be clearer by the end of this week.… Read the rest