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.
Posted on

Does farm size matter?

On October 20th next I will take part in a workshop organised by DG AGRI at the Milan EXPO on the subject “Structural realities in EU agriculture: Does farm size matter?” The aim of the workshop is to discuss the challenges and opportunities brought about by the structural change of the EU agricultural sector for a) the up- and downstream industries, b) EU rural areas and c) the sustainability of agricultural production in Europe.
The debate on farm size
There is a long history in Europe of interest in the structure of agricultural holdings. Many European countries have had land legislation in place with the objective of maximising the number of farm holdings or limiting the maximum farm size. In recent decades, many of these restrictions have been removed, although rules limiting foreign investment in land still exist in a number of countries, particularly in the new member states. Nonetheless, the issue of farm size remains a controversial and emotional issue, as seen in the opposition to so-called ‘mega-dairies’ in a number of member states, and the introduction of the ‘redistributive payment’ option in Pillar 1 of the CAP permitting member states to make higher payments per hectare to smaller farms.… Read the rest

Posted on

Informal Agricultural Council to discuss climate-smart agriculture

During the next two days (14-15 September) the Luxembourg Presidency invites agricultural ministers to an informal Council meeting which had been intended to focus on agriculture and climate change. Because of Commissioner Hogan’s absence through illness from last week’s Council meeting it seems that a good part of the meeting will be devoted to continuing discussions on the EU response to low milk prices. The time available for the discussion on how agriculture can best address the challenges of mitigating climate change will thus be curtailed.
However, the Luxembourg Presidency has prepared a very useful background paper intended to set the scene for discussions between the Ministers in three working groups. This paper, entitled Towards Climate-Smart Agriculture, does a very good job in setting out the context and in describing some of the options open in moving to a climate-smart agriculture.
What the Presidency paper on climate-smart agriculture does not discuss
However, there are a few striking omissions in the Presidency paper.… Read the rest

Posted on

€500 million farm aid package announced

The farm aid package announced by the Commission (in the form of Vice-President Jyrki Katainen in the absence of Commissioner Hogan due to illness) at the extraordinary Agriculture Council yesterday exceeded the expectations raised by the Presidency background paper in a number of respects (the elements of which related to dairying I discussed in this post), but fell short of what some Ministers had sought and what the farm organisations deemed satisfactory. The Council’s conclusions can be accessed here.
In my view, the package is a measured response to the difficulties in some specific farm sectors and, indeed, the Commissioner has held his nerve in the face of demonstrations and protests. However, further discussions will continue at the end of this week and at the informal Agricultural Council next week (14-15 September) which otherwise will focus on agriculture and climate. These are intended to address some of the practical implementation questions raised by the Commission’s proposals but the issue of raising the intervention price for dairy products may still not be finally settled.… Read the rest

Posted on

Is the producer price of milk too low?

How serious is the current dairy market situation? Are prices really below costs of production? In this post, I examine recent dairy market trends to throw light on these questions. The Agriculture Council meeting tomorrow (see this post for a preview) is expected to agree a package of aid for dairy farmers, but why should this be necessary? The Milk Market Observatory now provides detailed and up-to-date information on milk market trends and I make extensive use of its data and charts in this post.
What is happening to milk prices?


The trend in milk prices shown in the chart above can be divided into two periods: a downward trend in the years to 2007 (driven by the reduction in intervention prices and export subsidies due to CAP reform), and an upward trend since then but with great volatility. The peak price was reached in Nov-Dec 2013 when the weighted EU average milk price reached €40.21/100 kg.… Read the rest

Posted on

Hold your nerve, Commissioner!

An extraordinary meeting of the Agriculture Council will be held tomorrow Monday 7 September to discuss the difficult situation on agricultural markets. The Luxembourg Presidency has floated a number of ideas for discussion to address problems in the dairy, pork and fruit and vegetable markets, and the Commissioner is expected to table a package of measures.
Farmers will be out in force in Brussels to make their case for further assistance to the sector. In this post, I look at the options being discussed to address the dairy situation in particular. In a separate post, I examine the background to the milk market situation to explain why farmers will be protesting in Brussels tomorrow.
The Presidency proposals of particular relevance to dairy farmers include:
• Returning “at least part of the funds collected by way of the 2014/15 milk super levy to the sector to ease its situation”.
• Enhancing promotion measures
• Extending safety net measures such as private storage aids
• Temporarily increasing the intervention price for dairy products.… Read the rest

Posted on

Status update on Rural Development Programmes

DG AGRI was able to announce in this past week that it had approved a further 5 Rural Development Programmes (RDPs) for the period 2014-2020. This means that 78 of the 118 RDPs have now been adopted covering 76.6% of the envisaged funding. The state of play (as of the end of August) is shown in the graphic below. Note that one-third of RDPs still remain to be adopted at this point, even if they account for less than 25% of the envisaged expenditure.
Source: DG AGRI
Reasons for delays need to be examined

When the approval exercise is completed, we will need an investigation into the reasons for these unacceptable delays and some allocation of responsibility between possible contributing factors. Lessons need to be learned for the next programming period. The factors which might have contributed to the delays in approval fall under four headings:
• The delayed approval by the Council and Parliament of the basic legislation which in turn delayed the adoption by the Commission of the relevant delegated and implementing acts interpreting how the legislation should be implemented.… Read the rest

Posted on

Scrap the crop diversification greening requirement and find a sensible replacement

Here is a suggestion for the Commissioner’s simplification agenda: scrap the crop diversification requirement, which is one of the three ‘simple, generalised, non-contractual and annual actions that go beyond cross-compliance’ that make up the requirements for eligibility for the greening payment in the CAP’s Pillar 1. And use the money saved (up to half of the greening budget, or €6.1 billion in 2015) to promote improvements in soil organic matter (the main environmental objective of crop diversification) in a more cost-effective way.
The crop diversification greening measure is a scandalous waste of resources. Not only does the EU notionally spend €6 billion annually on this measure for virtually no environmental or other impact (as we will see). It is also a very complex measure to administer, requiring significant changes in the computer systems of the paying agencies to track individual cropping patterns and thus adding to the administrative costs of making payments to farmers.… Read the rest

Posted on

Should we limit methane emissions as part of air quality policy?

Last week the European Parliament’s Environment Committee (COMENVI) narrowly voted to adopt a report on the Commission’s proposal for a revised National Emissions Ceiling Directive (NECD). The NECD is one of the main measures designed to achieve the EU’s air quality targets in 2020 and 2030 under the Thematic Strategy on Air Pollution. The Commission’s proposal would tighten limits on emissions of sulphur dioxide (SO2), nitrogen oxides (NOx), non-methane volatile organic compounds (NMVOC) and ammonia (NH3) that each member state could emit for the period from 2020 to 2030 as well as introducing limits for the first time on the amount of methane (CH4) emissions after 2030. As agriculture is the single largest source of both ammonia and methane, this directive could potentially have an important impact on the agricultural sector.

The COMENVI opinion will now go forward to the full Parliament plenary at its first reading of the Commission proposal probably in October.… Read the rest

Posted on

Prospects for CAP reform after 2020

Even though the ink is hardly dry on the 2013 CAP reform, thoughts are turning already to the prospects for the next reform. I have already discussed some aspects relevant to the CAP post 2020 in this post, focusing in particular on a possible timetable of reform and some political economy issues likely to be important in determining the scope and ambition of any revision to the current regulations. I subsequently elaborated that post as a chapter in a book edited by Jo Swinnen on The Political Economy of the 2014-2020 Common Agricultural Policy: An Imperfect Storm which will be published next month (more on that book in due course). Another good read on this topic is Allan Buckwell’s recent thoughtful contribution putting forward ideas for a future CAP.
I recently returned to this topic when I was asked to give a presentation on the prospects for CAP reform after 2020.… Read the rest

Posted on

Food Wise 2025 agri-food strategy launched in Ireland

Last week the Irish government launched the latest in a series of rolling ten-year strategies for the Irish agri-food sector called Food Wise 2025 (FW2025). The report follows in the footsteps of Agri Food 2010 (published in 2000), Agri Vision 2015, Food Harvest 2020 (full disclosure: I was a member of the committees that drafted those two reports) and now Food Wise 2025. In this post, I review the latest strategy and comment, in particular, on its environmental implications.
While Food Harvest 2020 (FH2020) contained a number of detailed sectoral targets, Food Wise 2025 avoids this level of quantification and contains just four headline aspirations:
• increase the value of agri food exports by 85% to €19 billion,
• increase value added to the sector by 70% to €13 billion,
• increase the value of primary production by 65% to €10 billion.
• In turn, achieving these targets is expected to deliver a further 23,000 jobs in the agri food sector by 2025.… Read the rest