Category: Blog posts

The Commission has just forwarded the first of two required reports on the milk market situation and the prospects for a smooth phasing-out of the milk quota system. The next one is due at the end of 2012. The report concludes that a “soft landing” is on track in an overwhelming majority of Member States.

Milk quota prices have a very low value, already at zero in some Member States, and decreasing in most of the others with a view to reach zero in 2015. Milk quotas have ceased to work as a production limit in most Member States, especially in the new Member States, and market orientation is already the leading principle in a number of them. It concludes that under these circumstances there is no reason to revisit the Health Check decisions with regard to the gradual increase in quotas and the end of the quota regime on 1 April 2015.… Read the rest

The US Congressional Research Service has just updated its review of the US-EU beef hormone dispute, one of the longest-running trade disputes under GATT/WTO dating back to the 1980s. The briefing sets out the milestones in the dispute, discusses the basis for the differing positions of the EU and the US on the scientific evidence regarding the health risks of consuming hormone-treated beef, and outlines the Memorandum of Understanding signed between the two sides in 2009 which provides the basis for a potential settlement of this dispute.

The MOU provides that the EU should open an increased tariff rate quota for non-hormone-treated US beef at a reduced tariff rate, while the US agreed to delay its implementation of increased duties on particular EU imports, while retaining its existing duties which are sanctioned under the WTO dispute settlement procedure. Ultimately, there is provision for the US to drop is retaliatory duties altogether in return for a further increase in the TRQ for non-hormone-treated beef.… Read the rest

The Commission’s November 2010 communication on the future of the CAP post-2013 envisaged that Pillar 1 direct payments might, in future, consist of three elements: a basic income support payment; a green payment; and a natural handicap payment. Another theme of the communication is that greater flexibility should be given to Member States in how they distribute their Pillar 1 envelope. The Scottish Government recently released the Pack Report of an inquiry into future support for agriculture in Scotland. Although it appeared before the Commission communication did, some of its ideas reflect what is in the communication while other ideas suggest ways in which Member States might make use of any flexibility they were given.… Read the rest

The formal Commission communication on the future of the CAP published today, and which Jack Thurston has summarised below in his own inimical way, had become available some weeks ago in a leaked version when it went into inter-service consultation. It is an interesting exercise to deduce, from a comparison of the two versions, what changes were made as a result of this process and what implications they might have.

At the outset, we can state that the two documents are substantially the same, with only very minor adjustments. Thus, all of the criticisms made of the earlier document remain valid. The Commission stresses that this is still a consultation document. It does provide some shape to the discourse around the future CAP, sometimes in a positive direction (placing more emphasis on targeted payments for public goods and highlighting the importance of innovation) but sometimes in a negative direction (raising misleading concerns about relative farm –nonfarm income levels and food security).… Read the rest

The European Commission’s blueprint for the future of the CAP has been published. While the communication sets all the reasons why the Commission thinks the EU needs to keep on supporting its farmers, it puts off all the really big decisions for another day.

According to the Commission, the main objective of the CAP is “a territorially and environmentally balanced EU agriculture”. What this boils down to is that the Commission believes the EU should supplement any money farmers earn themselves with money from EU taxpayers. A considerable number of justifications are provided, among them:

– the EU should pay farmers because farm incomes are subject to greater variability and are, on average, lower than incomes in the rest of society. The Commission provides no evidence for this highly contested assertion.

– the EU should pay farmers to farm in places where it is too cold, to dry or too mountainous for farming to be economically viable, because it’s important that there is farming activity in every part of the European continent.… Read the rest

In the past few years commentators have emphasised the growing integration between food and energy markets. Food prices were always influenced by energy prices on the cost side, but with the growth of markets for biofuels made from agricultural feedstocks, prices are also linked on the demand side. If oil prices rose, this would tend to pull up food prices as grains, sugarcane and vegetable oils were diverted to fuel production, and if oil prices fell, feedstocks would move back again to the food market also pushing down prices there. The crucial lever here was seen as the Brazilian sugar-ethanol complex and Brazil’s fleet of flex-fuel vehicles, which facilitated easy substitution between the two markets.

But agricultural markets are subject to their own shocks independent of the energy market, and the price integration is far from perfect as shown by a comparison of sugar and oil prices over the past twelve months.… Read the rest

The European Court of Auditors today released a report reviewing the outcome of the 2006 sugar regime reform. The Court makes some criticisms of the design of the 2006 reform, but more important are its findings and recommendations which are likely to feed into the debate on the shape of the CAP post-2013. Here the report manages to give ammunition to both CAP reformers and diehards, and if early reactions in my own Irish media are any guide it is the more reactionary views which are getting the media spin.

The Court notes that one objective of the reform was to contribute to a more competitive sugar industry, and that this was to be achieved by concentrating quota reductions in the least competitive areas. The audit criticises the Commission for the absence of data on the productivity of individual factories and for the fact that data on the overall competitiveness of sugar production in different Member States was somewhat dated.… Read the rest