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On the complexity of defining active farmers

According to the latest proposals of the European Commission, applicants whose CAP direct payments equal less than 5% of their total receipts obtained from non-agricultural income or failing to provide the minimum land cultivation will be excluded from the provision of direct payments.

This might appear a good definition at first sight but the devil, as always, lies in detail. First of all, it is pretty sure that such a proposal would increase bureaucracy, which is totally against the ‘cutting the red-tape’ principle of the Commission. Just imagine how this system would be implemented for each and every farm in Europe. Second, some argue that this definition would exclude part-time farmers but this is not entirely true. As the definition would not apply to small farmers (receiving less than €5000), the latter argument only holds for those part-time farmers not participating in the small farmers scheme, the number of which is limited for sure.… Read the rest

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Basic Direct Payments for EU Farmers: The Proposal of the Commission of the EU

Direct payments are the most important budget outlay

EU expenditure on Agriculture and Rural Development makes up a high share of total EU expenditure. The share was – according to official information – 41 per cent of total EU expenditure in 2011 and amounted to €55.269 billion. The position ‘Direct Payments’ was the most important budget outlay during the present Financial Framework with €39.771 billion in 2011; it made up a share of 72 per cent of the total expenditure on Agriculture and Rural Development.

This budget item came into existence in 1993 as the Council of Agricultural Ministers had decided in 1992 to reduce the intervention prices for grain by about 33 per cent and to also reduce the support price for oilseeds. It was a widely held agreement in 1992 that farmers should be fully compensated for the income loss incurred from the price cut. This item grew over time as institutional prices for other agricultural products had to be reduced due to international pressure.… Read the rest

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Who cares about capping?

According to the latest proposals of the European Commission, the amount of support from the basic payment scheme received per farm would be limited to €300,000 per year. Payments higher than €150,000 will be subject to progressive reductions but the costs of salaries in the previous year can be deducted before these reductions apply.

Several critiques appear regarding capping. As recognised by many, it would further weaken the anyway decreasing competitiveness of European large farms by creating a discriminative instrument in the provision of direct payments. It is also contradictory to the economies of scale (and efficiency) as well as would significantly increase bureaucracy, which is totally against the ‘cutting the red-tape’ principle of the Commission. Moreover, it might also result in a splitting of farms, which would have serious consequences to the European agricultural sector and would not be ethically fair either. Another rather theoretical reasoning state that direct payments serve as a remuneration for the production of public goods, produced on small farms and large farms alike, meaning that capping is against the equal production of public goods.… Read the rest

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Evolving alliance for saving the status quo

France has played an extremely active role during the past few weeks to create a strong alliance aiming to save the status quo in the future of the CAP. Bruno Le Maire, the French Farm Minister has proved himself to be successful in persuading his German, Spanish and Italian colleague to help France maintaining the CAP as it is.
Starting on 30 January, Mr. Le Maire met Mario Catania, the Italian Farm Minister to discuss the future of the CAP. Both ministers declared the existence of a ‘strong convergence’ between French and Italian opinions in the debate and asserted that the two countries will safeguard each other’s interests in the main issues like fund distribution or the ‘milk package’ in the future.

Having Italy as an ally, Mr. Le Maire moved further to Germany to meet his colleague Ilse Aigner to discuss the Commission’s proposals for the future CAP. The outcome is a two-page declaration nearly stating that the CAP should remain as it is.… Read the rest

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Formulating interests of NMS in the CAP post-2013

Representatives of nine Central European Chambers of Agriculture gathered in Budapest in 28-29 November 2011 to have a discussion on the latest proposals of the European Commission on the future of the CAP. By the end of the meeting, a Joint Declaration has been signed, expressing the interests of the New Member States (NMS) in the future of the CAP.

The Declaration starts with the strong statement that the accession had an overall negative impact on NMS agriculture as its size and power has lost ground. Therefore the declaration clearly states that NMS have expected fundamental changes in the design of the CAP post-2013 and are highly disappointed with the recent proposals of the Commission. As clearly stated,

“The Commission’s proposal in its present form fails to envisage a stronger and more competitive European agriculture – instead it puts additional costs and various other administrative burdens on farmers. It does not come up with a genuinely simplified and transparent new regulation – instead it complicates the present system even further.

… Read the rest
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The green menu system: an idea worth considering

The recently published analysis of Groupe de Bruges (GDB) starts with demonstrating the challenges agriculture faces in the 21st century and points out that one of the biggest challenges will be to increase the production of sufficient, nutritious and high quality food for a growing world population while massively improving land use and management performance. In this context, the analysis criticises Commission proposals as they lack many important issues such as urgency, systems approach and integrated perspectives.

As to the lack of urgency, the analysis states that the Commission does not seem to realise that the European Union is in its biggest crisis ever and therefore does not provide any plans for acute natural/food security crisis. This argument is underpinned by that fact that there is neither prioritisation of objectives nor hierarchy of goals in the proposals. As to the lack of systems approach, it is well identified by GDB that income support in the current policy setting will not improve competitiveness of farmers as other factors like markets, services, information, capital and infrastructure as well as the position of farmers in the food supply chain seem to play a much more important role in this regard.… Read the rest

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Greening of the CAP: is the “Emperor Naked”?

Greening of direct payments is the focal point of the Commission’s legislative proposal. By this measure, Commissioner Dacian Ciolos substantiates the reform orientation and greater target orientation of the proposed new Common Agricultural Policy. Out of all funds for direct payments, 30 % would be allocated to fulfilling the environmental conditions, which is EUR 12.5 billion annually and five times more than the amount of funds for the agri-environmental measures under the current rural development policy.  The impact of agriculture on the environment is undisputable; we economists understand it through the concept of externalities or public goods, as something that cannot be regulated societally correctly by market forces.

Two poles: environment as target or excuse?

In last two decades, the arguments for the reform of traditional agricultural policy through targeted support for eco-system services of agriculture have been strengthening. The latter is also a part of the pro-reform campaign by the environmental organisations, which also emphasise that these services need to be carried out in a controlled manner.… Read the rest

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Leaked Commission figures sound death knell for biodiesel

Euractiv has a post purporting to contain the default carbon emission values to be assigned to biofuels made from feedstocks such as palm oil, soybean or sugar beet when the European Commission releases its proposed legislation on biofuels and indirect land use change later this spring, based on a leaked draft of the proposal.

Any application of the leaked values would severely hamper the ability of biodiesel manufacturers to enter into the EU’s new biofuels certification plan, announced last August.

Assuming that the EU does not relax its overall target for renewable energy in transport fuel (10% by 2020), if biodiesel fails to make the grade this would raise the demand for bioethanol made either from domestically-produced sugar beet or imported either from Brazil or Southern Africa.

This post was written by Alan Matthews.

… Read the rest
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Agricultural Council discusses the single CMO

Danish Agricultural Minister Mette Gjerskov presided over her first Agricultural Council of the Danish Presidency with some dash and vigour last Monday 23 January. Her energy contrasted with the comments of some of her fellow Ministers in their first formal debate on the Commission’s single CMO legislative proposal, with a number of ministers seeking to roll back some previous reforms.

The Presidency structured the debate around two themes: the effectiveness of exceptional measures in case of market disturbances and crisis; and the proposed measures aiming at a more competitive and well-functioning food supply chain. The debate, which lasted just over two hours, can be followed here on video.

The key battle lines that emerged can be summarised as follows. For simplicity, I refer to those who would like to return to a more managed market as the ‘blues’, and those who would like to push further in a more market-oriented direction as the ‘reds’, while recognising that this crude distinction does not always work.… Read the rest

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The political feasibility of CAP redistribution

A novel feature of the current round of CAP reform negotiations is that it explicitly aims to redistribute budget resources between member states. One of the reasons for the success of the 2003 Fischler Mid-Term Review and the 2008 Fischer Boel Health Check was that they left the pre-existing distribution of payments across member states more or less intact.

The demand from the new member states for greater convergence in the value of the direct payment per entitlement (or eligible hectare) in the current CAP negotiations means that redistribution is now firmly on the reform agenda. But it also makes reaching agreement much more difficult.

This is illustrated in a paper by Kyosti Arovuori from the Finnish Pellervo Economic Research PTT institute and and Jyrki Niemi from MTT Agrifood Research Finland at the Annual IFAMA World Symposium in Frankfurt last June. They examine a set of potential redistribution criteria identified in the Commission’s November 2010 Communication for their ‘political feasibility’, and conclude that none would pass the voting procedures of the European Council.… Read the rest