CAP Reform

All with an interest in EU policymaking must take note of current developments in Austria where the leader of the far-right Freedom Party FPÖ Herbert Kickl was given the task of forming a new government by the Austrian President Alexander Van der Bellen on Monday last. This followed the breakdown of government negotiations between the conservative, liberal and centre-left parties and the resignation of the former leader of the conservative ÖVP Karl Nehammer at the weekend.

Kickl is no stranger to the Austrian government. He previously served as Interior Minister between 2017 and 2019 when the Freedom Party was the junior party in a coalition with the ÖVP led by Chancellor Sebastian Kurz. At the time Austria faced punitive measures from other EU member states for admitting a party founded by former Nazis into government. Now the new leader of the ÖVP, Christian Stocker, has indicated that he is open to talking with the Freedom Party.… Read the rest

UK farmers are preparing to protest tomorrow November 19th outside Parliament against inheritance tax changes in the new Labour Government budget announced last month. They claim these changes will have a devastating impact on family farm businesses. Perhaps surprisingly, the accelerated phase-out of direct payments also announced in that budget has not been the focus of attention. In this post, I discuss the phasing out of direct payments, leaving the inheritance tax issue to one side.

The UK has been preparing and implementing its post-Brexit agricultural policy since 2018 with the most significant changes taking place in England among the four UK countries. The broad outlines were set in the White Paper Health and Harmony: the future for food, farming and the environment in a Green Brexit published in February 2018 when Michael Gove was the Secretary of State for Environment, Food and Rural Affairs in the UK Conservative government. This formed the basis for a public consultation that eventually led to the passage of the Agriculture Act 2020 in the UK. … Read the rest

In this post, I look at Member State net budget balances when it comes to CAP expenditure – which Member States would be net gainers or losers from an increase or decrease in the CAP budget, assuming the allocation criteria in play in 2023 were continued. The justification for this exercise is that these net balances likely feed into Member States’ views on the appropriate size of the CAP budget. Net recipients are more likely to favour an expansion in the budget, net payers the opposite. We know that the ‘juste retour’ principle is alive and well when it comes to negotiating the next Multi-annual Financial Framework (MFF).

The basic data are extracted from the DG budget Excel spreadsheet on EU spending and revenue 2000-2023. The assumption is made that we are interested in marginal additions or subtractions to the CAP budget, and that these will be financed by the residual own resource, namely the Gross National Income (GNI) contribution.… Read the rest

This post is a rather technical note on how we set and interpret climate targets where the underlying data series are subject to frequent revisions. In the EU’s climate architecture, the level of ambition is usually expressed in terms of reduction commitments relative to a base year. Sometimes these reduction commitments are in percentage terms but are then converted into absolute figures using data from the National Inventory Reports for a recent year or period. In other cases, the reduction commitments are already expressed in absolute terms, but the size of the required reduction has previously been determined by reference to national inventories in a base year or period. But what happens to these targets if the data used in these National Inventory Reports are later subject to recalculation?

For example, the Effort Sharing Regulation (EU) 2018/842 as amended by Regulation (EU) 2023/837 has an Annex I which sets out for each Member State the required percentage reduction in covered emissions in 2030 relative to their 2005 levels.… Read the rest

My attention was caught by a post on X (formerly Twitter) this week from Franz Sinabell, economist at the Austrian Institute for Economic Research. He reproduced a graph based on European Central Bank data showing the evolution of the nominal effective exchange rate for the euro over time. As can be seen from the post below, this shows a steady, if uneven, upward trend indicating a gradual appreciation of the euro, reaching a peak in August 2024. Franz commented that “Sectors that earn money on international markets – e.g. with agricultural goods or food – are currently not having an easy time”.

Als Agrarökonom bin ich weder Währungsspezialist noch Außenhandelsökonom.
Aber ich beobachte Entwicklungen.
Sektoren, die auf internationalen Märkten Geld verdienen – zB. mit Agrargütern oder mit Lebenmitteln – haben es derzeit nicht gerade leicht ??https://t.co/UPPht0AXQU pic.twitter.com/MZqqZaKwqy

— Franz Sinabell (@FranzSinabell) October 23, 2024

The post brought home to me how little attention exchange rate movements seem to get in discussions of EU agricultural competitiveness.… Read the rest

Yesterday’s vote in Moldova resulted in a razor-thin majority in favour of enshrining the goal of EU membership in the country’s constitution. It appears that significant efforts may have been made by outside interests to influence the voting but, even taking this into account, Moldova appears to be a country deeply divided about the future direction it wants to take. Here, the prospects for EU membership and the cost of the steps that need to be taken for membership to become a reality play an important role.

Moldova applied for EU membership on 3 March 2022, the same day as Georgia and just a few days after Ukraine made its application on 28 February 2022. These membership applications were made just a few days after Russia launched its full scale invasion of Ukraine and were obviously a response to it. Moldova has benefited from trade preferences with the EU under Autonomous Trade Measures since 2008 and signed a Deep and Comprehensive Free Trade Agreement which entered provisionally into force in September 2014.… Read the rest

Annex III of the CAP Strategic Plans Regulation (EU) 2021/2115 sets out the conditionality rules that farmers seeking CAP payments should follow. Under the climate and environment heading, and with the intention to protect the quantity and quality of biodiversity, GAEC standard 8 required a minimum share of the agricultural area devoted to non-productive areas and features, with a derogation for holdings where more than 75% of the area is used for permanent grassland or for the production of grasses or other herbaceous forage, or for the cultivation of crops under water. Holdings with an arable area less than 10 hectares were also exempt, as were certain holdings in areas of natural constraints in Member States with more than 50% of their total land surface area covered by forests.

Specifically, this obligation could be fulfilled in several ways:

• Minimum share of at least 4% of arable land at farm level devoted to non-productive areas and features, including land lying fallow.

… Read the rest

The European Commission has just released its Autumn 2024 short-term Outlook for agricultural markets which highlights a gradual but fragile return to stability. Eurostat has also released data on agricultural output and input price movements for the first two quarters of this year. The Commission’s short-term Outlook does not contain a forecast for farm income developments in 2024 – we must wait until mid-December for the first official forecast when Eurostat publishes its preliminary estimate for 2024 farm income. However, with these two sources of information in hand, we can begin to make some educated guesses about the likely farm income outcome this year.

We need to have due regard to all the sources of uncertainty highlighted in the short-term Outlook. These include the potential for further extreme weather events to impact on production, the potential impact on both input costs and markets of geopolitical developments such as the wars in Ukraine and the Middle East and trade disputes with China, and possible plant and animal disease outbreaks.… Read the rest