CAP Reform

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

The EU renewables target of 10% of transport fuel by 2020 to be met mainly by biofuels has been heavily criticised for its potential impact on diverting land from food to fuel production and thus putting upward pressure on food prices. Another source of criticism is whether it does actually contribute to reducing overall greenhouse gas (GHG) emissions. The Commission sought to deflect this latter criticism by requiring that biofuels which count against the renewables target must show a direct GHG saving of 35% compared to the fossil fuel that they displace. This saving requirement is gradually increased to 50% and 60% for fuels produced by installations that start production after 2017 and 2018, respectively.

However, these GHG reduction requirements do not take into account the possible indirect effects of converting cropland to biofuel production, which will encourage indirect land use change (ILUC) by conversion of pasture or forest to produce the food crops displaced by biofuels.… Read the rest

One result of the last two enlargements in 2004 and 2007 was to bring millions of small farms into the EU, most of which are either subsistence farms (SFs) or semi-subsistence farms (SSFs). Various definitions of what is a subsistence or semi-subsistence farm exist (see the background paper on this topic by Sophia Davidova and colleagues for the recent seminar in Sibiu, Romania on semi-subsistence farming) including physical area (e.g. less than 5 ha), size of farm business (below a certain ESU threshold) or market orientation (share of production going to own consumption).

According to Eurostat FSS, in 2007 there were 11.1 million small farms (below 8 ESU) within the EU-27. Of these, 6.4 million were below 1 ESU, therefore considered SFs and the remaining 4.7 million were SSFs. The total number of holdings in 2007 in the EU-27 was 13.7 million, so the share of SFs and SSFs was equal to 46.6% and 34.5% of the total number, making them the dominant farm type in Europe.… Read the rest

The draft Commission communication on the CAP towards 2020 is an underwhelming document, not just for those seeking to push an ambitious reform agenda but also for those seeking a roadmap to address issues that the Commissioner himself has identified as up for discussion. As Mairead McGuinness, the Irish MEP, commented, it lacks both detail and substance, and is devoid of both figures and analysis.

Nonetheless, it does contain some clues on what DG Agri might like to see in the final package, however cautiously they are expressed. The language used does nudge the debate on the future CAP in slightly different directions to the current CAP. The document is now in inter-services consultation, and the comments of other Commission DGs such as Budget, Finance, Trade and Environment have yet to be incorporated. Assuming that these DGs have been kept in the loop as the document was drafted, their comments are unlikely to modify it in any major way before its publication due next month.… Read the rest

An extended guest post by Jorge Núñez Ferrer , takes a close look at the leaked commission communication on the future of the CAP. Dr Núñez Ferrer (pictured, right) is Associate Research Fellow at the Centre for European Policy Studies and has written widely on the CAP and the EU budget

The CAP 2020 reform philosophy has finally seen the light, albeit only in leaked form. A carefully drafted document contains the usual CAP rhetoric punctuated by some apparently strong deviations from past doctrine. But once the objectives and policy proposals are reduced to their basic components, much of the fizz disappears.

Looking beyond the politically correct drafting and generalisations (and the inevitable linguistic awkwardness of an English text primitively translated from the French of the original draft), one finds the following objectives and reasoning as the guiding principles and motives:

The CAP should ensure that agricultural production across the whole European Union is maintained and even enhanced.… Read the rest