Vaasa, Finland: Philip Lowe is a leading figure in the rural studies community in the UK and he issues a stark warning about the so-called ‘new productivism’ in an interview that was issued to delegates at the ESRS Congress where he gave the opening plenary. Continue reading “Big Phil Lays It On The Line”
UK House of Lords reviews 2010 EU draft budget
In a recent report, the UK House of Lords European Committee criticised the European Commission’s proposals for the 2010 European Communities budget for maintaining a very high level of spending on agriculture, and failing to shift adequate resources to stimulus measures to aid economic recovery. It expressed frustration that, in the middle of an economic crisis, the proportion of the budget going to agriculture remained so large.
It identified a particular problem for the funding of the second tranche of the European Economic Recovery Programme. This was the stimulus package of €5 billion agreed in March 2009, of which €2.6 billion was to be funded from the 2009 budget and €2.4 billion from the 2010 budget. Because of the limited margin between the Financial Perspective ceiling and proposed appropriations for Heading 1 of the budget Sustainable Growth, last year it was agreed to fund the energy infrastructure projects by transferring some of the unused margin under Heading 2 (mainly agriculture) to Heading 1. The tortuous route to reaching agreement on this budget reallocation is well described in a blog post on the European Journal site.
The same problem arises with the 2010 draft budget, in that there is not enough of a margin in Heading 1 to fund the second tranche of the EERP. Apparently, in the political agreement last year, it was agreed that the remaining €2 400m would be funded through a “compensation Mechanism” to be defined. At the conciliation of the 2010 and 2011 budgetary procedures, the European Parliament, the Council and the Commission will examine all available sources that could provide for the compensation of funds. Presumably the most likely source is a further transfer of the margin in the agricultural budget to Heading 1.
The EERP, along with the Food Facility, highlight the inherent tension between agreeing a medium-term financial framework for budget spending with identified ceiling amounts for major expenditure categories, and the need to maintain flexibility to respond to particular needs or crises as they emerge. One of the ways to maintain flexibility is to insist on margins of a sufficient size, although there are a number of member states who argue that unused funding should be returned to them rather than reallocated to other headings. This is likely to be one issue touched on in the Commission’s response to the budget review expected later in the year.
Addressing the dairy crisis – is US intervention buying a good thing for EU producers?
Today, the US raised its intervention support prices for some dairy products as a way of supporting the US farm price for milk. The support price for skimmed milk powder was increased by 15 percent and for cheddar cheese by 16 per cent for a limited 3-month period. Immediately milk prices on the Chicago Mercentile Exchange increased by 5 per cent, and it is estimated that the measure will add $243 million to US dairy farm incomes in the current year.
From a European perspective, this measure has ambiguous effects and may even be welcomed for its short-run effects. In the short run, the Commodity Credit Corporation will enter the market as an additional buyer, raising the floor price of milk. While only US milk products are eligible for support, as a major dairy exporter this action is going to help to strengthen world market prices, to the benefit also of EU producers.
In the long run, of course, the measure will keep more US dairy farms in production than would otherwise be the case. When dairy markets recover, the disposal of US stocks will dampen the upswing in dairy product prices, and there will be more US competition than would otherwise be the case.
Nonetheless, as a way of mitigating short-run price volatility on world markets, encouraging countries to engage in counter-cyclical stock-holding seems a sensible thing to do, provided of course that the stabilised price is not set above the long-run market equilibrium. The limited duration of the US measure is a positive sign in that regard. The difficulty is that this measure would be caught in the WTO Aggregate Measure of Support as an amber box subsidy, and the ability of countries to pursue amber box subsidies will be severely curtailed under proposed Doha Round disciplines.
Is this a case where ideology has triumphed over sense? Would it make sense to exempt intervention buying from WTO disciplines under appropriate circumstances? The EU experience with intervention gave stock purchases to support market prices a bad name, but this was in the context where markets were also highly protected by tariff barriers and the use of export subsidies. In the absence of trade barriers, intervention buying has positive spillover effects for producers in other countries. Could WTO rules be designed to encourage such good neighbour policies?
Where to find data on EU export refunds?
Recently, I was looking for an internet source for EU export refunds – not overall expenditure, but the refund rates for individual commodities by month. What I was hoping to find was an Excel worksheet which set out this information, but it seems extraordinarily hard to come by. The nearest I could get was the excellent webpage on export refunds for milk and meat products maintained by OFIVAL, the French marketing agency. However, the data here take the form of pdf files containing the information every time the refund levels are changed, and it would be extremely tedious to transfer this into an Excel file. Another excellent site is Datum, hosted by the UK Dairyco. Here the information on export refunds for dairy products is updated weekly, and it is also possible to download an Excel file with historical data, but of course the data only covers dairy. The Commission’s CIRCA network also seems to have pdf versions of export refunds – you can view the sugar data here – but access to CIRCA more generally and to its interest groups requires one to register so I don’t know if similar information for other CAP commodities is also available here. Again the drawback is that the information is not available in Excel format. Do any readers have other suggestions where this information could be found?
Update 6 March 2015. The Irish Department of Agriculture, Food and the Marine maintain a very complete database of all EU regulations on export refunds going back to 2001. The drawback is that one has to plough through the regulations to derive the refund rates for any commodity over time.
Latest WTO agriculture update
Pascal Lamy, the WTO Director-General, provided an end-of-term report on the status of the Doha Round trade negotiations at the July meeting of the Trade Negotiations Committee before delegates left for their August break. This is what he had to say about the agricultural negotiations.
As you know, work in agriculture is continuing, particularly in light of the renewed political mandate from the G20 and G8. The Revision 4 bracketed and annotated areas needing further work have been identified. These include SSM [Special Safeguard Mechanism] (especially the architecture), cotton, issues related to sensitive products, preference erosion and tropical products, TRQ [Tariff Rate Quota] expansion as well as tariff simplification. The Chair has indicated that consultations are underway to determine how best to broach these issues, with a view to a steady programme of technical work in late-summer through to the autumn. The aim is to complete as much as possible of the outstanding technical work so as to set the stage for decisions on more political issues.
Discussions are on-going on the templates for scheduling and on the required format of support tables and data needs — both for completion of the templates and for the establishment of modalities and of the time-lines and process for scheduling and verification. It will be important for members to take ownership of this matter so that you can be fully ready, with agreed time lines and formats, to complete the scheduling process in agriculture once modalities are established. This is a very necessary, non-political work that should continue with greater focus through the autumn.
Does farm size influence environmental outcomes?
A widely-accepted justification for subsidising agriculture is that we need to prevent the emergence of the industrialised, mono-cultural agriculture which is the inevitable result of an efficiency-based, cost-oriented farming model by protecting the diversified, environmentally-friendly small farmer in order to maintain the positive environmental benefits of European agriculture. This is part of the philosophy of agrarianism which underpins much discussion of agricultural policy.
Let us leave aside for the moment the fact that the bulk of existing farm subsidies go to larger farmers rather than smaller ones, so that even if the thesis above is valid, current agricultural policy does not support it. My interest is in the evidence for the thesis itself. Is it the case that small farms are better for the environment? Continue reading “Does farm size influence environmental outcomes?”
The Commission milk market report
The Commission today produced its report on the dairy market requested by the European Council in June, and Commissioner Fisher Boel has underlined its main findings in her blog. The background to the current market crisis is shown clearly in the graph reproduced from the Commission report.
Continue reading “The Commission milk market report”
Friday fun quiz: What is a public good?
Anyone who has followed the CAP debate this past few years will have observed how the term ‘public good’ has been adopted by almost everyone seeking to advance their own vision of the CAP, from the dinosaurs of COPA-COGECA, to the more moderate National Farmers Union to the José Bové’s Via Campesina, organic farmers like the Soil Association, food policy wonks like Sustain and the Food Ethics Council, and of course the various environmental groups from where the public goods idea orignally hailed. Continue reading “Friday fun quiz: What is a public good?”
Franco-German combine to set future path of the CAP?
Euractiv reports on the creation of a new Franco-German working group to frame reform of the EU’s Common Agricultural Policy (CAP) after 2013. France has a new Agriculture Minister in Bruno Le Maire, who wasted no time in setting out his stall in meetings with Commission President Jose Manuel Barroso. Continue reading “Franco-German combine to set future path of the CAP?”
Trends on the EU rice market
There was a fundamental reform of the EU rice market in 2003. The intervention price was cut in half to bring it down to the (then) level of the world prices, and producers were compensated by an increase in direct payments. An important impetus for this reform lay in the market opening offer by the EU to least developed countries (LDCs) under the Everything But Arms agreement which promised duty-free and quota-free access for rice imports from LDCs from September 2009.
Few LDCs are net exporters of rice. However, it was feared that LDCs might export, in line with the rules of origin, the totality of their domestic rice production to the EU, while importing their domestic consumption requirements from the world market. Another fear was that the LDCs might import raw rice, process it and then export it back to the EU, adding sufficient value so as to meet the rules of origin requirements. Reducing the support price for rice by around 50% was projected to translate into a very sharp fall in EU domestic prices towards world market levels, which would boost EU rice competitiveness while reducing the attractiveness of the EU market as an export market. Continue reading “Trends on the EU rice market”