It is frequently asserted in Brussels agricultural policy discussions that European farmers over the past few years are barely surviving, buffeted by unprecedented price collapses, the unwillingness of supermarkets to pay decent prices, the closure of external markets and tightening regulations. Commissioner Hogan spent much of the first half of his term of office bringing forward one emergency financial package after the other as taxpayers pumped more money into a sector supposedly on its last legs.
This picture of an industry in crisis is naturally promoted by the well-oiled publicity machine maintained by the farm lobbies in Brussels and national capitals.… Read the rest
Does capping direct payments make sense?
CAP Pillar 1 direct payments were originally introduced to compensate farmers for the reduction in intervention support prices following the MacSharry reforms in 1994. This was an important and necessary step to help farmers adjust to a new economic situation. However, assistance for adjustment should only be temporary. As the years have passed, the argument that direct payments are intended as compensation payments has become less and less credible. As result, a number of alternative rationales for the continuation of Pillar 1 direct payments have been proposed.
These payments are variously justified as addressing low farm incomes, as a necessary support for EU food security, as providing a safety net for farmers against unexpected market shocks, as compensating for higher regulatory standards and as ensuring more sustainable management of natural resources.… Read the rest
CAP – out of the box thinking
Last Monday saw the launch of a report “CAP – thinking out of the box” by the Rural Investment Support for Europe (RISE) Foundation. The report director was Allan Buckwell and the other contributors to the report are Erik Mathjis, David Baldock and myself. The report is a response to the public consultation on the modernisation and simplification of the CAP launched by Commissioner Phil Hogan in February.
Below, I reproduce a short summary of the key messages of the report.
… Read the restFurther adaptation of the CAP is necessary to help EU farming become a well-structured industry which is economically viable and environmentally sustainable.
Is a level playing field an argument for continued support to UK agriculture after Brexit?
We are pleased to publish this guest post by David Blandford (Penn State University) and Berkeley Hill (Imperial College London).
The President of the National Farmers Union (NFU) of England and Wales told the Food Manufacture Group’s Business Leaders’ Forum (Feb 14, 2017) that the NFU is currently actively lobbying the UK government to ensure that British farmers are not disadvantaged with respect to their main competitors in Europe following Brexit. The fear seems to be that cuts in the £3 billion of direct aid, which seem highly likely when Britain leaves the EU and its CAP, will result in a non-level playing field in which UK farmers are put at a competitive disadvantage.… Read the rest
More on the future of direct payments
Yesterday, I had the privilege of presenting my report on the future of direct payments to a workshop on the future of the CAP after 2020 organised by the AGRI Committee in the European Parliament and its Policy Department (AGRI Research). I reproduce below my statement to the workshop which attempted to convey the flavour of my report.
… Read the restIt is an honour to be invited to address you today on the background note that I have prepared on the future of direct payments. Direct payments accounted for around 72% of the CAP budget and for just less than 30% of the EU budget in recent years.
Focus on the distribution of direct payments
Each year, the Commission presents a report on the distribution of direct aids to agricultural producers (links are provided on this web page). In this report, the Commission presents the breakdown of direct payments by Member State and size-class of aid. It is the source for the graphs which compare the cumulative amounts of payments with the cumulative number of beneficiaries.
The graph from the most recent report for the 2014 financial year (thus covering direct payments made to farmers in 2013 as Member States are reimbursed in the following financial year) is shown below. It confirms that the oft-quoted statistic that 80% of direct payments go to just 20% of farmer beneficiaries is alive and well; indeed, the distribution is even more skewed in Bulgaria and Romania than in other Member States.… Read the rest
When is enough taxpayer aid enough?
The article below was published in the Irish Farming Independent on Tuesday 17 May (the original article can be read by clicking on this link and choosing the ‘Continue to use Press Display’ option). The article addresses the high dependence of Irish agriculture on public support, but the question I raise has, I think, wider relevance for other EU member states as well. With expectations growing that the June Agricultural Council may announce yet another aid package for the agricultural sector, my question is whether there is a vision for European (and not only Irish) agriculture in which this heavy dependence on public support for income in the sector can be reduced.… Read the rest
Milk policy in the EU – a case of policy incoherence
While milk producers in the EU struggle with low milk prices, the EU and its member states struggle to come up with a coherent policy to address the issue. Milk prices will not recover until there is a better balance between supply and demand. I have previously written a number of posts (here and here) in which I have described the policy responses introduced in response to the sharp fall in milk prices since their record high in early 2014.
These responses include measures designed to reduce supply. Specifically, the Commission has activated Article 222 of the CMO Regulation which suspends competition law in the case of producer organisations, co-operatives and inter-branch organisations and allows them to voluntarily limit supply with a view to raising the price of milk.… Read the rest
The dependence of EU farm income on public support
In spite of the substantial reforms in the structure of the CAP over the past two decades, EU agriculture remains hugely dependent on public support. The importance of public transfers, including direct payments, to EU farmers can be shown in various ways. One indicator is the importance of direct payments relative to the value of total output in the total revenue of farms (used by DG AGRI in this report on EU farm income). We can also focus more directly on the role that public transfers play in sustaining farm income. Here, there are two possibilities depending on the definition used for farm income – whether this is taken as factor income or entrepreneurial income (using the definitions in the Eurostat Economic Accounts for Agriculture, EAA).… Read the rest
Two steps forward, one step back: coupled payments in the CAP
One of the success stories in the evolution of CAP reform has been the change from supporting the product to supporting the producer by moving, first, from market price support to coupled payments, and then by decoupling these payments.
The 2013 CAP reform has reversed this process. Coupled aids have started to grow again, from a projected €2.7 billion in 2014 to a projected €4.8 billion in 2015, an increase of nearly 75%. Their share of total direct payments will rise from 6.7% in 2014 to 11.6% in 2015. This step backwards was one of the negative outcomes of the recent CAP reform.… Read the rest