Thursday, June 10, 2010

How the NFU sees the challenges

After some delay, I am returning to the NFU paper on 'The CAP after 2013.' I would agree with their basic definition of the challenges facing farming: 'Put simply, farmers across the world will be required to produce considerably more food, from finite and precious resources, amid a changing climate and at the same time impacting less on the environment.'

The NFU specifies the benefits of the CAP in the following terms:
1. European consumers expect food that is produced to exacting environmental and welfare standards. These lead to higher regulatory costs which do not always apply to third country imports. The CAP is a form of compensation for these costs.
2. The CAP plays a key role in the EU's long-term food security.
3. There is a territorial cohesion role in terms of allowing farming activity to be spread throughout the EU. It also underpins rural employment [only in some, generally more remote locations in my view].
4. The policy helps to ensure that agricultural production is environmentally sustainable and helps to maintain some of our most important landscapes and environments. [This is essentially an argument for the second pillar].

But perhaps the real point is that 'Fundamentally, the CAP helps to address the failure of agricultural markets to develop fair and profitable returns to farmers.' What constitutes a 'fair' return is a moot point, but in my view farmers have experienced what I would regard as anti-competitive behaviour by supermarkets, especially in the UK. The solutions, however, reside in more effective use of competition policy (more on this in a later post].

Arguments (1) and (2) are really those that underpin the SFP. However, the actual costs imposed on (1) fall far short of present SFP payments. (2) is more difficult to quantify, particular given the uncertainties associated with climate change, but there are grounds for taking an 'insurance' payment against this.

Without the SFP, many farms would cease production. This would probably hit public benefits more than food production given that it is the most marginal farms that would cease production. What this points to (in the absence of an acceptable bond scheme) is a SFP at a reduced rate.

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