The usual suspects continue to subsidise

The OECD Agricultural Policy Monitoring and Evaluation Outlook 2024 has just been published and provides a comprehensive analysis and global reference on government support to agriculture across 54 countries, which shows that total support to agriculture averaged USD 842 billion per year during the 2021-23 period.

Support remains concentrated in a few large economies, with China, the United States, India and the European Union representing 37%, 15%, 14% and 13% of the total respectively. Although public support for agriculture has declined since 2021 it remains near historic highs and is still not sufficiently directed at critical innovation, productivity and sustainability goals, according to a new report from the OECD.

In this context, the share of estimated support dedicated to general services such as innovation, biosecurity or infrastructure averaged only 12.6% of total support in 2021-23. While it has been fairly stable since 2020, this share is well below the 16% seen at the beginning of the 21st century. These services are key elements in countries’ efforts towards sustainable productivity growth – the ability to produce more with less while reducing demands on the environment.https://doi.org10.1787/74da57ed-en

Why Mercosur deal concerns EU farmers

The EU deal with Merocsur has not gone down well with European farmers and this analysis refers to some of their concerns as well as the drivers of the deal: https://ukandeu.ac.uk/eu-and-mercosur-bloc-breakthrough/?mc_cid=60623adc76&mc_eid=a47fa58ca7

New EU farm supremo sets out his stall

The EU’s new agriculture chief is pushing for more of the bloc’s generous subsidies to be doled out to low-income farmers rather than big agribusinesses. Christophe Hansen told the Financial Times that the seven-year €387bn Common Agricultural Policy (CAP) should no longer reward the biggest landowners and instead focus on small farms, as discussions get under way on the bloc’s finances for the next decade.

[This, then, is a move towards treating the CAP as a welfare payment, but it is not an efficient instrument for delivering such payments.   What about international competitiveness and efficiency?]

 “We all know that the CAP budget will not be higher,” he said. “There is a lot of pressure because we have a lot of political priorities in the European Union so we need to better target the support to those most in need.”

The new EU commissioner, who took office on December 1, said his reform of CAP would not amount to a “revolution” and would not move “entirely” away from hectare-based payments. But changing the allocation would constitute the most significant overhaul in the history of the 62-year-old subsidy programme, which represents a third of the bloc’s annual budget.

The largest farms in the bloc have traditionally received most of the funding, with an analysis by the Institute for European Environmental Policy, a Brussels-based think-tank, estimating about 80 per cent of the direct payments go to roughly 20 per cent of farms.   [My view is that this is a lazy application of the Pareto rule and the actual figure is lower].

 Nearly 6mn farmers and landowners received direct payments in 2022, according to the European Commission. Discussions around the next EU multi-annual budget, which is due to run from 2028, have shifted towards a much greater focus on defence spending in recent months in response to Russia’s invasion of Ukraine and Donald Trump’s return to the White House. The US president-elect has threatened to pull out of Nato if allies refuse to spend more on the military.

Any CAP reduction will be met with fierce resistance from farmers who took to the streets of Brussels and other European capitals last year to protest against stringent environmental regulations, red tape and unfair prices. European Commission president Ursula von der Leyen in September vowed to ensure farmers receive “fair and sufficient income” and preserve farming amid financial and environmental pressures. Hansen, a centre-right Luxembourgish politician, said the commission should encourage farmers to look at “alternative income” streams.   [Historically there has been a suspicion that farm commissioners from Luxembourg are susceptible to French pressure].

While “producing and selling a tomato” was good, “it makes you vulnerable because it’s your only income”, Hansen told the Pinl ‘Un. Farmers could grow crops for biofuels or use their land for solar panels and other renewable energy sources. Planting trees that could be monetised as carbon credits should also be considered, he said.   [Farmers in the UK have been diversifying for decades].

Part of the commission’s response to the protests was to water down environmental standards that farmers were required to meet in order to access CAP support, despite widespread outcry from green groups. Von der Leyen on Tuesday is set to put forward further measures aimed at helping farmers sell their products at a better price.

The proposals, if agreed by EU lawmakers and member states, will make written contracts between farmers and food companies mandatory and allow more co-operation between national authorities to manage cross-border disputes.

Hansen said he also intended to ease competition rules to promote products from young farmers and require greater transparency in retail pricing. “Big retailers use certain products to attract the consumers and they use the weak position of the farmers in the supply chain,” he said. Christel Delberghe, director-general of the retail industry body EuroCommerce, said introducing stricter pricing rules would result in “inflation. What else?”

[Farmers in the UK have certainly been turned into price takers by supermarkets, but changing the balance of power is not easy because consumers demand cheap food]. 

The limits of Dutch lessons for farmer protests

This article by a political scientist looks at the impact of farmer protests in the Netherlands and their implications for the UK: https://ukandeu.ac.uk/farmer-protests-lessons-from-the-netherlands/?mc_cid=6bb3292f21&mc_eid=a47fa58ca7

What it doesn't mention is that the Netherlands has a very pure system of proportional representation which makes it easy for insurgent parties with a narrow support base to win legislative seats.

Doing the Brexit walk

In a thorough and authoritative analysis, Alan Matthews examines the repurposing of the English agricultural budget since Brexit, noting that the only other developed country to attempt such extensive changes is New Zealand: http://capreform.eu/agricultural-policy-reform-in-england-and-the-2024-uk-budget/

There has been a much greater reallocation to agri-environmental funds in England than in the CAP.

Benelux countries increase net contributions to CAP

Alan Matthews takes a look at net contributions to the CAP: http://capreform.eu/how-net-balances-might-influence-member-state-views-on-the-size-of-the-next-cap-budget/

He notes: 'Instead of the smooth transition from the largest net contributors to the largest net recipients as we move from left to right [on the chart], the general picture is now more jagged even if the general pattern is maintained.

The two smallest Member States, Luxembourg and Malta, with relatively limited agricultural area relative to the rest of their economies, now appear as the largest net contributors in relative terms.

More significant in economic terms is that, despite the huge significance of Germany’s absolute net contribution to the CAP, in relative terms the contribution of the Netherlands and Belgium is even greater.'

New farm commissioner in EU

The outgoing EU agriculture commissioner reviews his five years in office which appear to be ones of problem free achievement: https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/highlights-2019-24_en?s=09

The new commissioner, Christophe Hansen, is from Luxembourg, often perceived to be amenable to French concerns.  Food has been added to his portfolio, but animal welfare goes to health.   His biography is here: https://commission.europa.eu/document/download/1af2336d-a010-4ac0-b8de-81a23772a5ac_en?filename=CV%20Hansen.pdf

In 100 days he has to produce a vision for agriculture and food, so good luck with that.

Agriculture needs to cut emissions

The EU’s chief climate scientist has warned that the bloc will miss its climate targets if it does not force the agricultural sector to pay for its greenhouse gas emissions. Ottmar Edenhofer, chair of the European Scientific Advisory Board on Climate Change, told the Financial Times that it would be “almost impossible” to achieve the European Commission’s proposed aim of cutting emissions by 90 per cent by 2040 without a levy on agricultural emissions.

 “[Over] the last 15 years, the emissions in the agriculture sector remained quite stable,” Edenhofer said, while other sectors had cut their climate impact. “The price signal is important because without the price signal, it is very unlikely that, basically, we can reduce emissions,” he added.

Farming makes up 12 per cent of the EU’s emissions, of which about two-thirds comes from meat and dairy production. But it is one of the few sectors in the EU to have so far avoided strict climate legislation, including sectoral emissions reduction targets, in part because of farmers’ ability to stage widespread and disruptive protests.

Earlier this year, tractor blockades and demonstrations by farmers in many European capitals catalysed a rethink in the EU about how it was approaching efforts to decarbonise farms. It prompted the commission to retract a proposed law on pesticides and delete recommended targets from a document outlining how the bloc would reach its 2040 goal.

But the issue of making either farmers or other parties in the food chain pay for emissions has risen up the agenda as Brussels starts to outline its priorities for the next five-year mandate starting later this year.

 Denmark has also been lobbying Brussels to introduce an EU-wide system after it announced the world’s first carbon tax on farm emissions in June. EU officials are weighing options including a levy on food processors that would also include incentives for farmers to use their land as a carbon sink.

But a report on the future of farming in the EU that stemmed from consultations between food and farming industry groups as well as environmental NGOs, published this month, said it was “premature” to come to a conclusion about pricing agricultural emissions.