The Financial Times has a major article this morning
on the CAP as discussions take place on the next iteration of the CAP. And who is in charge as farm
commissioner? A farmer from Luxembourg who went to university in France. The Grand Duchy is always seen as susceptible
to French influence.
I reproduce some highlights from the article below but add
some comments of my own in square brackets.
On May 1, decades of resistance by the agricultural lobby
were broken when the trade deal Mercosur came into effect. Member states
earlier voted narrowly to apply the pact, albeit with significant concessions
to assuage the farmers and their powerful special-interest groups. European
Commission president Ursula von der Leyen exercised her power to over-rule
legal challenges to the deal to ensure it came into provisional force.
It was a moment that suggested the long-held power of the
farmers could be weakening. Through political protection and heavy subsidies,
European farming has been designed not only to secure food supplies but also to
preserve a rural way of life. [But the
future of many rural areas may not be principally in farming but in tourism. Better broadband connection is vital.]
The result is a sector that remains dominated by small
family farms even as agriculture elsewhere in the world has consolidated and
industrialised. But the Mercosur deal has shown that the model may be coming
under strain, just as policymakers are debating the future of the subsidy
regime that underpins it. [But the deal
has been watered down and took quarter of a century to negotiate].
Farming groups say trade deals and other reforms threaten
Europe’s food security at a time of growing geopolitical risk and just as
farmers come under even more pressure as the Gulf crisis forces up fuel and
fertiliser prices. [It’s a good time
for farmers to bang the food security drum].
But supporters of reform to the system argue that Europe’s
priority has to be competing in this new geopolitical world, rather than
shielding farmers from market forces with a safety net of subsidies.
Some believe these heavy subsidies are slowing down
market-driven restructuring that could replace failing family farms with more
efficient, large-scale agribusinesses — as is happening already in parts of
southern Europe. The impact on overall food production would be limited, they
say. [But the idea of the family farm
has sentimental appeal to urban voters].
Smaller farms are also seen by industry groups as central to
Europe’s rural identity. Organisations such as Italy’s biggest farm lobby
Coldiretti argue that these holdings sustain not just local economies but
landscapes, traditions and food cultures that define much of the continent. [High quality foodstuffs are niche products
that can command a price well above that commanded by commodities. Many consumers are ‘foodies’ interested in
cooking and provenance].
But some experts argue the risk to food security is
overstated. Recent studies by the EU’s Joint Research Centre show that if the
CAP were removed, agricultural production would only reduce by just over 5 per
cent.
“Fertile good land is not going to be left idle if we don’t
pay subsidies to farmers,” Alan Matthews, professor of European agricultural
policy at Trinity College Dublin, told the Pink ‘Un. He says that to maximise
food production and reduce subsidies, the EU needs bigger farms. But that goes
against the grain of popular opinion and national culture. [I have recently been working on a
co-authored essay with him].
The current moment “raises interesting questions about
whether family farming is the way to continue the structure in the future”, Matthews
told the FT, “not only when farmers have to raise their crops but have to be
accountants, they have to be vets and environmentalists and work drones and all
this stuff. To expect anyone to be even medium level in all these skills is a
little too much.”
Institutional investors move in
As many family farmers are selling up, institutional
investors are moving in. Spain and Portugal, which already supply a large share
of Europe’s fruit, vegetables and olive oil, have become a focal point, where
many see an opportunity to expand and modernise farming. Data from global real estate adviser CBRE
shows more than €4.2bn was invested in Iberian agribusiness between 2022 and
2024, with institutional investors accounting for roughly half of that total.
“Until 10-15 years ago, the agricultural asset class wasn’t
a prime consideration in investors’ portfolios,” Javier Uribarren, partner at
Trifolium Farms told the leading business paper. This business acquires and manages
agricultural land on behalf of institutional investors across Iberia, focusing
on permanent crops such as olives, almonds and citrus.
Increasingly, however, it has become more attractive as “an
inflation hedge” and as “an asset that is uncorrelated from others” in a
typical portfolio, he commented. The attraction is not just the land itself,
but how the sector is changing. “There’s a natural consolidation of a sector
that was very much driven by family ownership and that is the succession of
family ownership into institutional investors, private equity, pension funds
etc,” he added, explaining that farms are often too small to compete and in
many cases there is no one to take them over.
Investors are betting
that bigger farms work better. “Everything that we do is mechanised,” Uribarren
says. “Unless you have the necessary scale . . . it’s not
profitable.” Larger operations can invest in
irrigation, new planting systems and technology that smaller farms cannot
afford.
This will make it easier for the EU to compete with more
industrialised producers such as Brazil or Australia, where agriculture
operates at greater scale and with fewer subsidies. But Europe’s farmers are
unlikely to go down without a manure-slinging fight first. [Expect more angry demonstrations in
Brussels and member states].
