Friday, August 22, 2014

Agricultural policy outside the EU

There has been relatively little discussion so far of what kind of agricultural policy the UK might have if it left the EU and hence the CAP. Agricultural economist and CAP expert Alan Swinbank has been trying to stimulate debate on this issue, but so far with little success. His latest effort is in the journal EuroChoices.

He notes, 'Successive British governments have repeatedly argued for more radical reform of the CAP than the EU has been willing to accept ... To what extent these aspirations would translate into a reduction of support for British farmers, and a greater emphasis on the provision of environmental public goods, should the UK exit the EU is open to question ... British farmers might bitterly complain that they faced an uneven playing field as their competitors were better able to remain in business as a result of more generous Pillar 1 payments subsidising their farming activities.'

Swinbank also poses the question: 'Could a WTO compatible agri-food trade agreements be negotiated with its former EU partners, or would Irish and Brazilian beef face the same tariff barriers on imports into the British market?'

My initial thinking has been that the single farm (soon to be basic) payment should continue during a transitional period if the UK left the EU, but at a somewhat reduced percentage of the current rate, e.g., 90 per cent, 85 per cent, 80 per cent over three years. However, there is danger that this could become set in stone and we would be left with an historically determined form of subsidy rather than debating and re-thinking the pattern of support.

As Swinbank argues, the alternatives do need to be spelt out so that voters can make an informed choice in any referendum.

Thursday, August 07, 2014

Big changes at ComAgri

With the extension of co-decision to agricultural policy by the Lisbon Treaty, the European Parliament's Agriculture and Rural Development Committee has become a much more important player in the decision-making process. It has tended to contain MEPs from agricultural and rural constituencies, or with interests in the sector, and in that sense has sometimes been a brake on reform, with the chair in 2009-14 insisting that the CAP budget be maintained in real terms with more money for farmers and more flexibility on how they spent this publicly funded largesse: Handouts

The committee's composition in the new Parliament has changed substantially, creating more uncertainty about its stance, although it will be chaired by the centre-right EPP. ComAgri’s political breakdown is based on the election results. The European People’s Party (EPP) came first so gets 13 of the 45 seats, with the Socialist and Democrats (S&D) next with nine seats and the other groups getting between three and five each.

A number of old hands who played key ComAgri roles in 2009-2014 are back, including former chair Paolo De Castro (S&D), Albert Dess (EPP) and Jim Nicholson (ECR). Notable absentees include ALDE’s George Lyon and the S&D’s Luis Manuel Capoulas Santos.

Of the 45 new ComAgri members, 23 were re-elected to the Parliament, of whom 20 sat on ComAgri in 2009-2014. New to ComAgri but not to the Parliament are Portugal’s Nuno Melo (EPP), the UK’s Richard Ashworth (ECR) and Dane Jens Rohde (ALDE). The other 22 are newly-elected to the Parliament. This reflects dramatic changes to the Parliament’s political make-up brought by the elections, with eurosceptic, anti-EU parties significantly increasing their MEP numbers – as well as some left-wing anti-EU parties.

The expanded Europe of Freedom and Direct Democracy (EFDD) group has increased its ComAgri representation from two to three MEPs. Back is Stuart Agnew from the UK’s Independence Party (UKIP), which wants the UK out of the EU altogether, but has a poor record of voting and committee attendance in the Parliament. UKIP's position is that UK farmers would then receive a version of what has been the Single Farm (to become Basic) Payment, but that it would be capped to limit the amount going to larger farmers, something the UK has always fought within the EU. Agnew is joined this time by Giulia Moi and Marco Zullo from Italy’s Five Star Movement – a populist party born out of a protest movement led by a comedian.

One of the three non-attached members, Edouard Ferrand, is from France’s far-right Front National, which increased its Parliament MEPs from three to 24. The FN is a critic of the CAP, lamenting the loss of control on farming decisions and arguing that the CAP has not helped agricultural earnings or done enough to protect French farming.

As for the Greens/EFA group, outspoken French MEP José Bové and German Martin Häusling are joined by new MEPs Bronis Ropé from Lithuania and Jordi Sebastià Talavera from Spain’s Compromis party. Bové was once involved in physically dismantling a MacDonalds that had set up in a cheese producing region and is a staunch opponent of GM.

The left-wing alliance GUE-NGL has four brand new MEPs on ComAgri. Two from Ireland – Matt Carthy and Luke ‘Ming’ Flanagan – are joined by Antje Anna Helena Hazekamp from the Netherlands’ Party for the Animals (PvdD) and Spain’s María Lidia Senra Rodríguez. We might expect more attempts to pursue animal protection issues.

Ciolos odds on favourite for farm commissioner

Dacian Ciolos looks like he is the front runner for re-appointment for a second term as farm and rural development commissioner. He has not offended any major players among the member states and has been careful not to upset the French, being perceived originally as a French-approved appointment. He is strongly backed by his own government with farming being a more important part of their economy than in most member states.

From a reform perspective, he has been a disappointment, but that is not surprising. It is difficult to get reform through in the face of the vested interests of member states. The farm share of the budget is dropping, but relatively little has been done to make the CAP responsive to climate change.

There is an argument for continuity for the CAP, as Cioloș would be able to oversee mid-term reviews of ‘greening’ and other 2014-2020 reforms that he proposed back in 2011. But 'continuity' can be another way of saying 'business as usual'. The inefficiencies of the CAP are bound to be an agenda item in any referendum debate in the UK.

Ireland is always keen to get the farm commissioner's post and has done well in the role in the past (think of the MacSharry reforms). The Republic's Phil Hogan, who has served as Irish environment, community and local government minister since March 2011, is being advanced as a candidate. Hogan, from the Fine Gael party that is in coalition government with the Irish Labour Party, also has experience in EU issues and is being backed by fellow Fine Gael politician and MEP Mairead McGuinness. McGuinness, from the EPP group and an active member of the European Parliament’s agriculture committee (ComAgri) throughout the CAP reform process, is now a vice-president of the Parliament.

There are a couple of dark horses and one former Spanish agriculture minister Miguel Arias Cañete, since elected to the new European Parliament. Yet the chances for Italian Socialist (S&D) MEP Paolo de Castro, who was ComAgri chair in 2009-2014, appear slimmer.

Although there is much horse trading to come, Ciolos must be the odds on favourite.

Getting a start in farming

If you don't have a farm to inherit, getting a start in farming is difficult. The capital costs of setting up, equipping and stocking a viable farm are huge. For some the practical route is to become a farm manager, but then you are working for someone else.

Perhaps surprisingly, there are people from a non-farming background who want to become farmers. I say 'surprisingly' because it is hard physical work, requires a wide range of skills including dealing with a lot of paper work and the returns are often poor and uncertain. There are some jobs I could never do and farmer, actor and politician are top of the list. But I appreciate that there are those who have a real and genuine commitment.

One route in has been through county council farms. These are not usually large and may have to be combined with rented land to be viable. When I have interviewed such farmers, the off farm work of their partner (or even the farmer) has often been a key contribution to the household budget. They tend to be livestock farms, raising beef or sheep or a dairy enterprise. Smaller arable farms have been squeezed as yields have flat lined for some thirty years and economies of scale have becoming increasingly important in that sector.

However, cash strapped county councils have been selling off their estates. Since 1964 the council farms estate across England and Wales has shrunk by 37 per cent to 111,650 hectares in 2012. Total holdings have fallen by 79 per cent to just 3,442 as they have been combined to try and make them more viable.

Average size has gone up from 10.9 hectares to 32 hectares, but arguably that is little better than a large smallholding. In some cases, part of the holding has been sold off for housing, sometimes the most productive land. When councils sell holdings off, tenants can purchase at market value, but there is no way that a farm of, say, 125 acres with a book value of £1.2m could support a large mortgage.

I don't think county farms are the way forward for the future, but the measures taken under the CAP don't help much either.

Finally, can I give my nephew Deiniol Williams a plug. He has left the family farm where his brother will carry on as, I think, the eighth generation. But he has started a ceramics business and uses a kiln on the farm: Ceramics

Wednesday, August 06, 2014

Wellcome result for Co-op

The Co-operative Group has sold its farm business to the Wellcome Trust for £249m. This is indeed a welcome result as it ensures a benevolent owner for the business which takes a long-term view and shares many of the ethical standards of the Co-op. As Danny Truell, its chief investment officer, put it, the trust values 'responsible stewardship over quick profits'.

Dedicated to driving improvements in human and animal health, the trust is the world's second highest spending charitable foundation. In effect, they function as another research council for the UK. I have had some loose association with their veterinary work and I have been favourably impressed.

The trust already has significant agricultural holdings in Cambridgeshire, Hertfordshire and Cheshire. It rarely sells businesses once it has acquired them.

The Co-op estate is made up of nearly 40,000 acres of land, 15 farms, three pack houses, and almost 130 residential and commercial properties. Its apple orchards at Tillington in Herefordshire were purchased in 2008, thereby preserving more than 1,000 rare varieties of British apples that were threatened with extinction.

This is one of Britain's largest land sales in decades and one of the largest global deals of its kind. It ends an association between the troubled Co-op and agriculture that dates back more than 100 years.