Is the influence of the farm lobby weakening?

 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].