An imperfect storm

A new book edited by Johann Swinnen entitled The Political Economy of the 2014-20 Common Agricultural Policy judges it to be an 'imperfect storm' compared with the 'perfect storm' of the Fischler reforms dealt with in an earlier book. The book has chapters written by leading experts on the CAP such as Alan Matthews, Tim Josling and Alan Swinbank.

The authors generally found the outcome of the 2013 decision to be disappointing. The policy changes were relatively minor and not always coherent. The term 'reform' is probably inappropriate.

In terms of explanation, the reform proposals presented by Commissioner Ciolos were not very ambitious to begin with, reflecting his inexperience and that of his cabinet. Another factor was the role of the European Parliament with COMAGRI able to control much of the decision-making with farm interests having more influence than environmental organisations. A final element was that the increase in global food prices pushed food security up the agenda.

The new CAP provides an unprecedented amount of flexibility for member states. However, flexibility may have been a rational choice by decision-makers to reach an agreement. It may become a permanent part of the CAP, reflecting the need to come to political decisions in an increasingly heterogeneous EU.

Alan Matthews suggests in his chapter that the reformist camp, always a minority among member states, seems to have lost much of its momentum and cohesion during the 2013 negotiations. The UK in particular was preoccupied with other issues.

CAP reform a dress rehearsal?

The CAP reform could simply be a dress rehearsal for a further reform, suggested David Baldock of the Institute for European Environmental Policy at a seminar of the Westminster Food and Nutrition Forum in London last week. The reform could serve as a means of showing which issues we had to get serious about. The reform had been a rush, it didn't have a finished feel about it. This was a widespread perception in Europe. What was needed was a credible mid-term review.

What was good about the reform was that the public goods idea survived in the CAP. It also couldn't be a one size fits all policy. On the downside, there had been a loss of the commitment to transparency and simplicity. There was a theoretical possibility of reverse modulation.

On the greening measures, it was quite difficult to see what was going to change on permanent pastures. The Ecological Focus Areas had changed greatly from original proposal. The idea covered much less than had been originally envisaged. Cross-compliance entailed a softening of the regime in some directions. Protecting carbon rich soils, the most innovative idea, had been lost.

The last Mid-Term Review was in the Fischler reforms and, as Baldock noted, the then Commissioner had created a platform and had worked to create relationships with heads of government and ministers. My question would be whether anyone around today possesses Fischler's adroit skills.

Farmers face early SFP hit

Farmers are likely to face an immediate hit in their 2013 subisdy payments. 'If farmers budget the same as for 2012, they may be in for a nasty surprise,' warned Richard King, head of research at the Andersons Centre.

The proposed EU budget includes a 9 per cent in CAP funding. But one of the oddities of the system is that this year's single farm payment (SFP) will be based on the new CAP budget, but under the current SFP regime. The result could be a cut of about 10 per cent in the single farm payment. This comes at a time when many farmers have been hit by the unseasonable weather. This particularly applies to livestock farmers in higher areas who tend to operate on small margins.

The 10 per cent figure may be a little high, although Richard King insists that it contains a margin for safety. The Commission envisages a cut in single farm payments of marginally under 5 per cent (4.98 per cent) in 2013, equivalent to an overall cut of €1.47bn from the Pillar 1 budget of €44.1bn. This figure will have to be approved by the European Parliament. The cut is the first time that the 'financial discipline' included in the 2003 Fischler reforms has been triggered.

The difficulty is that farmers have become very dependent on subsidies to make a profit. This is the problem with subsidy dependency. Faced with cash flow problems, farmers have been borrowing more. Bank of England agricultural lending figures show farmer borrowing increased to almost £13.5bn for January 2013. This compares to £12.2bn in January 2012 and £11.7bn in February 2011 (albeit there is an inflation component in those figures).

One recommendation is that farmers should consider hedging at least part of their single farm payment to protect against exchange rate fluctuations. This could make thousands of pounds difference, but it is only an option for larger scale farmers.

Other farmers need to consider whether they want to stay in low margin businesses like dairying. There is a risk that if farmers sell their cows and machinery they may then be tempted to live on the assets while the capital value of the farm (if owned) deteriorates. They need an alternative business plan in place.

Fans of The Archers will note the controversy caused by Tom Archer's argument that Bridge Farm should stop milking its own cows and buy in the milk it needs on the market. Although the scriptwriters had the character put it tactlessly, he is right: milking cows is time intensive and the real money is to be made adding value to milk by making niche products such as organic ice cream and yoghurt.

The real difficulty for farmers is that they do not face a level playing field given the buying power of supermarkets. That is not going to change any time soon. But farmers need to recognise that subsidies are going to fall more in real terms than they have in the past.

Progress towards a European food model?

This paper reports on an Austrian workshop that sought to review progress towards a European food model: Food model

The construction of such a model has been an aspiration of the EU since the Fischler reforms of the Common Agricultural Policy. It sought to replace an earlier crude productionist model that emphasised the quantity of production with one that put the consumer at the centre of the model with an emphasis on quality rather than quantity. Implicit in this approach was a contrast with an American model which still adhered to a more Fordist model of homogeneous mass production. The interests of the farmer were still served because high value added production offered the prospect of better margins per unit of production.

The flaw in this model was that, although niche production had flourished as consumers had become wealthier and more discerning, a lot of European agriculture was still dependent on price-sensitive commodity production. An era of austerity has reinforced consumer behaviour in which price is the dominant consideration.

The Austrian paper takes sustainability as an unifying principle and considers the relationship between a number of dimensions such as food safety, food quality, regionality, diversity and value and appreciation of food.

From a British perspective there is an interesting absence of any reference to animal welfare. Indeed, it is claimed that conservation is promoted by 'bringing rare species and endangered animal breeds back on the table of consumers.' In other words, one eats that which is conserved.

Nevertheless, this paper is an interesting contribution to a continuing debate: what, if anything, is distinctive about European agriculture and how can the CAP best serve it?

CAP reform proposals have no friends

The Commission's proposals for the reform of the CAP have not gone down well in any quarter and have managed to draw fire from Britain and France: Reform

Of course, it was ever thus and one is never going to devise a reform that is welcomed in all quarters. However, Franz Fischler as commissioner had a new vision for the CAP which was more adjusted to contemporary realities. He also showed great subtlety in the tactics that he used to secure some real changes in the CAP, albeit that much was left to be done.

One suspects with the present reform that it very much 'business as usual' with some greening at the edges. It is far from clear that the 'greening' element has been well designed and will actually achieve its aims and here the French have a point.

Similarly, the capping of payments has a populist appeal as it seems to target 'fat cat' farmers, but once again it reflects the confusion and uncertainty that surrounds what the real objectives of the CAP are. Is it a social policy, is it about food security or is it about a competitive and efficient agriculture? One doubts whether it is about the last objective.

Times have changed

As farm commissioner Franz Fischler pushed through a reform of the CAP against resistance from member states. However, in an interview with Agra Focus he indicates that in the changed environment of co-decision such a strategy is no longer feasible.

Asked whether the plans put forward by current Commissioner Dacian Ciolos went far enough, Fischler commented that the plans were rather vague and went on to say, 'I accept that under the new circumstances, under the way decisions will be made in the EU with the co-decision procedure, one cannot do what we have done in the past - that is to say come forward with a big surprise, a big reform, where everybody is against this reform at the beginning. This doesn't work anymore so one has to find a different approach and in principle I think the approach of Ciolos is the right one, but how far can you go?'

Fischler is a candidate for the post of director general of the UN Food and Agriculture Organization which is perhaps not as influential as it once was and needs a strong hand at the helm to revive it.

Fischler emphasises need for reform

Former EU farm commissioner Franz Ficshler has emphasised the need for continuing reform of the CAP: Fischler

It was Fischler who carried out the most thorough reform of the CAP. But he points out that a strong farm lobby could halt the forward momentum of reform. He also emphasises the need for investment in research and development.

So, it's farewell then Mariann Fischer Boel

Farm commissioner Mariann Fischer Boel says goodbye to Brussels: Boel

I think she's done a reasonably good job, not as good as Franz Fischler, but he was a hard act to follow and whoever came after him was going to have to consolidate and deal with the unfinished business. I am sure that sorting out the unreformed sugar sector required a lot of determination and energy and used up political capital.

The farm commissioner is constrained by the political forces surrounding her and you need to be both a strategist and a wily tactician to change anything. Franz Fischler was both and he also seized a window of opportunity which may not repeat itself now that food security has become a dominant discourse.

Franz Fischler

I name Franz Fischler as a politician I admire on one of my other blogs: Fischler