Insurance back on the agenda

European farm commissioner Dacian Ciolos is considering plans for a publicly-funded insurance scheme for farmers' incomes. His view is that it is needed to give a minimum income to farmers after the disapperance of most market support mechanisms.

An alternative view would be that either these farmers would be better off exiting the industry or they should be funded by income support schemes for the least well off, although admittedly these vary substantially as they are a member state matter.

Economists tend to favour insurance schemes and consider that not enough has been done to promote them in the debate in the UK about cost and responsibility sharing in animal health. The difficulty in practice is that the pool is not big enough or lucrative enough to interest insurance companies.

You are then back to state subsidies, albeit delivered by a possibly more efficient policy instrument. EU farmers' group Copa-Cogeca states that average incomes in agriculture were about 50 per cent less than those in other sectors, with two-thirds of farmers' income coming from direct payments from the CAP.

An original objective of the CAP was to narrow the gap between urban and rural incomes and this has never been achieved as far as farmers are concerned. This suggests that for some people farming is simply not a viable activity, at least as a full-time occupation. If one considers that one needs people to remain in remoter areas, a subsidy should be paid specifically for that.

What one really wants is a more diverse rural economy and in the UK, and I suspect elesewhere, the absence of rural broadbrand or a service that is slow (as on the Isles of Scilly) is a real constraint.

A friend runs an agriculturally related consultancy business in a rural area. Recently her provider said that it could no longer offer a broadband service. There are mechanisms to complain, but it will all take too long. She is going to have to move. Action on infrastructure of this kind would help rural areas more than additional payments to farmers.

Scottish Government cracks down on sofa farmers

The Scottish Government is planning to crack down on so-called 'sofa' or 'slipper' farmers who use barren hillsides to claim Single Farm Payments. This proposal follows the short-term recommendations of the Pack Inquiry into Future Support for Agriculture in Scotland.

The proposals do not require EU approval and could be put in place by January. Minimum stocking rates would be established and farms that fell below them would find an inspector calling. They would then have 60 days to put things right. The Scottish NFU endorsed the plan as the best way forward.

It is also hoped that Scotland will secure a devolved animal health budget by next April which should help a number of innovations in policy that the Scottish Government has been pursuing in this area. Their policy experiments could provide lessons for the rest of the UK, although the fact that the UK is a single epidemiological unit poses some challenges.

Productionist move at Defra

Rural development programmes should place more emphasis on competitive agriculture and less on environmental considerations, according to new farm minister Jim Paice:
Rural development

In some respects this may be seen as a return to a MAFF-style productionism at Defra, even if the name of the department has not (yet) changed. However, it is often forgotten that there are three dimensions to sustainability: economic, social and environmental. What the balance should be between these is a matter for debate.

The biggest challenge facing Defra is the budget cuts that are going to hit it given the ring fencing of the NHS and lower than average cuts that are likely in defence and education. If it wasn't for coalition politics, one might wonder why Energy and Climate Change needs to be a separate ministry.

Disclosure of subsidies may end

Transparency in the CAP may be reduced with a ruling which suggests that EU rules which require member states to publish details of payments to individual farmers may be invalid. An opinion by an ECJ Advocate General is often indicative of the view that the Court itself may take. German farmers had challenged the rules on the grounds that they were an invasion of their privacy.

Advocate General Elinor Sharpston said that the rules were disproportionate and that there were discrepancies in the reasons the European Commission and the European Council had given for needing the legislation. The assumption that farmers consented to disclosure when they applied for subsidies was also open to question on the grounds of whether it was explicit enough.

Reform advocates have used the information to draw attention to the very large sums of money paid under the CAP to big landowners or to food processing companies making use of export subsdies. Farmers' organisations argued that members of the public often confused Single Farm Payments with profits.

How many members of the public have been interested is open to question. The information is not that readily digestible and is not equally available for all member states (in the UK it can be found on the Defra web site). However, when I have looked at information relating to farms in areas I am familiar with (admittedly not a representative sample) I have been surprised by how relatively low the payments have been. They would be higher, however, in areas like East Anglia and Lincolnshire.

Depending on the nature of the final ECJ ruling, the Commission may have to redraft the rules rather than scrap them altogether.

What's wrong with the CAP

A polemical attack on the CAP using data from farmsubsidy.org which nevertheless admits that the chances of real reform are slim: CAP

CAP consultation draws a big crowd

The consultation on the future of the CAP has been so popular that the deadline has been extended: Deadline

3,700 responses have been received, although that is not so many when one considers the size of the EU. I also wonder how many of them were from ordinary citizens or consumers and how many from special interests that derive benefits from the policy?

I am rather sceptical about such consultations as I think that they rarely change the minds of decision-makers who pick out those responses that suit their thinking. But I wouldn't want to discourage anyone from responding.

How the NFU sees the challenges

After some delay, I am returning to the NFU paper on 'The CAP after 2013.' I would agree with their basic definition of the challenges facing farming: 'Put simply, farmers across the world will be required to produce considerably more food, from finite and precious resources, amid a changing climate and at the same time impacting less on the environment.'

The NFU specifies the benefits of the CAP in the following terms:
1. European consumers expect food that is produced to exacting environmental and welfare standards. These lead to higher regulatory costs which do not always apply to third country imports. The CAP is a form of compensation for these costs.
2. The CAP plays a key role in the EU's long-term food security.
3. There is a territorial cohesion role in terms of allowing farming activity to be spread throughout the EU. It also underpins rural employment [only in some, generally more remote locations in my view].
4. The policy helps to ensure that agricultural production is environmentally sustainable and helps to maintain some of our most important landscapes and environments. [This is essentially an argument for the second pillar].

But perhaps the real point is that 'Fundamentally, the CAP helps to address the failure of agricultural markets to develop fair and profitable returns to farmers.' What constitutes a 'fair' return is a moot point, but in my view farmers have experienced what I would regard as anti-competitive behaviour by supermarkets, especially in the UK. The solutions, however, reside in more effective use of competition policy (more on this in a later post].

Arguments (1) and (2) are really those that underpin the SFP. However, the actual costs imposed on (1) fall far short of present SFP payments. (2) is more difficult to quantify, particular given the uncertainties associated with climate change, but there are grounds for taking an 'insurance' payment against this.

Without the SFP, many farms would cease production. This would probably hit public benefits more than food production given that it is the most marginal farms that would cease production. What this points to (in the absence of an acceptable bond scheme) is a SFP at a reduced rate.

The French perspective: the new French food law

Recently I had the opportunity to talk to some French agriculture and food policy advisers. This was very informative in the sense of understanding where we differ. The French stance on these matters is a product of their own values which in turn reflect their historical development. One has to understand their stance, even if one does not agree with it.

One topic was the new French law on the 'modernisation' of agriculture which I understand has reached the Senate. I think our understanding of modernisation is somewhat different from the French one. There appear to be three broad objectives: creating a public policy for food; stabilising and re-regulating the agricultural market; and ensuring food security.

Apparently, there is a view in France that there is need to combat new food behaviours. From an English perspective, I would say that this was no concern of the Government, but again this reflects the difference between a liberal and an étatiste tradition.

France was once the country of the one hour lunch: indeed it was not unknown for some lunches to extend more than hour and be washed down with more than a glass of 'vin ordinaire'. However, the view is that France has moved away from having a fixed eating time and young people are turning to fast food. This is thought to be not good for public health, but above all it is believed that restoring traditional behaviour would open the market for agricultural products.

France would also like to strengthen corporatist associations of producers, but admits this would require competition law changes at EU level. A somewhat more sensible idea is to seek longer-term contracts between farmers and the hypermarkets.

However, some of the goals sound a little strange to English ears. Preserving the food heritage is one. Now, whilst I do not share the English middle class love affair with France, I would admit there is something special about a Parisian café. But does this require government intervention?

The policy also seeks to rely on educated citizens, that is educated about food and that objective would certainly resonate with many in England. However, the notion of keeping competitive enterprises on all parts of the territory is a less comfortable one, even if one admits that many parts of France are thinly populated and at risk of depopulation. (Whether depopulation is necessarily a bad thing is itself an interesting question).

A British participant in our discussions argued that the structure of dirigisme facilitated collusion and was essentially anti-competitive. Were the objectives coherent and did they try to cut across the expressed preferences of the French people? The attempt to stabilise might be an attempt to immoblise.

Not surprisingly, this was seen as a rather polemical point on the French side. They explained, that their policy was not economically rational, but was a [normative] choice. The production of food had a very strong public good component and belonged to public policy. However, it was admitted that French consumers had a very limited role in food policy formation.

More from our discussions at a later date.

Ag econ folks give it large to SFP

The intention of the European Commission to retain the SFP as the centre piece of the CAP after 2013 is a fundamental error according to leading agricultural economists. In a paper by David Harvey and colleagues to the Agricultural Economics Society conference in Edinburgh, it was argued that direct farm payments should be phased out.

The very idea of general direct payments was said to be unjustifiable. Payments should be reoriented from payments that are still historically linked to production-based payments and towards the guarantee of food supplies, rural economic development and protection of the environment.

The ag ecnomists argue that the overall agricultural policy problem for the EU is the preoccupation with farm incomes which dates back to the formation of the CAP in the 1950s. The bulk of an expanding budget is still spent on that objective. Despite this expenditure, average farm incomes remain below the national average income in almost all member states (which, of course, could be seized on as an argument for not making things worse by removing farm support). The economists argue that whatever governments do, they are not going to substantially improve the incomes of the less efficient and marginal farm holders.

The economists note that these payments were originally meant to be transitional. Of course, following Mancur Olson, the politics of subsidies which have concentrated effects but diffuse costs means that they are often converted from temporary to permanent payments.

Harvey revives the idea of a bond scheme to buy out these payments as first suggested by Professor John Marsh more than twenty years ago and subsequently developed by Alan Swinbank and his colleagues. Uncertainty for farmers would be reduced and they would have time to adjust to liberalised markets.

I have always found such a scheme attractive in principle, but the Commission view is that it is not compatible with cross-compliance.

Cows account for 4 per cent of greenhouse gases

The urgent need for a stronger climate change dimension to the CAP is emphasised by a report from the Food and Agriculture Organisation (FAO) which is a UN agnecy. If one takes account of everything from nomadic herds to processing plants, milk production accounts for 2.7 per cent of global greenhouse gas emissions. This rises to 4 per cent when meat processed from the dairy industry is added in.

Methane contributes most to the global warming impact of milk, accounting for 54 per cent of emissions. Nitrous oxide accounts for 27 per cent of emissions in developing countrues and 38 per cent in developing countries.

You can find the full report here: FAO

Spel(l)ing it out

New Defra supremo Caroline Spelman went down well at her first Farm Council as she has a fluent command of French and German which facilitated informal discussions with ministers. She has built up informal links with German agriculture minister Isle Aigner on the issue of lighter regulation and is planning a bilateral meeting with French minister Bruno le Maire.

She is taking a relatively reformist stance on CAP, noting that there are four constituencies to be satisfied. She told Farmers Weekly 'Farmers need a good deal from CAP reform. So, too, do consumers, taxpayers and the environment. It is a four-pronged approach to how we reform the CAP.'

Rumours have been circulating that Defra will be abolished or rebadged and substantially restructured. However, the minister said: 'I am not a huge fan of big structural change. In my experience, messing around with structures can end up costing money as well as saving money. It is not my top priority.'

Reading the farming press one gets the sense that farmers have realised that it is not bonanza time, particularly given the fiscal constraints. Cost and responsibility sharing on animal health is still very much on the agenda and the commitment on a bovine TB cull is very qualified.

All four Defra ministers have strong farming connections which is how the Conservatives tend to recruit their ministers and there are no Lib Dems in the department, somewhat surprising given their rural focus. However, this is not necessarily a MAFF (Ministry of Agriculture) in all but name. As far as CAP reform is concerned, the personnel may have changed, but British interests in value for money have not. Indeed, they are likely to be emphasised even more.

Investors pile into farmland

As Britain's Con-Lib government threatens a big hike in capital gains tax, investors are piling into farms despite the fact that a typical yield on capital in the sector is only 2 per cent (although that is more than you would receive from many deposit accounts).

According to Strutt and Parker farmland in the UK has risen in price from an average of £5,260 per acre at the beginning of the year to £6,233 this month, an increase of 18 per cent. Prices have already topped those achieved when the market peak in 2006, but annual growth of about 5 to 6 per cent until 2015 is still expected.

Farmland has always been seen as a safe haven at a time of economic volatility, a kind of gold with cashflow. There are also capital gains and tax benefits. Agricultural property relief means that all of the land, as well as a portion of the farmhouse, is exempt from inheritance tax after two years, provided the owner farms the land or has a farming contract in place based on shared profit. You can also offset farm losses against other income.

The problem is that it is difficult to get a foothold in farming unless you inherit or become a farm manager. Tenancies don't come up that often and local authority estates which were a traditional entry route are being sold off. In any case, many of these units were not viable without an off farm income, although that is also true of many owned and tenanted farms.

The farm population is an ageing one and the industry needs younger people to come in other than through the inheritance route, valuable though that is in providing a sense of 'trusteeship' of the land. When my nephew takes over from his dad, he will be the eighth generation to farm in a very beautiful part of Cymru, although three formerly separate farms have now been combined into one big property.

Lobbying links

Questions are being raised in some quarters about links Defra secretary of state Carloline Spelman has had with the lobbying industry. Of course, it is not unknown for politicians in opposition to have such links or to undertake business roles and Defra has made it clear that everything will be done in compliance with the ministerial code. Read more here: Lobbying

Productionist emphasis at Defra

The productionist emphasis at Defra continues with junior ministerial appointments: Defra . Jim Paice, the Minister of State, was substantially involved in the Young Farmers' movement and has been connected with farming all his life. The 'Pussy', Richard Benyon, is MP for Newbury and is stated to be a local farmer. (As it so happens, I had lunch in the constituency on Sunday and my enquiries suggest that he is more a country landowner than a farmer, not that there is anything wrong that: they often tend to have stronger conservationist instincts).

However, Lord Taylor of Holbeach has not become the Lords minister as expected, the post going to Lord Henley.

The ministerial team would thus be an all Conservative one. However, I am uncertain what is happening to the fisheries portfolio and there were rumours that this was destined to be occupied by the Lib Dem MP for the west of Cornwall and the Scilly Isles, Andrew George.

Sweet appointment at Defra

Caroline Spelman is the new secretary of state for Environment, Food and Rural Affairs. As it so happens, I was with some Defra civil servants yesterday and they were intrigued about what the outcome might be.

Nick Herbert was the shadow spokesperson, but I was not greatly impressed by some of his comments: indeed, I even thought of writing to him and offering some advice! There was speculation that a Lib Dem might get the post and it has been suggested that one of the junior posts in the department will go to the Lib Dems.

Caroline Spelman has a background with big sugar. She worked for the British Sugar Corporation and held the sugar commodities post at NFU. She also worked for the International Federation of Beet Growers in Paris. I have had some dealings with big sugar myself and I know they are serious players.

Her appointment will no doubt be welcomed by the barley barons in East Anglia and the NFU. Farmers felt that Defra until Labour had become the Department for the Elimination of Farming and Rural Activity. I do think that there are some issues on which they have legitimate grievances, for example the failures of the Rural Payments Agency and policy paralysis on bovine TB.

Nevertheless, I would appeal to the new ministerial team not to shift policy too far in a productionist direction and neglect environmental considerations. A good record on the environment is ultimately important for the relationship between the farmer and the consumer.

I know that many individual farmers undertake excellent initiatives on conservation and environmental protection. The typical farmer still has a real dedication to his calling and sees himself or herself as a 'trustee' of their farm. This is not always sufficiently acknowledged. But it does need a supportive policy framework to sustain it.

NFU sets out ideas on CAP debate

The National Farmers' Union has published a major policy document setting out their ideas on the future of the CAP: NFU

The NFU has been working on this policy statement for some time and as one would expect it is a strategically oriented and sophisticated analysis. Clearly it takes account of the perspectives of farmers, but it is also politically realistic in terms of what can be achieved.

I don't agree with everything that is contained in the document, but it also contains a number of sensible and well thought through suggestions that provide a positive contribution to what is a very important debate.

As time allows over the next few weeks, I will through the document highlighting some of the major elements of the analysis provided and suggesting points of agreement and difference.

The future of the CAP

Interesting and informative article in The Economist looking at the future of the CAP: CAP

Debate on future on CAP launched

The European Commission has launched a debate on the future of the CAP. Judging by the remarks made by EU farm commissioner Dacian Ciolos to the European Parliament, one of his main concerns is to engender broader public understanding of and support for the CAP. But if you want to take part in the debate, you should go here: Debate

Foot dragging US damages Global South cotton farmers

An interesting study from the ICTSD finds that US cotton subsidies continue to damage farmers in the Global South. Ths US dragged its feet, only acting at the last possible moment to implement a WTO disputes settle mechanism decision. It could do more by cutting domestic subsidies, but it is not surprising that it fails to do so given the political influence exercised by southern cotton-producing states. More here: Cotton

The ICTSD has also done a study of how a trade deal would affect countries importing and exporting cotton: Trade

Commission announces plan for animal health law

The European Commission has announced plans for a new EU Animal Health Law: Animal Health . The law was anticipated in the Animal Health Strategy in 2007 with the objective of securing a single and simplified horizontal legal framework.

Promnoting animal welfare is, of course, a key aspect of a 'public goods' oriented CAP and there is need to move from dealing with animal disease outbreaks to stopping them happening in the first place.

The big question is: who pays? The EU proposes to review spending in the veterinary field with the intention of coming to conclusions in time for the review of post-2013 spending plans. However, member states and farmers will also be expected to contribute.

How can direct payments be justified after 2013?

This is the question that former OECD trade and agriculture supremo Stefan Tangermann poses in a recent issue of Agra Europe. In effect the answer that the agricultural economist gives is that they can't be, although he is too canny to say that in so many words. But he takes each argument for the SFP in turn and demolishes it.

He points out that direct payments make up nearly three-quarters of EU expenditure on the CAP, equivalent to about one third of the Union's total budget. The argument that they are compensation for earlier reforms can no longer be used to justify their continuation.

What about the view that farm incomes lag behind incomes in other parts of society, which in fact is not necessarily the case? Then payments would have to be in line with the criteria for other income support policies. It would have to be means tested so that better off farm families received less. Moreover, payment would have to be higher in member states where the gap was greater which is not compatible with the idea of a level playing field in a single market.

What about the food security argument, the desire to safeguard a viable agriculture in Europe? Tangermann points out that empirical studies show that farm support is largely capitalised in land values. Where land is rented, most of the direct payments flow to landlords. If support was eliminated, 'Land rents will adjust and farming continues.' This perhaps reveals an economist's faith in automatic adjustment in functioning markets. In fact adjustment would probably only occur after a time lag and then not fully. That delay could be cricial for some farmers.

What about enhancing competitiveness? Tangermann points out that competitiveness depends on productivity, know-how, product quality and the like. Education, training, extension services and research and development are the policies that help, not per-hectare payments.

What about the argument that environmental and other standards are more demanding in Europe than other parts of the world? Tangermann notes, 'Research has shown that they differ very much from sector to sector within the farming industry, but also from farm to farm. Overall, though, any such extra costs are relatively small, certainly much smaller than the level of payments currently granted to EU farmers.'

What about cross-compliance? Most of the requirements under cross-compliance would have to be respected anyway: 'Justifying payments on these grounds is akin to granting payments to all car drivers, which are then claimed back from drivers exceeding speed limits.'

So Tangermann concludes that it is doubtful whether any credible justification can be developed for direct payments. But when he gets on to political ground is touch is less sure. Having a good case matters, but there is also a lot of raw power politics surrounding agriculture with many member states willing to spend political capital to defend their farmers. Tangermann says that 'Europe's taxpayers are keen to know why they are expected to finance such payments', but I see little evidence of such interest. Hence, it is possible for agricultural lobbies to mount 'business as usual' arguments with little effective challenge.

Subsidy trade is on the up

Trading of single farm payment entitlements is almost double that of a year ago with prices noticeably higher than in 2009. English flat area or area-only entitlements are changing hands at about £185 a hectare while a full entitlement is worth £225 a hectare. Some purchasers were those who had taken on land without entitlements. Others were speculating on the current subsidy mechanism being rolled on after 2013 or hoping that if the system is dismantled, there could be some form of compensation.

It may seem odd to have a brokered trade in subsidy entitlements, but some economists would argue that it is a second best solution that allows them to be allocated where they are most needed in terms of ability and willingness to pay.

Sarko accepts budget cuts

President Sarkozy has accepted the reality of CAP budget cuts, provided they are offset by greater import protection for farmers: Sarko

Farmers do not lack protection as it is with many tariffs in the three figure range. Sarko says that imported products should be produced to the same standard as in the EU which sounds reasonable enough but in fact is a way of excluding developing country exports altogether.

Continued need for market support

A paper circulated by the Spanish presidency has argued for keeping a strong arsenal of market support measures within the CAP. The paper includes a series of graphs showing the volatility of EU and world food commodity prices, even before the 2007/2008 price spikes.

It is argued that a strong budget is needed to support such measures. Among those specifically mentioned are intervention buying, private storage aids and export refunds. It is evident that the perceived food security crisis is breathing new life into policy instruments that seemed to be on the way to extinction, encouraging those who hope for a 'business as usual' model for the future of the CAP.

The paper does mention earnings and incomes insurance, but does not back the idea pending assessments of the effectiveness of such a tool and its WTO compatibility.

The French agenda

An interesting article in the Financial Times which looks at some short-run political maneouvring in France, reviews French proposals to tackle price volatilty and suggests that, as CAP money is transferred to new member states, the policy may become a drain on the French exchequer, possibly leading to a long-run shift in the French stance: France

Call for tax on livestock emissions

Methane is a particularly powerful greenhouse gas and recent research suggests that it may have 33 times the effect of carbon dioxide when its interaction with airborne particles is taken into account. It is also very persistent in the atmosphere.

Calls for a tax on livestock emissions have been discussed half seriously in the European Commission, but now it has been advocate by the United Nations: Flatulence

What is evident more generally is that agriculture and the food chain has to be fully incorporated in attempts to mitigate and adapt to climate change. However, the farm lobby has been a powerful opponent of the cap-and-trade bill in the US.

CAP support levels reach new high

CAP subsidies as reported to the WTO reached a new high of over €90 billion for the decade in the 2006/7 marketing year, but conveniently most of them have been parked in the allegedly non trade distorting green box, something that has provoked disquiet in Geneva: Subsidies

Ciolos gets positive report

The authoritative Agra Focus has given a positive report on how new commissioner Dacian Ciolos handled his confirmation hearings in front of the European Parliament, although they and others think that the process leaves a lot to be desired.

Given his background it was not surprising that he would handle technical matters competently, but apparently his political atennae were impressive. Let's hope this doesn't mean kowtowing to farm interests. The longest spontaneous applause he received from MEPs in the committee was for stating that he will defend the largest CAP budget possible. He has also received the dubious accolade of being embraced by the farm lobby COPA-COGECA which welcomes his intention to defend a 'robust CAP'.

He did make it clear that direct payments will have to be maintained to provide 'a minimum level of stability in farmers' incomes', but this was not a surprising stance. He cited food security as one reason, but one might question why farmers need financial stability when it is not available to other small businesses that face fluctuating levels of demand.

He did, however, rule out any return to old style policy instruments, making the sensible suggestion of a guarantee or insurance fund that could kick in should there be price volatility. He also wants to reduce the gap between the average payments per hectare in member states by moving away from payments on an historic basis as used in most 'old' member states.

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.

NFU slams new CLA policy on CAP

Landowners and conservationists have launched proposals for a more environmetally friendly CAP: CAP

When I attended a RASE lecture last year it was evident that there were some differences of emphasis between the approach of the Country Land and Business Association and the NFU. These have now become more marked to judge from the NFU's response which sees the CLA's approach as 'out dated' and 'naive': NFU

Too much focus on environment

Conservative shadow minister Lord Taylor has said that there has been strong a focus on environmental considerations in agricultural policy. He said, 'If we want a very productive agriculture we want to re-focus the attention that's been diverted away from farming itself.'

It has been apparent for some time that a Conservative government would adopt a more productionist approach to farm policy, but that has always been foreshadowed by the recent Defra strategy paper which was substantially influenced by the growing influence of the food security discourse.

This comes at a time when a new study by WWF-UK and the Food Climate Research Network estimates the food we eat accounts for 30 per cent of the UK's carbon footprint. Previous official estimates had been below 20 per cent. However, these figures take into account emissions generated overseas. It is estimated that more than half of greenhouse gas emissions are accounted for by livestock farming.

What we do not want are ill thought out responses of the 'Meat Free Monday' type which have been criticised by careful analysts like Tom MacMillan of the Food Ethics Research Council. Too hasty a lurch in that direction could have implications for animal welfare.

New ideas from Scotland

The interim report of the Scottish Government's Pack Inquiry has called for direct support to Scottish farmers to continue beyond 2013. You can find out more here:
Pack

No surprises there, but the report also proposes a new top-up find which would be financed by money taken out of the direct payment budget. This could be used to support measures such as fuel efficiency, renewable energy and animal health schemes (an area where Scotland has often been ahead of the curve).

Former auctioneer Brian Pack commented, 'Much more consultation and research is needed, but the idea is that a top-up fund would be used to back outcome and transformational change. It could be the new contract between producers and Scottish society and give the Scottish public the sort of efficient and sustainable agriculture they want to see.'

This is an interesting and innovative idea which deserves further consideration.

It all kicks off in Greece

Greece's financial troubles may be hitting the euro, but this has not deterred Greek farmers who have been in a ten day confrontation with their government as it desperately seeks to stabilise the budget. The farmers have marched through central Athens demanding an extra €1 billion in subsidies.

This is cloud cuckoo land politics but, quite frankly, anything is possible in Greece which has shamelessly misled the EU about the scale of its budget deficit. Greece is the worst kind of party state reminiscent of Italy in the past where politics is about granting favours and can verge very closely to behaviour that is corrupt.

One of the populist slogans is 'Give money to farmers not bankers', referring to the government's attempts to raise funds abroad to pay down its debt. The realities of the situation have been well summarised by Yannos Papantoniou, the former finance minister who took Greece into the euro: 'Deep structural refoms are needed to engineer first growth, then productivity increases. Since the state sector is inadequate and inefficient, the country needs to embrace privatisation and market liberalisation to get growth going again.'

They could start with the agricultural sector which, if it was smaller, might be able to cause less disruption. Farmers have been blocking 20 highway junctions across the country, including a blockade of the country's border with Bulgaria which has upset the fellow EU member state. One might think that, in an internal market, this came within the remit of the EU itself.

But I'm afraid it's old style farm politics in Greece and we shall see a lot of that as the EU and its member states include agriculture in the round of budget cuts.

The health check is over

The health check is now well and truly over so the CAP Health Check blog has been replaced by a new and more attractively designed site at Subsidies

They also have a film on You Tube about the work of their site: You Tube . This is interesting and well-made.

I suppose my view would be that if you are going to have subsidies, one has to be careful about cutting them off from large farmers who are arguably more efficient and certainly more internationally competitive. Of course, 'efficiency' is a contested concept and does not take account of negative environmental externalities, but what that implies is a proper Pillar 2 in the CAP and a new Pillar 3 to deal with climate change (or at least a substantial climate change dimension to Pillar 2).

The NFU perspective on the future of the CAP

Britain's National Farmers' Union is noted for its strategic, long-term view of agricultural issues. Its officials have a sophsiticated, well informed view of developments and it was therefore interesting to read an interview in the latest edition of Farmers Weekly with the NFU's head of economics and international affairs, Tom Hind. He was at one time acting head of the NFU's office in Brussels.

Not surprisingly, he takes the NFU line that farmers need to continue to receive the single farm payment (SFP) to give them a degree of income stability, especially faced with volatile markets. A basic tenet of agricultural economics is that markets for farm commodities are relatively unstable: to put it at its simplest, even with modern agronomy, the weather remains a factor which can disrupt such markets. If one accepts the view that farmers as a category require market stabilisation measures (which is not quite the same thing as income stabilisation), there is still room for a debate about whether the SFP is a particularly efficient or fair policy instrument, but it could be argued that we have to work with what we have.

In any event, he is confident that the long-term legitimacy of direct payments will be strengthened during the upcoming debate about the future of the CAP. He is emphatic that decision-makers in the UK 'must move away from ideologically entrenched positions, especially on phasing-out direct payments.' Not surprisingly, he is heartened by the declaration made by 22 EU governments in Paris in favour of a strong CAP. It's a document short on specifics, but it really represents a political commitment, rather than a set of policy recommendations.

It is interesting that he does fear some further renationalisation of the CAP which many member states pushed during the health check. He notes that in recent weeks several governments have resorted to state aids to give support to their farmers. He is correct to point out that such activities can lead to competitive distortions between member states and hence undermine the single market. What particularly concerns him is the possibility of national co-financing of direct aids. With justification, he fears that UK farmers would lost out as the Treasury would not be keen to top up direct support.

He does oppose direct payment schemes that used farm size or turnover for determining levels of support. He says that such criteria are 'woolly' and they are certainly difficult to interpret and apply in practice given the legal and other issues surrounding what constitutes 'a farm'. However, the real objection is that Britain is one of the countries that would lose out. If one is going to have farm subsidies, and one wants European agriculture to be competitive, should they be denied to the farmers best placed to compete on international markets?

Where I have particular sympathy with him is when he says that what is wanted is a policy focused on the market. This does not mean just decoupling, but also correcting market failures such as excessive retail power. Whether the EU can do much about this is another question. In large part it falls within the competition policy remit of member state governments, but they are often reluctant to rein in retailers who keep down inflation by delivering cheap food to voters, albeit by using contractual and other tactics that are arguably unfair and not in the long-run interests of an efficient and effective food chain.

Clearly someone like Tom Hind is looking at these issues with the needs of his members in mind: that is what he is paid to do. Most of us wouldn't start from where we are and a sudden withdrawal of subsidies could have substantial negative impacts on the agricultural economy.

Nevertheless, modern farmers are much more market oriented and are aware that they have to deliver products that the consumers want: hence the proliferation of farm shops and small-scale processing businesses serving niche markets with value added products. Hopefully, they can eventually be weaned off subsidies, particularly if competition policy is used to remove unfair practices.

Hedge fund moves into agriculture

A leading New York-based hedge fund is moving into agriculture through a vehicle called the American Farmland Company. Optima has $6 billion funds under management. It plans to start its swoop by investing in arable land in Arizona and vineyards in California.

It has no European plans at present and the predominantly smaller nature of most farms in Europe may make it a less attractive location. Even though the US subsidises its farms, especially its larger ones, making farm investment even more attractive, the sheer complexity and the CAP and the uncertainties surrounding its future may be an off putting factor. In the States the initial plan envisages up to 15 farms with an average size of 500 acres, so the involvement is modest.

It is the longer-term strategy that is interesting. Dixon Boardman, Optima's chief executive, believes that economic recovery, continued population growth and increased incomes, especially in emerging markets, will create increasing demand for food. The diminishing availability of arable land, especially in China, is also seen as a key factor. In other words, a food security crisis leading to increasing prices is seen as being on the agenda.

Boardman argues that farmland is an asset class that has been overlooked by many investors. I am not so sure that is so true in the UK where interest has waxed and waned over the years with companies like Sentry Farming eventually pulling out of farm management. Boardman argues that in the US farmland has generated revenues exceeding 15 per cent per annum in the past five years, but part of that has been fed by the biofuels boom which is of questionable net environmental value. He also points out that the farming sector has low debt which is an attraction in the current crisis.

The sector produced a return of 31.7 per cent in America between June 2007 and June 2009, according to the National Farming Index. Over the same period the S&P 500 index declined 35.9 per cent.

Only a small proportion of American farmland, estimated to have a value of around $2 trillion, is owned by institutional investors. Boardman is confident that farmers will sell up: 'Farming is much more than a commercial choice than a lifestyle choice in America. A lot of these farmers are getting old and the next generation is not always interested in taking over these farms.'

In the UK farmland values in southern England have long been boosted by interest from the City. Sporting assets such as shooting and fishing are a key attraction, along with opportunities to stable and exercise horses. However, these activities may be undertaken alongside a commercially managed farming operation. There may be inheritance tax advantages in investing in farmland.

New Year Greetings

I had an interesting visit to Australia in February and March and met many people connected with agricultural policy. This llama on a property in Queensland did not seem too pleased to see me, probably having been told that there was about to be a CAP regime for camelids.

May I wish all readers a happy, prosperous and healthy new year. I would like to be also able to forecast that the momentum of CAP reform will be maintained, and that agricultural policy will increasingly be adapted to the needs of climate change mitigation and adaptation, but I am not optimistic on either point.

Franz Fischler

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

New farm boss faces confirmation battle

The European Parliament always likes to assert itself by refusing to confirm one or two nominated commissioners in its confirmation hearings and the designate new farm commissioner Dacian Ciolos could be in their sights as the youngest and least experienced of the nominations. Although nominally an independent, he has been embraced by the centre right European People's Party, but they could easily drop him if the heat is turned up.

He got the nomination despite a late push by 'old' member states to nominate Ireland's Marie Geoghegan Quinn who was acceptable to France. However, they had left it too late to get the nomination for their candidate. Finland's Olli Rehn and Slovenia's Janez Potocnik were also in the frame at one time, while the favourite for a while was Latvia's Andris Pieblags who had shadowed Franz Fischler in 2004. To many it was a surprise that Ciolos got the nomination.

There have been complaints that Ciolos is 'too French' in the sense that his postgraduate education was undertaken in France and that his family and France's Michel Barnier's family are personal friends. He also has a French wife whom he met when both of them were trainees in DG AGRI. Ciolos was in fact appointed a director in DG AGRI earlier in the year, but was not able to take up the post.

His defenders argue that he is committed to a 'modern concept' of European agricultural and rural development policy in line with Commission thinking.

The appointment of John Dalli as the new Health Commissioner is also significant for farm policy. His appointment was perhaps even more surprising than that of Ciolos. Although the 61-year old is a big name in Malta where he was the longest serving Minister of Finance, he is less well known at a EU level.

DG SANCO will now take over responsibility for GMO cultivation and pesticides which currently resides with unit D.4 in DG ENVI. It is thought that this is because Commission president Barroso is looking for a more scientific, depoliticised approach to the GM debate.

Dalli has no prior experience of the food safety and animal health issues for which he will now take responsibility.

Cross-compliance is not delivering

Cross-compliance has no clear objectives, does not reflect the 'polluter pays' principle and is not being properly enforced, and is therefore not providing concrete diversity promotion, according to a new report. Published by Birdlife International it is entitled 'Through the green smokescreen. How is CAP cross compliance delivering for biodiversity.' It can be found here: Birdlife

Birdlife highlights that some of the biggest burdens imposed by cross-compliance are perversely felt by extensive livestock producers, i.e. the production systems which are most important for biodiversity and for which subsidy levels are usually lower than more intensive farms. It advocates a complete and urgent overhaul of the whole system and the need to realign the whole CAP to the principles of Rural Development.

Scotland 'on message' on farm subsidies

Scotland is far more in tune with current thinking on farm subsidies in mainland Europe than England and Wales, claims Scotland's rural affairs minister Richard Lochhead.

Addressing farmers at a Christmas Carcass competition in Inverurie, Mr Lochhead brought them glad tidings about the deep divide in agriculture policies on the two sides of the border. 'My opinion on CAP reform is very different from DEFRA's view that all direct subsidies should be removed and we should rely on a free market. Scotland should not go down that route and our thinking is much closer to the mainstream of Europe which is that the pendulum is swinging back towards support for active agriculture.'

The minister felt that outgoing farm commissioner Mariann Fischer Boel didn't envisage that pendulum swinging too far, ruling out headage payments, but new commissioner Dacian Ciolos could bring in a new era.

There are certainly those in Brussels who think that Ciolos will favour more market support and help to smaller farms. However, others take the view that he is on message with the Commission view on reform and has been playing down his linkages with France to reassure pro-reform countries.

However, Christmas has come early for some English farmers, with over 80 per cent of farmers receiving £1.3bn in Single Farm Payments to date. That's approximately £15,116 per recipient. Not quite a banker's bonus, but welcome all the same. Organicduck tweeted from Devon, 'Hurrah and thank you RPA. Maybe off Christmas shopping or maybe pay off some overdraft.' Payments are also well advanced in Wales and Scotland.

New farm commissioner a setback for reform

The appointment of Romania's Dacian Ciolos as farm commissioner looks like a setback for reform. Romania has a bloated farm sector and has been in trouble for its management of EU funds.

The smart money recently was on the appointment of Andreas Pilebags from Latvia. France was hoping for an Irish appointment, but then swung behind Ciolos who undertook his postgraduate study in France.

CAP budget report has been 'binned' - or has it?

A controversial draft report which advocated cutbacks in CAP spending after 2014 has now been ditched according to Farm Commissioner Mariann Fischer Boel. She denied having backed the report which called for agriculture to account for a lesser share of the EU budget that it does at present. Fischer Boel claimed that the paper was now a 'non paper' and was 'in the bin'.

However, the position may be a little less straightforward than it appears. It was a small group of Commission President Barosso's advisers that drafted the review with his explicit approval. With Barosso back for a second term it is quite likely that the final version of the budget review document, to the tabled in the New Year, will contain views not dissimilar to those in the draft, including linking Single Farm Payments more closely to the provision of public goods.

Budget Division sources indicated that just how much the CAP's budget will be reduced is still up for grabs, but considerable cuts are considered to be necessary to focus spending on other higher priority investment areas. These include climate change and the promotion of growth and jobs.

A new style CAP

A group of agricultural economists has launched a new attempt to reform the CAP with an emphasis on public goods provision: CAP

G-21 an anti-reform bloc?

At various times in the history of the CAP, member states have formed informal groupings to address particular issues, e.g., 'the Aachen Five' and the agri-monetary system. The G-21, in effect led by France, is a much larger grouping which constitutes a qualified majority in the Council.

It become the G-21 rather than the G-20 at a meeting in Vienna when Greece joined. This left only the four leading reform countries (UK, Denmark, Netherlands, Sweden) outside the grouping, plus Cyprus and Malta - countries that have small farm sectors and may not have thought it worth the time and effort.

It's evident that this grouping forced the Commission to climb down on the Milk Fund issue and allocate an extra €280m to dairy farmers. This decision was apparently taken by Commission President Barrosso rather than by farm commissioner Mariann Fischer Boel.

A real concern is that this grouping could constitute a basis for mobilisation against further reform of the CAP.

Budget directorate wants to cut CAP

Leaked copies of a document from the European Commission's budget directorate reveal an aspiration to substantially cut agriculture's share of the EU budget from 2013 onwards.

The paper says that it is too early to see what the future reform of the CAP will look like, but argues that it should be driven by two objectives. 'Firstly, it should resolutely pursue the modernisation of the CAP, concentrating spending where it most adds value. Second, it must stimulate a further significant reduction in the overall share of the EU budget devoted to agriculture, freeing up spending for new priorities.'

The paper argues that direct aids should be reduced and linked more strongly to the delivery of public goods. A Pillar 3 should be established dealing purely with climate change.

The full communication is expect to be published in November.

Sweet tooth

The International Centre for Trade and Sustainable Development has produced a paper on how a trade deal on sugar would affect importing and exporting countries. You can read it here: Sugar

The paper finds that a significant amount of sugar trade is conducted under preferential trade agreements which encourages sugar production where it is not competitive at the expense of low-cost sugar producing countries.

The EU sugar reforms had an adverse effect on higher cost producers in the Global South such as Fiji, Guyana and Mauritius. Full access by LDCs to the EU sugar market once the Everything But Arms Initiative is in operation should help countries like Sudan to boost their EU market share.

Sarko: the answer lies in the soil

French president Nicholas Sarkozy has unveiled a €1.65bn rescue package to help French farmers cope with lower commodity prices and shore up his support among rural voters. It forms part of a broader thrust to reaffirm French 'national identity' and also to deflect criticisms over local tax reforms and allegations of nepotism in relation to the promotion of his son's career. Mr Sarkozy is facing difficult regional elections next year and needs the support of rural voters.

In a speech in the Jura, the president claimed that 'The word "soil" has a special meaning in French and I was elected to defend French national identity'. The package of subsidies is made of €1bn in subsidised loans and €650 in cuts to land and energy taxes and social charges (which have particularly hit fruit and vegetable producers weighed down by high social charges on seasonal labour).

Mr Sarkozy insisted that the plan, with its focus on tax cuts, would not contravene EU rules on state aid. He attacked the Commission for dragging its feet on proposals to help dairy farmers. French dairy farms are on average smaller than their competitors in other large member states.

The package signals a tougher stance by Paris as the EU prepares for the debate on scaling back CAP subsidies. Mr Sarkozy said that he wanted tighter regulation of the milk market from next year.

Mr Sarkozy has described a complete U turn from the first speech he made to farmers as president in 2007 when he told his audience they had to learn to make a living from market prices rather than subsidies. But now he needs to consolidate his traditional centre-right base and he has reverted to a more typical French stance.

Dairy sector measures do not set pulses racing

4000 dairy farmers with 900 tractors demonstrated outside an EU agricultural ministers meeting in Luxembourg yesterday calling for more aid for the sector. Inside, ministers faced a Franco-German memorandum backed by 20 member states with a series of demands for market distorting measures. In the event the concessions the Commission made are probably the least they could have got away with in the circumstances. Farmers' organisation COPA immediately condemned them as insufficient.

The main move was to make an additional €280m of public money available under the Article 186 'disturbance clause' which allows the Commission to step in at short notice when the market collapses. The milk market has hardly collapsed and this is something EU finance ministers may wish to consider when they meet to consider the approval of the move on 19 November.

What the money is to be spent on is yet to be decided, although private storage for cheese has been mentioned. No, this doesn't mean that members of the public can get a subsidy for filling their fridges with cheese, although anything is possible in the Alice Through the Looking Glass world of the CAP.

What is significant is what was in the Franco-German document that has not been acted upon: official intervention buying of chesse, additional funding for school milk schemes (funding for fruit yoghurt had already been agreed) and more targeted export assistance and subsidies for skimmed milk powder to be used in animal feed.

It was this last measure which had the greatest potential for damage. Commissioner Fischer Boel dismissed it by saying that she had not received any convincing evidence that it would increase demand. What it has done in the past is seriously distort other markets, e.g., for pigmeat.

The notion of freezing quotas had already been knocked off the agenda in September, a singularly ill thought out proposal which would have done nothing in the short run and delayed adjustment in the longer run.

It is worth noting that milk prices have been increasing, by 2 per cent in August while butter has gone up by 4 per cent in France, 8 per cent in Germany and even more in the UL. Intervention buying of skimmed milk powder has virtually come to a halt because the market price is higher that the intervention price.

Watchdog slams farm payments mess

In one of its most critical ever reports, the National Audit Office has slammed the way in which the Rural Payments Agency has administered Single Farm Payments to farmers. It accused the agency of showing 'scant regard to protecting public money'.
The agency has wasted around £700m, the capital equivalent of building thirty secondary schools.

The average amount paid to about 107,000 English farmers is about £15,300 a year. However, the watchdog found there were substantial overpayments totalling between £55m and £90m but the data was so unreliable the auditors were unable to find out the precise sum. £280m has been set aside to pay Brussels penalties for administrative errors and late payments to farmers, but a further £43m of overpayments are likely to be irrecoverable.

What the report brings out is the high transaction costs incurred even in a supposedly simplified system of subsidies. It is estimated to cost £1,743 to process each farmer's claim for cash, a rise of 20 per cent in four years.

It is argued that some of the problems arise from the payment system chose by Margaret Beckett, at one time in charge of Defra. The devolved regions opted for a simpler system based on historic payments made to farmers. In Scotland the cost of administering payments is £285 per farmer. However, one reason for choosing an area farmed system was to try to break away from the 'to him that hath shall be given' aspect of the subsidies system.

Of course, some might think that we would better off by phasing out subsidies altogether.

Nasty surprises in the green box

Governments are increasingly putting their subsidy payments into the 'green box' of the WTO, but there is evidence that these subsidies are harmful to the environment and farmers in the Global South. Read more here: Green box

Who will be next agriculture commissioner?

The next agricultural commissioner will have the chance to shape the future development of the CAP. So who will it be?

We can eliminate three sets of member states. By convention the post cannot go to a large member state, ruling out the UK, France, Germany, Italy and Spain (and presumably Poland).

Former Romanian farm minister Dacian Ciolos is the name formally mentioned, but indications are that a candidate from a member state with such a large agricultural population, and possible problems with the use of its EU funding, would not be acceptable. Indeed, one can rule out the new member states altogether as the only two other possible candidates - former Slovenian farm minister Iztok Jarc and his Cezch counterpart Petr Gandalovic - have now left office and are unlikely to get support from their governments.

We can also rule out member states who have appointed non-agricultural commissioners: Belgium, Finland, Luxembourg and Portugal. While it would be interesting to have someone without an agricultural background in the post, it is unlikely to happen in practice. Sweden is also thought not to want the dossier.

Given the recent election in Greece, the unstable political situation in Ireland, and no agricultural expert being discussed from those countries, they are unlikely to provide a viable nomination - although Ireland could spring someone out of the hat at the last minute: remember that Fischer Boel was a late and unexpected appointment. An Irish nominee would certainly be welcome in Paris.

We are really left with Denmark, the Netherlands and Austria. A second Danish appointment seems unlikely. If climate minister Connie Hedegaard is the Danish nominee, she could occupy a similar portfolio at the European level. Farm minister Eva Kjer Hansen is also in the frame but could get a food safety/SANCO dossier if she comes to Brussels.

The Netherlands has perhaps the best qualified candidates in the form of current agricultural minister Gerda Verburg or former minister Cees Veerman.

But the smart money is on another Austrian, former farm minister Wilhelm Molterer, even though Vienna would prefer him to have the budget portfolio. It's certainly not a done deal and there could be a last minute surprise.

Back to butter mountains?

It's a familar scenario: the milk price falls; farmers come out to the street; and the Commission starts to panic.

Following a 'milk strike' across Europe, an emergency meeting is to be held by farm ministers on October 5th. Nineteen member states have signalled support for a Franco-German initiative for an aid package for dairy farmers. However, farm commissioner Mariann Fischer Boel, insists that there is no prospect of reversing the decision to abandon dairy quotas as part of the CAP reform process.

Global prices surged in 2007, but this led to more production which came on to the market as the recession ended.

The simple fact is that there are too many inefficient dairy farmers in Europe. A slimmed down dairy sector would be more globally competitive. However, despite the opposition of Britain and Denmark, one suspects that a policy fudge is on the way.

Fischer Boel steps down

Mariann Fischer Boel has confirmed that she is to step down as farm commissioner, citing her age (66) and the wish to spend more time with her family. An assessment of her time as commissioner can be found here: Boel

The race is now on to succeed her. Ireland has already thrown its hat into the ring, although no name has yet emerged. A successful Irish candidacy would not assist reform.

Will Fischer Boel stay or go?

Agra Focus is still 60 - 70 per cent positive that farm commissioner Mariann Fischer Boel will step down. At 66, the attractions of retirement from a demanding role might seem clear. Manuel Barosso, the Commission president, would like her to stay as he thinks she is a skilled negotiator. The Danish prime minister, Anders Rasmussen, would also like her to stay to give the Danes a key portfolio.

If she does go, there will be more uncertainty about the future direction of policy. Romania is reported to be pushing for the agriculture portfolio and is receiving backing from France and Poland on the basis that a Romanian commissioner would be more resistant to a genuine reform of the CAP. Moreover, the favoured candidate, former Romanian farm minister Dacian Ciolos studied in France, has a French wife and is a personal friend of former French farm minister Michel Barnier.

However, would a candidate from a new member state with a large and inefficient agricultural sector really be favoured when CAP reform is on the agenda? Nearly 30 per cent of the Romanian population is employed in agriculture, more than five times the EU average. Another problem is tha at some stage the Commission will have to start investigating how Romania and Bulgaria have been implementing CAP aid schemes since they joined the EU in 2007. Their record in relation to the SAPARD scheme for pre-enlargement funds was none too good.

So perhaps the choice could again fall on a smaller northern member state like the Netherlands?

Consumer aversion to GM declining

Consumers are less averse to GM crops and foods than they used to be, according to results from a quarterly tracking survey carried out on behalf of the UK Food Standards Agency. See FSA

Worries about food safety in general continued a general downward trend, from 64 to 61 per cent in this quarter. The top concerns were food poisoning (47 per cent) and the amount of fat, salt, sugar and saturated fat in food (responses in the 36 to 41 per cent range). Food prices and the conditions in which animals were raised were both mentioned by a third of respondents.

GM foods ranked 22nd out of 24 concern categories with only 2-4 per cent expressing spontaneous concern, rising to 21 per cent when prompted. In the previous survey conducted in the spring thse figures were 6 per cent and 26 per cent respectively.

The news comes at a time when livestock feed supplies in the UK are under increasing threat. UK livestock farmers are dependent on soya feed imports from Argentina and Brazil. These two countries supply about 90 per cent of UK imports. But they are increasingly switching to GM production and a joint Defra/FSA report suggests that livestock feed costs could soar by 300 per cent if Europe maintains strict import rules.

Admittedly this entails a worst case scenario in which there were no imports from the two Latin American countries. Should that happen, it is forecast that there would be a 24-29 per cent reduction in UK pig production and a 10 to 68 per cent reduction in poultry production.

The report argues that the risk to food supplies could be avoided if the EU allowed a low-level preesnce of some non-EU approved GM material rather than operating a strict zero tolerance policy as at preesnt.

The situation is complicated by poor harvests in South America last season, active purchasing there by China and the halting of imports from the US after the discovery of traces of unapproved GM maize in a shipment.

Consumers may at some point have to make a choice between lower food prices and an insistence on strict GM-free standards for animal feed. This particular problem is symptomatic of more general debates about the role of technology in ensuring food supplies.

Four legs good, two legs bad

A leading scientist is the latest person to warn that the bickering over whether conventional or organic farming is environmentally superior is getting no one anywhere in mitigating climate change. In an interview with Farmers Weekly Ian Crute, shortly to become chief scientist at the Agricultural and Horticultural development board, said it was vital to reduce greenhouse gas emissions from all types of agriculture. The former director of Rothamsted Research commented, 'The notion that this is a case of organic farming, conventional farming bad, doesn't get us anywhere.'

More investment in scientific research was needed to uncover beter ways that agriculture could help in the mitigation of climate change. 'There is no good data which would say that the emissions of nitrous oxide from organic systems compared to systems which are using synthetic fertiliser are necessary any worse or any better. I could argue very strongly that efficient pest, disease and weed control using pestcides was a far greener system in terms of the efficiency with which nitrogen us used than an inefficient system using far more land and inputs inefficiently.'

NFU policy director Martin Haworth endorsed Professor Crute's comments. More money needed to be spent on research and development to address 'market failure' issues. He commented, 'We need to reduce greenhouse gas emissions from all systems and science is key.'

The comments came after a study by the Institute of Grocery Distribution (IGD) found that four out of five shoppers are turning their backs on organic produce in favour of cheaper, conventionally-produced food. They found that 10 per cent of shoppers have found alternative products offering the same perceived benefits as organic food at a lower price.

A further 8 per cent are focusing their organic spend on fewer products where they think it really makes a difference, while another 8 per cent say they are not sure what organic stands for anymore. More than 40 per cent of shoppers say they have never been interested in organic.

The hard core of dedicated organic shoppers make up nearly one in five of the UK population. They tend to be younger and more affluent. However, some of them are looking for their ethical values in products that meet high animal welfare standards, local foods and Fairtrade. Nine per cent of shoppers will buy more organic food when they have more money.

Soil Association director Patrick Holden admitted that many people saw organic as a lifestyle choice rather than a sustainable farming system. 'We need to work at changing these perceptions,' he said.

The iceing on the cake

With the approval by the Icelandic Parliament of arrangements to pay back money owed by failed Icelandic banks to depositors in the UK and the Netherlands, the way is now clear for Iceland's application to join the EU to proceed.

The opening of negotiations has already been approved by the Parliament, but membership would have to be approved by a national referendum and approval rates have been dropping sharply as the nation's population consider that they have been harshly treated by the international community for the failures of a few financiers.

Fish is normally seen as the main obstacle to Icelandic membership, but agriculture also poses many challenges. Iceland has a PSE of around 70 per cent, one of the highest in the OECD (along with Norway and Switzerland, although reforms have been introduced in the latter country) and twice the OECD average. The OECD has commented that since the last 1980s there has been limited progress in policy reform with only a slight drop in levels of producer support.

Sheep farming has been the main activity, but this has been in decline. Scarcely any crops are grown in the country. There are around five hundred dairy farms, presumably to ensure a liquid milk supply given the country's isolation. At least until recently, dairy prices were still administered.

The EU's net trade balance with Iceland is just over €150m for agricultural and food exports. The value of EU food exports has risen 25 per cent in the last four years. However, there is a trade deficit of more than €1bn in fish products.

In any negotiations account has to be taken of Iceland's special circumstances in terms of climate and location. There is no doubt that agriculture as well as fish is a sensitive subject in terms of the already wounded national pride of the Icelandic nation. The main potential gain for Iceland is membership of the euro and relief for their own battered currency.

We shall be paying special attention to negotiations as they proceed.

The impact on CAP on developing countries

This interesting report from the International Centre for Trade and Sustainable Development shows how the CAP can often undermine the development goals that member states are pursuing: Millennium Goals

New Ag committee line up

With co-decision on agricultural issues likely to come into force from next year, the European Parliament's Agriculture Committee has assumed a new importance and there was plenty of competition for places. However, one unasnwered question is whether the Budget Committee will have a stronger influence on plenary voting patterns than the Ag committee.

Many of the leading lights from the old committee have gone. Former chair UK Conservative Neil Parish is standing for the UK Parliament and may have a role in Dave Cameron's government at a junior level. I am grateful to Parish for getting me a glass of champange after German Green landowner Freidrich-Wilhelm Graefe zu Baringdorf had attacked me when I appeared before the committee as 'not a real scientist.' (It then all kicked off with a German CDU member heckiling the Green Junker).

The new committee chair is Paulo De Castro, the second Italian to chair the committee and just the second Social Democrat. The fact that he is chair owes much to the priority which the European People's Party gave to chairing other committees under the D'Hondt points system for allocating committee chairs.

De Castro is well qualified for the job, having been a Professor of Agricultural Economics at the University of Bolonga and Italy's farm minister from October 1998 to April 2000. He also served as a special adviser on agricultural issues to Commission President Romano Prodi from June to December 2000.

Agra Focus commented that De Castro 'is arguably as well-qualified as anyone in Europe to head one of the EU Institutions going into the debate on the post-2013 Common Agricultural Policy.' It remains to be seen whether the 1st reading vote on the reform proposals occurs while he is chair, or after the halfway point in the mandate (early 2012) by which time there could be a different chair.

De Castro used encouraging terminology in a short interview with Agra Focus. There have been concerns that co-decision (if the Irish get the vote right at the second time of asking) could slow down and dilute reform because of farm interests on the EP Committee. However, De Castro emphasised the importance of goals of concern to all EU citizens such as public goods, food safety and animal welfare.

Organics: it all kicks off

We haven't yet looked at the Food Standards Agency (FSA) report earlier this month that stated that 50 years of evidence on nutrition and health effects found that there was little difference in the nutritional value of orgainic produce. The small nutritional differences which did occur were not large enough to be of any public health relevance.

This is not a message organic farmers and growers wanted to hear at a time when sales have been slumping in the recession. According to research by the Institute of Grocery Distribution earlier this year, the number of people buying organic produce dropped from almost a quarter to 19 per cent. Prince Charles' organic food range, Duchy Originals, has seen a dramatic slump in sales. Profits fell from £1.53m in 2007 to £57,400 last year.

Organic goods were coming to be seen as a luxury in the recession as consumers search for value. Admittedly, there have been some signs of a recent recovery. Last month Tesco said that the sector was seeing 'green shoots of recovery'. Organic milk buyer OMSCo reported earlier this month that sales of organic milk had increased by 10.5 per cent in four weeks.

In any case the FSA report misses the point about why consumers buy organic. It was evident from vox pops after the report came out that the main concern for many of them was pesticide residues rather than nutrition. There is little point in telling them that pesticide residues are minimal or that they are strictly monitored both by the regulator and by supermarkets who don't want any damage to their brands.

Unfortunately the debate has become pivoted around an artificial divide between organic and conventional methods of farming when more attention should be paid to how conventional farming can be made less intensive and environmentally damaging through integrated crop and pest management. It is evident, however, that the position of many organic proponents is deeply ideological in the sense that they hold entrenched positions that dismiss any contrary arguments or evidence.

There is a sense in which 'organic' has become a diluted brand that is confusing to customers. In many ways it is 'local' that is the acclerating brand, particularly through the farmers' market movement. In supermarkets 'local' is sometimes really 'regional'. The big boom in the last year, as many garden centres could attest, has been in the 'grow your own' movement in allotments and gardens.

As was pointed out at the ESRS conference in Vaasa last week the notion of locality is linked to a narrative of producers' pride but also links into the willingness of consumers to pay more as part of a search for excellence. Wealthy and concerned consumers provide a basis for the protection of European agriculture not through traditional market barriers but by reinventing old forms of quality and developing new ones.

For retailers there is an imperative to strengthen consumer loyalty through an appeal to ethical and moral values as well as competition on price. This, of course, brings us into the debate about 'choice editing' as a means of dealing with problems such as obesity. But that is another story.

Productivism by any name

Vaasa, Finland: Geoff Lawrence told delegates at the ESRS conference today that one should be careful about terms like neo-productionism and post-productivism that had been used at the conference. Liked productivism, they amounted to a triumph of output over sustainability.

He emphasised the way in which the financialisation of the world food regime has encouraged speculative trading which in turn had resulted in more volatile prices. In 2003 $13bn have been spent on agricultural futures trading and it had soared to $260bn in 2006 as traders saw an opportunity as prices rose.

This theme was emphasised by Peter Feindt and Terry Marsden who argued that short-term and long-term resource shortfalls fuelled speculation. They also drew attention to the carbon dependant nature of the current world food regime.

Unfortunately, the articulation of sustainability concerns often di not got beyond reports, leading to an incoherent articulation which did not change policy. Cracks in the current regime offered up real opportunities for change, but more attention needed to be paid to the politics of transitions.

Mark Tilzey presented an analysis informed by Marxist categories, drawing attention to the attempts of fractions of capital to restore class hegemony. Delegates wondered if they had stumbled into a time warp, but Tilzey argued that the export of productivism through globalisation opened up spaces for the affluent at home. He questioned whether the production of staples could be undertaken by a sustainable rural paradigm, but did not call for machine tractor stations.

In discussion it was argued that supply chains were the dominant form of governance in the current agri-food system. These were potentially highly flexible strategic devices, but did they have the absorptive capacity to deal with challenges like the decreased availability of fossil fuels?

Later discussion emphasised the increasingly close links between food, the environment, energy and finance.

Big Phil Lays It On The Line

Vaasa: Philip Lowe is a leading figure in the rural studies community in the UK and he issues a stark warning about the so-called 'new productivism' in an interview that was issued to delegates at the ESRS Congress where he gave the opening plenary.

Asked if we were moving towards a 'new productivism', the Duke of Northumberland professor at Newcastle University said: 'Much of what I hear sounds like the old productivism. The characteristic of the old productivism that prevailed until the 1990s was that it sought recklessly to boost primary production. Although it claimed to do this with attention to efficiency, this only embraced the so-called factors of production: land, labour and capital.'

The RELU boss continued, 'So we encouraged a form of agriculture that was wasteful in its use of water, energy, soils and caused pollution problems and diminished biodiversity. We must not return to the old-style productivism - of expansion of food production at any cost.'

'No,' Lowe declared, 'the new productivism msut be constructed on the basis of economic and ecological efficiency which thereby protects the capacities of individual ecosystems to deliver a range of valued a life-supporting services.'

Greetings from Finland

Vaasa, Finland: This week I am here at the European Rural Sociology Conference. There are many panles and papers that look relevant to this blog and I will reporting on them as time allows.

So, farewell then, Fernand Boden

Don't know who he is? Well as Luxembourg's farm minister he was on the Agriculture Council for 14 years and hence its longest-serving member. This included two presidencies. Now, as he approaches the age of 66, he has stepped down and also shed his portfolios of the Middle Classes [sic], Tourism and Housing.

His replacement is Romaain Schneider, the former Secretary-General of the Socialist Workers' Party [sic] who comes from the city of Wiltz and also takes on the sports portfolio. This is not a surprise as he is the President of the 2nd Division ('Division of Honour') football club FC Wiltz 71.

At one time members of the Farm Council remained there for a long time and this had quite an effect on its culture and decision-making. Given that the members were generally male and had some kind of agricultual background, even if only as a bureaucrat, this created something of a 'club' atmosphere. Now only 6 of the 27 members were in office in two-and-half years ago.

Food security

The follow-up report one year after the publication of the Cabinet Office report on 'Food Matters' can be found here: Food Matters

You can see a short video by Hilary Benn in which he says 'Overall we're doing ok' here: Benn . For some baffling reason this has been recorded in a particularly noisy street location.

Threat to cross-border trade

The internal market is arguably the greatest achievement of the European Union and from time to time we are told that it is now almost complete. However, regulatory decisions can easily derail it and a threat has arisen to cross-border trade between England and Scotland.

The Scottish Government is planning to capitalise on its low incidence of Bovine TB by applying to the European Commission for TB-free status. They have held back from making an immediate application after auctioneers and meat wholesalers expressed reservations. They warned that the sustainability of abattoirs and markets could be threatened as cross-border trade dried up.

It might also be counter productive in terms of containing the disease. Scottish finishers typically buy cattle from the north of England where TB is less common. However, if they are not prepared to pay the cost of pre-movement testing, they might start buying from high-risk areas in Wales and the West of England.

Another complication is that some farmers have holdings on either side of the national border. It is also unclear whether livestock taken from Scotland and not sold at an English market can then be returned north of the border.

It's sometimes a bit of an Alice in Wonderland world in agricultural policy. No doubt the move is seen as a patriotic one in Scotland, but whether it is good policy is another matter.

Eurosceptic MPs deny they had snouts in trough

Eurosceptic Conservative MPs have argued that there is nothing inconsistent in receiving payments from the CAP whilst being critical of it - which is indeed the case. The three MPs were the subject of an investigation screened by More4.

Former Conservative Party chairman Michael Ancram was said to have received £11,451 for his farm in the Scottish borders (not an unusual figure for a large business). David Heathcoat-Amory received £114,000 for his Scottish farms while Philip Dunne received £201,000 for his farm in Herefordshire.

The three MPs were among 45 who last year supported Eurosceptic Bill Cash's amendment to the Lisbon Treaty. All three of them mounted a robust defence of the farm subsidies received by businesses in which they had an interest. Mr Ancram pointed out that as a non-active partner, he only received money if the farm made a profit, which it hadn't done in the 12 months to May 2009. The year before it had only made a small profit. He commented, 'I'd love to see the CAP reformed - as long as it exists I'm entitled to claim.'

Mr Heathcoat-Amory said his arrangements were part of a farming partnership and the money didn't go into his bank account. Mr Dunne, who is MP for Ludlow, said the farm support arrangements enabled him to employ 20 people and farm effectively to award-winning environmental standards. He agreed that the CAP was in need of reform, but said it should be done at a European-wide level so UK farmers were not disadvantaged (which is indeed the only level at which it could be done).

If a flawed system exists, it is difficult to blame individuals who are entitled to claim for doing so. Nevertheless, as the countdown to a general election begins, it is evident that there are some contradictions in Conservative policy on Europe. Part of this arises from a tension between the Eurosceptic views of Conservative activists and many MPs and the need to pursue a strategy at the European level which protects British interests. Antagonising the EU over a range of issues could reduce the political capital at Britain's disposal to pursue CAP reform, although it could be argued that Labour has not made as much progress in that direction as it originally hoped.

'Can't pay, won't pay' say French farmers

French farmers have been told that they have to pay back hundreds of millions of euros after the Commission ruled that the subsidies were paid out illegally. Moreover, the Commission doesn't just want the €330m back, it is also charging interest of up to €150m.

With Sarko disporting himself in the Mediterranean as he recovers from his recent fainting fit, Francois Lafitte, president of the fruit and vegetable producers' union Fédécom has warned of a 'fiery' summer if the government pushes ahead with plans to claw the money back in September.

According to Mr Lafitte, recovering the money for taxpayers would bankrupt farmers. He also claims that Brussels has got its sums wrong (which is possible). But the French state has admitted that the subsidies, paid over a ten year period, were illegal under European law.

Mr Lafitte claims that the subsidies were needed to see off competition from Spain and Portugal. They were producing more cheaply at a time when French producers had a surplus. No mention of the consumer here.

France has launched an appeal at the European Court of Justice, but thinks that the process of repayment should start even before a decision is taken, otherwise they could end up paying even more. They don't sound very confident about their case.

The subsidies have to be paid back by January 2010, but new farm minister Bruno Le Maire has said that he would 'do nothing to compromise the future of the industry' which is being hit by current low prices.

He didn't explain how he would square this particular circle other than to say 'I will be very careful that the situation of each farmer will be analysed on a case-to-case basis in order not to penalise the most fragile.'

Translation:
1. Decisions will be subject to political pressures as I don't want to blot my copybook.
2. The most efficient will be hit hardest.

Have milk prices turned the corner?

Problems in the EU dairy sector have led the Commission to resort to the tired old policy instruments of intervention buying of skimmed milk powder and export subsidies. To be fair to the Commission, they have had to resist a lot of political pressure for even more intervention, including backing off the planned phasing out of quotas which have ossified the EU dairy sector and made it less internationally competitive.

However, there are a few signs of an improvement in prices. In the UK the NFU believes the corner has been turned for dairy farmers supplying the liquid market after Robert Wiseman Dairies announced that it was raising its price by 0.3p a litre. This increase follows a period of better returns from the cream market and will take the standard litre price for about 900 direct suppliers to 24.3p before seasonality deductions.

Prospects for milk used in manufacturing are less good. Skimmed milk powder continues to flow into intervention stores throughout Europe. While President Obama enjoyed one of the best publicised beers in history, the USA continues to distort the world market with subsidised exports.

Prices on global commodity markets are still under pressure. Butter is quoted at about £1160/t, while skimmed milk powder has slipped back recently to £1227-£1288/t. EU prices are somewhat better and the butter price has climbed above the intervention level. But significant volumes of skimmed milk powder are still being sold into intervention at about £1450/t. These stocks will eventually have to be sold into the market with an inevitable depressing effect.

What is evident is that supermarkets have been creaming off profits. According to a new market situation report from the Commission, 'the pronounced fall in the prices of milk and dairy commodities since the end of 2007 has only triggered a slight decline in consumer prices for dairy products.'

Since the end of 2007, Commission figures show that the wholesale butter price has dropped by 39 per cent, skimmed milk powder by 49 per cent, cheese by 18 per cent and milk by 31 per cent. Yet the price consumers pay in the shops for dairy products has dropped by just 2 per cent.

The Commission's conclusion is that 'the EU dairy supply chain does not function efficiently.' The market power of supermarkets, particularly in Britain, but increasingly in other member states, is considerable.

Competition policy authorities seem reluctant to act. Admittedly, it is sometimes difficult to get hard evidence of exploitation of market power as suppliers feel they are vulnerable, even with guarantees of confidentiality.

However, there is also a broader political context as supermarkets help the less well off by holding down food prices. Given the importance to New Labour of working people and their families, it is not surprising that they are unwilling to back strong action, but I would not expect Dave Cameron to take a very different line when he is in charge.

Meanwhile, the Commission has proposed extending intervention purchasing for 13 months. Even more worrying, it has suggested allowing state aids of up to €15,000 per dairy farmers. This will do nothing to solve the industry's structural challenges.

Franco German alliance revived

France and Germany are seeking to revive the Franco-German alliance on CAP reform, seeking to agree a mutual deal which they can then impose on others. This may, however, not be so easy in a 27 member state EU. France and Germany may, however, be able to exploit the existence of a lame duck administration in Britain, the main champion of liberal solutions, combined with a likely change of government next year.

Paris and Berlin haveannounced the creation of a Franco-German working group to frame reform of the EU's Common Agricultural Policy (CAP) after 2013. The working group was established on 2 July, a day before newly-appointed French Farm Minister Bruno Le Maire met with European Commission President José Manuel Barroso to explain France's stance on the future reform.

Le Maire said Barroso had shared his views on the 'strategic importance' of agriculture to the EU and on guaranteeing European food security.' It is absolutely necessary to regulate production,' Le Maire told the press after the meeting, insisting that the agricultural sector is far too strategic to be left to market forces alone.

'More regulation' will be France's guiding line in negotiations on farm reform, he added. But regulation does not necessarily mean quotas, he added, a reference to ongoing protests over milk prices.

'Our main political objective must be to guarantee stable and decent revenue for farmers,' he went on, noting that French farmers had lost 20 pet cent of their income since 2008. Such price volatility and decreases are 'not economically viable' and 'farmers cannot live with such instability,' he stressed. In other words, they must be funded by European taxpayers.

Franco-German cooperation on CAP reform will be very tight, Le Maire said, indicating that he would add a German official to his cabinet to prepare the work. Similarly, a French official will be sent to Berlin, he said.

The working group is open for others to join, he added, announcing a charm offensive tour of EU capitals that will start in London before going to Madrid, Rome, Bucharest and Warsaw. Paris and Berlin expect to table their first guiding principles for CAP reform 'in the coming months,' he added.

The appointment of Marie, formerly junior minister for European affairs, as farm minister in the 23 June reshuffle was itself significant. An ENArque, he has no clear agricultural experience or background. He is, however, a fluent German speaker and made numerous visits to Berlin in the first half of the year.

Superficial change

Santiago, Chile: it was argued in the panel on agricultural policy and trade at the IPSA conference yesterday that the so-called ´paradigm shift´ in discussion of the CAP had not occurred in 2003 as some had argued or, if it had, it had had few concrete results. Supposedly the state assisted paradigm was replaced by a new multifunctionality paradigm. However, it was argued by Carsten Daugbjerg from Aarhus University that the multifunctionality paradigm provided cover for the continuation of state assistance.

Another paper looked at ´rent seeking´ interpretations of agricultural subsidy. From the ensuing discussion a view emerged that whilst such models might not be able to explain the origins of subsidy policies, they might be useful in understanding their continuation.