The LDC Sugar Group which represents the 19 least developed countries with interests in sugar has called for changes in the EU's proposed sugar reforms. They argue that gains under the 'everything but arms' initiative will be outweighed by the planned 37 per cent price cut. They want a twenty per cent cut phased in over ten rather than three years. The LDC Group has tried to appeal to EU agricultural opinion by arguing that under their proposal sugar beet growers would survive in all but two EU countries (Finland and Italy) rather than disappearing in all but nine. However, their plan does not look feasible after the recent WTO appeal panel decision.
The problems faced by LDC sugar exporters are illustrated by the example of Mozambique, a country that is third from bottom on last year's UN human development index. Three out of four people live on less than $2 a day. It has a HIV/AIDS infection rate of 15% and has serious problems with malaria, cholera and tuberculosis. There is virtually no infrastructure with only one decent road running up the edge of the country.
The land is fertile and could develop quickly with more agricultural production and trade. Sugar offers one path out of poverty. The current sugar trade with the EU represents 16% of the country's exports and 34% of its export revenue. The real danger with sugar reform is that the beneficiaries will be emerging countries like Brazil rather than much poorer countries.
Sunday, May 08, 2005
The answer lies in the soil
European agriculture is under threat as the quality of soil worsens, especially in eastern states. More than 16 per cent of the EU's land is affected by soil degradation, but in the accession countries more than a third is affected, according to the first Soil Atlas of Europe which was published recently.
The chief threats to soil identified by the atlas are erosion, degradation from the overuse of fertilisers and pesticides, the loss of organic content, contamination from industry, the loss of biodiversity, salinity, the compacting of soil by agricultural vehicles, landslides and flooding. In southern Europe nearly 75 per cent of the soil has an organic matter content (a measure of fertility) so low that is a cause for concern. But even in England and Wales the percentage of soils classed as low in organic matter rose from 35 per cent to 42 per cent between 1980 and 1995 because of changes in farming practice.
The atlas is the first report to analyse all of Europe's soil. The study will form the basis of the Soil Framewirk Directive, expected by the end of the year which is intended to protect Europe's soil from further damage. But the real answer does not lie in the publication of a directive in the Official Journal, but changes in farming practice. Farmers need to be encouraged to use more composted organic material, but their willingness to do so will be affected by considerations of availability and price.
The chief threats to soil identified by the atlas are erosion, degradation from the overuse of fertilisers and pesticides, the loss of organic content, contamination from industry, the loss of biodiversity, salinity, the compacting of soil by agricultural vehicles, landslides and flooding. In southern Europe nearly 75 per cent of the soil has an organic matter content (a measure of fertility) so low that is a cause for concern. But even in England and Wales the percentage of soils classed as low in organic matter rose from 35 per cent to 42 per cent between 1980 and 1995 because of changes in farming practice.
The atlas is the first report to analyse all of Europe's soil. The study will form the basis of the Soil Framewirk Directive, expected by the end of the year which is intended to protect Europe's soil from further damage. But the real answer does not lie in the publication of a directive in the Official Journal, but changes in farming practice. Farmers need to be encouraged to use more composted organic material, but their willingness to do so will be affected by considerations of availability and price.
Friday, May 06, 2005
Magyar farm minister gets the sack
Hungarian farm minister Imre Nemeth has been sacked for failing to provide adequate storage for the country's mountain of surplus grain and pay EU subsidies to farmers on time. The dismissal is of more than Hungarian interest as it illustrates some more general issues that arise out of enlargement.
Much of Hungary's grain storage is oudated and leaky and there is not enough of it. As a result it has been forced to rent grain storage facilities in other countries. The storage space problem and other infrastructure issues mean that Hungarian farmers have seen little benefit from the record grain harvest last summer. In addition, raspberries and sour cherries were left to rot as state buying prices were too low to make harvesting worthwhile. Since Hungary joined the EU the country has increasingly been flooded with cheap fruit and vegetables from Poland and dairy products from Slovakia.
Semi-subsistence farming
It is estimated that between 700,0000 and 1.2 million people (seven to ten per cent of the population) depend on farming. Some 80 per cent of these are small-scale farmers. Government estimates suggest that between a third and a half of all agricultural concerns are unviable.
The story of the early years of the CAP was effectively the elimination of the European peasant, always seen as a politically dangerous reservoir of support for reactionary and populist movements (or occasionally for the far left). Now with acession peasants (or subsistence and semi-subsistence farmers) are back in droves. And there will be even more of them when Bulgaria and Romania join the EU. These problems would be exacerbated even further should Croatia and Turkey join.
When the European economy was expanding rapidly in the years of the long post-war boom, it was possible to transfer peasants (or rather their children) into urban areas and manufacturing employment. There are large areas of eastern Europe with a very low density of services, with high unemployment, but where subsistence level agriculture makes it possible to eke out some kind of living. For example, Poland has 1.8 million people classified as farmers, many of them cultivating holdings of an average of little more than one hectare in size.
What all this points to is the importance of a rural development policy that promotes economic restructuring. But it won't be easy to find the money or to remedy deeply rooted structural problems reinforced by a lack of appropriate skills and the absence of an entrepreneurial mindset.
Much of Hungary's grain storage is oudated and leaky and there is not enough of it. As a result it has been forced to rent grain storage facilities in other countries. The storage space problem and other infrastructure issues mean that Hungarian farmers have seen little benefit from the record grain harvest last summer. In addition, raspberries and sour cherries were left to rot as state buying prices were too low to make harvesting worthwhile. Since Hungary joined the EU the country has increasingly been flooded with cheap fruit and vegetables from Poland and dairy products from Slovakia.
Semi-subsistence farming
It is estimated that between 700,0000 and 1.2 million people (seven to ten per cent of the population) depend on farming. Some 80 per cent of these are small-scale farmers. Government estimates suggest that between a third and a half of all agricultural concerns are unviable.
The story of the early years of the CAP was effectively the elimination of the European peasant, always seen as a politically dangerous reservoir of support for reactionary and populist movements (or occasionally for the far left). Now with acession peasants (or subsistence and semi-subsistence farmers) are back in droves. And there will be even more of them when Bulgaria and Romania join the EU. These problems would be exacerbated even further should Croatia and Turkey join.
When the European economy was expanding rapidly in the years of the long post-war boom, it was possible to transfer peasants (or rather their children) into urban areas and manufacturing employment. There are large areas of eastern Europe with a very low density of services, with high unemployment, but where subsistence level agriculture makes it possible to eke out some kind of living. For example, Poland has 1.8 million people classified as farmers, many of them cultivating holdings of an average of little more than one hectare in size.
What all this points to is the importance of a rural development policy that promotes economic restructuring. But it won't be easy to find the money or to remedy deeply rooted structural problems reinforced by a lack of appropriate skills and the absence of an entrepreneurial mindset.
Thursday, May 05, 2005
Breakthrough in Doha Round talks
A breakthrough has been reached in a highly technical yet nevertheless important dispute about EU import tariffs that was holding up progress on the Doha Round. The deal was struck at a 'mini-minsterial' of thirty countries in Paris. It represented a compromise between the EU's views and those of agricultural exporting countries such as Brazil and Australia. Full details are not yet available.
EU trade commissioner Peter Mandelson gave ground on the issue of converting specific tariffs into ad valorem equivalents (expressed as a percentage of a product's value) so as to make it possible to pursue discussions on tariff reductions. The deal involved Mandelson taking risks as it is likely that tariffs will be reduced by a greater amount than the Commission had envisaged. However, market access is proving the most difficult agricultural issue in the Doha Round and something had to be done to break the log jam.
New USTR Robert Portman was seen as having played a key role in brokering the deal. He commented, 'It was a technical calculation, but had so many real-world impacts.'
The issue at stake was how to determine the import price to use for products such as meats and dairy products where the values may be distorted by tariff rate quotas, tariff preferences etc. The EU has the most specific tariffs of any WTO country, followed by Switzerland, the United States and Bulgaria.
EU trade commissioner Peter Mandelson gave ground on the issue of converting specific tariffs into ad valorem equivalents (expressed as a percentage of a product's value) so as to make it possible to pursue discussions on tariff reductions. The deal involved Mandelson taking risks as it is likely that tariffs will be reduced by a greater amount than the Commission had envisaged. However, market access is proving the most difficult agricultural issue in the Doha Round and something had to be done to break the log jam.
New USTR Robert Portman was seen as having played a key role in brokering the deal. He commented, 'It was a technical calculation, but had so many real-world impacts.'
The issue at stake was how to determine the import price to use for products such as meats and dairy products where the values may be distorted by tariff rate quotas, tariff preferences etc. The EU has the most specific tariffs of any WTO country, followed by Switzerland, the United States and Bulgaria.
Sunday, May 01, 2005
Radical reform of sugar regime more likely
A radical reform of the EU sugar regime is now more likely after the WTO's Appellate Body upheld a ruling against the elaborate subisdy scheme. The complainants,Australia and Brazil, welcomed the decision, their only disappointment being that the EU has been given fifteen months to implement the necessary changes.
The appeal body upheld the original ruling that so-called 'C' sugar exports benefit from an element of cross-subsidy through production quotas and tariff barriers. These work in such a way that EU sugar producers can sell their sugar abroad at below the cost of production, in other words dumping on the world market to the disadvantage of other producers.
The appeal body also confirmed that the EU could not deduct a quantity equivalent to the sugar imported at the full EU price from ACP countries and India under preferential arrangements from the subsidised exports notified to the WTO.
The consequences
The affected exports amount to almost 4 million tonnes a year and would push the EU's volume of subsidised exports well over the 1.273 million tonnes agreed in the Uruguay Round. The EU's notifiable spending on export subsidies would jump to €1.3bn a year as a result of the verdict, compared with the official (and misleading) ceiling of €499m.
The Commission will now have to revise its reform proposals for the sugar regime. A revised reform package is now promised for 22 June. The EU is going to have to find a formula for reform that effectively eliminates the production of C sugar. It is not economic to produce beet sugar in Europe at typical world prices for sugar which are about one third of the current EU support price.
The EU cannot hope to be rescued by a higher world sugar price. There is a structural surplus of production over consumption leading to a declining trend in prices. Given the continuing obesity debate, sugar consumption (especially in processed foods) is likely to fall rather than rise.
In order to conform with the WTO ruling the EU has to cut its support price to the level where it is no longer profitable to produce sugar outside the quota. Account must be taken of the increase in sugar imports that will result from the implementation of the 'Everything But Arms' agreement intended to help least developed countries.
The current draft plans would eventually achieve what is required, but they would not do so within the timetable laid down. To do so, the whole of the 37 per cent cut in price would have to be introduced at once, not in three stages.
The politics
The Comission's plans have already been under attack in the Farm Council as too radical. The European Commission's own calculations suggest that at world prices almost all of the EU sugar beet industry would be wiped out.
It is difficult to see the Council accepting measures that would cut the EU's production by more than a quarter with the biggest hit taken by the most marginal beet sugar producing areas which include politically sensitive parts of France and Germany.
Both beet farmers and the sugar processing industry have always been very effective lobbyists, hence the delay in the implementation of the EBA agreement. Beet refining is an important employer in rural areas. Most beet farmers in the UK are large scale farmers in Eastern England who have considerable political clout and will argue that including beet in their rotation brings agronomic benefits.
Companies take hit
Beet processing companies are already taking a hit. British Sugar was set up by the government as part of its moves to counter the depressionin the 1930s, but is now owned by Associated British Foods. It is reducing its dependence on the sugar beet refining business, but its shares dropped after it admitted that the looming EU reform was likely to have an impact eventually.
The first serious impact on profits is expected in 2007. At present analysts are forecasting a halving of British Sugar's profits over the next five years.
The appeal body upheld the original ruling that so-called 'C' sugar exports benefit from an element of cross-subsidy through production quotas and tariff barriers. These work in such a way that EU sugar producers can sell their sugar abroad at below the cost of production, in other words dumping on the world market to the disadvantage of other producers.
The appeal body also confirmed that the EU could not deduct a quantity equivalent to the sugar imported at the full EU price from ACP countries and India under preferential arrangements from the subsidised exports notified to the WTO.
The consequences
The affected exports amount to almost 4 million tonnes a year and would push the EU's volume of subsidised exports well over the 1.273 million tonnes agreed in the Uruguay Round. The EU's notifiable spending on export subsidies would jump to €1.3bn a year as a result of the verdict, compared with the official (and misleading) ceiling of €499m.
The Commission will now have to revise its reform proposals for the sugar regime. A revised reform package is now promised for 22 June. The EU is going to have to find a formula for reform that effectively eliminates the production of C sugar. It is not economic to produce beet sugar in Europe at typical world prices for sugar which are about one third of the current EU support price.
The EU cannot hope to be rescued by a higher world sugar price. There is a structural surplus of production over consumption leading to a declining trend in prices. Given the continuing obesity debate, sugar consumption (especially in processed foods) is likely to fall rather than rise.
In order to conform with the WTO ruling the EU has to cut its support price to the level where it is no longer profitable to produce sugar outside the quota. Account must be taken of the increase in sugar imports that will result from the implementation of the 'Everything But Arms' agreement intended to help least developed countries.
The current draft plans would eventually achieve what is required, but they would not do so within the timetable laid down. To do so, the whole of the 37 per cent cut in price would have to be introduced at once, not in three stages.
The politics
The Comission's plans have already been under attack in the Farm Council as too radical. The European Commission's own calculations suggest that at world prices almost all of the EU sugar beet industry would be wiped out.
It is difficult to see the Council accepting measures that would cut the EU's production by more than a quarter with the biggest hit taken by the most marginal beet sugar producing areas which include politically sensitive parts of France and Germany.
Both beet farmers and the sugar processing industry have always been very effective lobbyists, hence the delay in the implementation of the EBA agreement. Beet refining is an important employer in rural areas. Most beet farmers in the UK are large scale farmers in Eastern England who have considerable political clout and will argue that including beet in their rotation brings agronomic benefits.
Companies take hit
Beet processing companies are already taking a hit. British Sugar was set up by the government as part of its moves to counter the depressionin the 1930s, but is now owned by Associated British Foods. It is reducing its dependence on the sugar beet refining business, but its shares dropped after it admitted that the looming EU reform was likely to have an impact eventually.
The first serious impact on profits is expected in 2007. At present analysts are forecasting a halving of British Sugar's profits over the next five years.
Estonia stuck over sugar for jam row
Estonia is facing a fine of up to 2 per cent of its gross national income over its sugar stockpile. There was a huge surge in sugar buying in the run up to accession as both traders and private households engaged in what the Commission suspects were speculative mass purchases. There was justified anticipation that sugar prices would rise substantially in new member states after accession a year ago as most of them had not had their own sugar subsidy regimes - or certainly not on the lavish scale of that provided by the EU.
Estonia claims that of the 91,466t of extra sugar that suddenly appeared on the Estonian market last year, two-thirds was bought up by private households so that they could indulge their traditional pasttime of making jam and preserves to provide high energy food the year round. Given that Estonia's population is a little over 1.4m, all one can say is that they must be the most enthusiastic jam makers in the world.
A short-term fix
The European Commission decided in mid-April to give Estonia and four other new member states an extra seven months to get rid of their surplus sugar stocks. This can be done by processing it into animal feed or biofuel or by exporting it as C sugar, i.e., without EU export subsidies.
Estonia claims that of the 91,466t of extra sugar that suddenly appeared on the Estonian market last year, two-thirds was bought up by private households so that they could indulge their traditional pasttime of making jam and preserves to provide high energy food the year round. Given that Estonia's population is a little over 1.4m, all one can say is that they must be the most enthusiastic jam makers in the world.
A short-term fix
The European Commission decided in mid-April to give Estonia and four other new member states an extra seven months to get rid of their surplus sugar stocks. This can be done by processing it into animal feed or biofuel or by exporting it as C sugar, i.e., without EU export subsidies.
Thursday, April 14, 2005
It all goes bananas
The WTO is going to have to step in to arbitrate between the EU and Latin American countries on how its import control system, based on a blend of tariffs and quotas, should be replaced by a tariff only system.
The EU seems relatively relaxed about the challenge from Ecuador, claiming that there was a 'gentleman's agreement' to resolve matters in this way. Less relaxed are the small Caribbean with a heavy reliance on banana exports.
Relatively few bananas are grown within the EU (mainly in the Canary Islands and Greece). The tropical fruit is popular as a snack, especially in Germany which has the highest per capita consumption in the EU. When the wall came down, many East Germans came in search of bananas. There were great celebrations in Britain when supplies of the energy boosting fruit became available for the first time after the Second World War.
It's cheaper to produce bananas on large plantations owned by American multinationals in Central America, countries such as Ecuador and in Hawaii. And these companies have a lot of political clout in the US through donations to both political parties. Hence, the 2001 agreement.
The Windward Islands and Jamaica have already taken a hit. Before the creation of the common market organisation for bananas in 1993, there were 24,000 banana farmers in the Windward Islands, a figure that had fallen to 7,000 in 2001. Production in 1999-2002 was 50 per cent of the 1989-92 figure. The fall in Jamaica has been smaller, but is still substantial.
However, there have been some gainers among ACP countries. Belize, Cameroon, the Dominican Republic and Cote d'Ivorie have all expanded production and exports. In particular, Cameroon and Cote d'Ivorie benefit from low production costs comparable with those of dollar banana producers.
The EU has proposed a common tariff of €230 per tonne which leaves no one pleased. The ACP producers want a higher tariff of €275/t, while the dollar area exporters want a zero tariff or at most the €75/t level applied at present to quota imports.
The likely outcome us that the EU will have to make further concessions on the tariff and compensate disadvantaged least developed countries through the Special Framework of Assistance that is to be used in relation to the sugar regime, as well as through other EU development policies.
That way EU consumers will have a reliable supply of reasonably priced quality fruit and it will not be necessary to revive the song 'Yes, I have no bananas.' But some LDCs could go the way of Suriname whose EU exports ended in 2002 with the bankruptcy of its banana export company.
The EU seems relatively relaxed about the challenge from Ecuador, claiming that there was a 'gentleman's agreement' to resolve matters in this way. Less relaxed are the small Caribbean with a heavy reliance on banana exports.
Relatively few bananas are grown within the EU (mainly in the Canary Islands and Greece). The tropical fruit is popular as a snack, especially in Germany which has the highest per capita consumption in the EU. When the wall came down, many East Germans came in search of bananas. There were great celebrations in Britain when supplies of the energy boosting fruit became available for the first time after the Second World War.
It's cheaper to produce bananas on large plantations owned by American multinationals in Central America, countries such as Ecuador and in Hawaii. And these companies have a lot of political clout in the US through donations to both political parties. Hence, the 2001 agreement.
The Windward Islands and Jamaica have already taken a hit. Before the creation of the common market organisation for bananas in 1993, there were 24,000 banana farmers in the Windward Islands, a figure that had fallen to 7,000 in 2001. Production in 1999-2002 was 50 per cent of the 1989-92 figure. The fall in Jamaica has been smaller, but is still substantial.
However, there have been some gainers among ACP countries. Belize, Cameroon, the Dominican Republic and Cote d'Ivorie have all expanded production and exports. In particular, Cameroon and Cote d'Ivorie benefit from low production costs comparable with those of dollar banana producers.
The EU has proposed a common tariff of €230 per tonne which leaves no one pleased. The ACP producers want a higher tariff of €275/t, while the dollar area exporters want a zero tariff or at most the €75/t level applied at present to quota imports.
The likely outcome us that the EU will have to make further concessions on the tariff and compensate disadvantaged least developed countries through the Special Framework of Assistance that is to be used in relation to the sugar regime, as well as through other EU development policies.
That way EU consumers will have a reliable supply of reasonably priced quality fruit and it will not be necessary to revive the song 'Yes, I have no bananas.' But some LDCs could go the way of Suriname whose EU exports ended in 2002 with the bankruptcy of its banana export company.
Wednesday, March 23, 2005
Size of cash payments to big farmers revealed
The extent of CAP payments made to farmers in the UK in 2002-3 is revealed in data released under new Freedom of Information legislation.
Among the beneficiaries are the Queen who receives over half a million pounds for her estates at Sandringham and Windsor. Prince Charles received nearly £135,000 for his Duchy of Cornwall estate and just over £90,000 for Home Farm, Highgrove.
The largest sum in direct farm payouts went to Farmcare Ltd., a subsidiary of the Co-operative Group, which banked £2,601,767. Lilburn Estates, farmed by Duncan Davidson, founder of builder Perismmon, received £1.3m and multimillionaire Sir Richard Sutton £1.1m. The Vestey Family Trust received just over £906,000.
Leading dukes are all paid six-figure cheques. The Duke of Westminster, reckoned to be the second richest man in Britain, was paid £448,472 through Grovesnor Farms Ltd.
The Duke of Marlborough, who owns Blenheim Palace, received £511,435 through the Blenheim Farm Partnership. The Duke of Richmond, who is said to be worth £45 million, was paid £456,404 through the Goodwood Estate Company. The Duke of Bedford did rather less well with £365,801, while the Marquess of Cholmondeley received only £306,619 and Sir Richard Fitzherbert had to make do with £245,215.
These sums are dwarfed by the amounts received by large companies in the form of export refunds and other payments. Tate and Lyle led this league with over £127m, but Nestlé UK got just over £11.6m.
Among the beneficiaries are the Queen who receives over half a million pounds for her estates at Sandringham and Windsor. Prince Charles received nearly £135,000 for his Duchy of Cornwall estate and just over £90,000 for Home Farm, Highgrove.
The largest sum in direct farm payouts went to Farmcare Ltd., a subsidiary of the Co-operative Group, which banked £2,601,767. Lilburn Estates, farmed by Duncan Davidson, founder of builder Perismmon, received £1.3m and multimillionaire Sir Richard Sutton £1.1m. The Vestey Family Trust received just over £906,000.
Leading dukes are all paid six-figure cheques. The Duke of Westminster, reckoned to be the second richest man in Britain, was paid £448,472 through Grovesnor Farms Ltd.
The Duke of Marlborough, who owns Blenheim Palace, received £511,435 through the Blenheim Farm Partnership. The Duke of Richmond, who is said to be worth £45 million, was paid £456,404 through the Goodwood Estate Company. The Duke of Bedford did rather less well with £365,801, while the Marquess of Cholmondeley received only £306,619 and Sir Richard Fitzherbert had to make do with £245,215.
These sums are dwarfed by the amounts received by large companies in the form of export refunds and other payments. Tate and Lyle led this league with over £127m, but Nestlé UK got just over £11.6m.
Tuesday, March 08, 2005
EU plans to dump grain surplus on world market
The EU's trading partners are likely to be angered by plans to export a grain surplus that has developed in the last few months on to the world market. Bulging grain intervention stores were thought to be a thing of the past but problems have been caused by a massive harvest in 2004 in the Czech Republic and Hungary. Hungary faces particular problems as a landlocked country and the increased transport costs associated with exporting its grain.
The volume of grain in EU intervention stores has jumped from less than 4mt to more than 10mt since purchasing commenced in November. The Czech Republic and Hungary are facing problems in finding enough storage space for the surplus grain (mainly wheat). Commissioner Fischer Boel has said that the volume of grain has now reached a 'critical mass' and it is planned to open an export tender.
The volume of grain in EU intervention stores has jumped from less than 4mt to more than 10mt since purchasing commenced in November. The Czech Republic and Hungary are facing problems in finding enough storage space for the surplus grain (mainly wheat). Commissioner Fischer Boel has said that the volume of grain has now reached a 'critical mass' and it is planned to open an export tender.
Budget cuts could hit rural development
If the EU budget from 2007 to 2103 is held at one per cent of economic output as some member states insist, it could be the rural development budget that takes the hit. Market support is seen as too politically sensitive to tamper with.
This also applies to the ongoing argument about whether cash for direct aid payments in Romania and Bulgaria should be included under the budgetary ceilings agreed for EU farm payments up to 2013. The option of squeezing the two new members within existing guidelines has been raised as a way of saving several billion euros.
However that would probably mean a reduction of eight to nine per cent in direct aids which would be politically unacceptable to countries such as France. The switch towards a Common Agricultural and Rural Policy, in the spirit of 'multi-functionality', could be placed in jeopardy.
This also applies to the ongoing argument about whether cash for direct aid payments in Romania and Bulgaria should be included under the budgetary ceilings agreed for EU farm payments up to 2013. The option of squeezing the two new members within existing guidelines has been raised as a way of saving several billion euros.
However that would probably mean a reduction of eight to nine per cent in direct aids which would be politically unacceptable to countries such as France. The switch towards a Common Agricultural and Rural Policy, in the spirit of 'multi-functionality', could be placed in jeopardy.
Most of sugar mountain was for making jam
Estonia has claimed that the greater part of a massive sugar mountain in the country is the result of Estonians hoarding enormous amounts of sugar to indulge in the favourite national pastime of jam making.
However, the matter is far from funny as the small Baltic country faces up to €50m in fines (2% of GDP) for failing to get rid of as much as 90000t of surplus sugar prior to accession. Accession rules state that new member states have to bear the cost of getting rid of stocks of any product 'exceeding the quantity which could be regarded as constituting a normal carryover.' Estonia is charged with having failed to prevent traders flooding the low price Estonian market in anticipation of much higher EU prices after enlargement.
The problem in Estonia is seen as a test case on which to base discussions with other new member states. Cyprus and Malta are in the firing line for having high sugar surpluses.
However, the matter is far from funny as the small Baltic country faces up to €50m in fines (2% of GDP) for failing to get rid of as much as 90000t of surplus sugar prior to accession. Accession rules state that new member states have to bear the cost of getting rid of stocks of any product 'exceeding the quantity which could be regarded as constituting a normal carryover.' Estonia is charged with having failed to prevent traders flooding the low price Estonian market in anticipation of much higher EU prices after enlargement.
The problem in Estonia is seen as a test case on which to base discussions with other new member states. Cyprus and Malta are in the firing line for having high sugar surpluses.
Sunday, February 27, 2005
Franco-German farm deal may have to be re-opened
EU Budget Commissioner Dalia Grybauskaite has said that 'a large group of countries' were looking to re-open the Franco-German farm deal that freezes spending until 2013 at current levels in order to take account of the accession of Romania and Bulgaria in 2007. 'A gentle reopening could be to include in the ceiling Romania and Bulgaria, which weren't included in the 2002 Brussels deal', she said. France is, however, opposing the move.
Thursday, February 24, 2005
Skids are under CAP
The threat to the existence of the CAP as we know it is very real, according to Lars Hoelgard, deputy Director-General at DG Agriculture. Any eventual settlement of the current budget dispute under 1.14% of GNI, the current Commission draft figure, would hit agricultural spending and even this figure would lead to cuts. Heolgaard commented, 'Something has to give - Pillar 1, although supposedly set in stone, is under threat.'
Even if the draft on the table was accepted, which is not very likely, farm spending would fall from about 45% of the EU budget now to around 35% on 2013. This reflects the fact that, according to Agra Europe 'Of all the EU's policies, the CAP is fast becoming the least fashionable under Commission president Barroso.'
Dairy farming faces particular problems. If a deal on global trade liberalisation is reached at the WTO talks in Hong King in December, the EU may not be able to sustain the required reductions in tariffs, particularly if the dollar remains weak.
Insurance
One possible response is the debate on farm insurance systems which is attracting increasing attention. It would be an alternative way of safeguarding farmers against income fluctuations. A draft Commission document has been circulating exploring some kind of stabilisation fund. Rural development funds could be used to help farmers to pay insurance premiums up to a maximum of 50% (although this seems to imply using Pillar 2 money to achieve Pillar 1 objectives). Mutual stabilisation funds through producer groups, supplemented by some EU money, are another possibility.
Even if the draft on the table was accepted, which is not very likely, farm spending would fall from about 45% of the EU budget now to around 35% on 2013. This reflects the fact that, according to Agra Europe 'Of all the EU's policies, the CAP is fast becoming the least fashionable under Commission president Barroso.'
Dairy farming faces particular problems. If a deal on global trade liberalisation is reached at the WTO talks in Hong King in December, the EU may not be able to sustain the required reductions in tariffs, particularly if the dollar remains weak.
Insurance
One possible response is the debate on farm insurance systems which is attracting increasing attention. It would be an alternative way of safeguarding farmers against income fluctuations. A draft Commission document has been circulating exploring some kind of stabilisation fund. Rural development funds could be used to help farmers to pay insurance premiums up to a maximum of 50% (although this seems to imply using Pillar 2 money to achieve Pillar 1 objectives). Mutual stabilisation funds through producer groups, supplemented by some EU money, are another possibility.
Wednesday, February 23, 2005
Sugar mountain is back
The EU has had to accept sales of sugar into intervention for the first time in nearly twenty years. Sugar is understood to have been offered in both France and Belgium and the intervention authorities are obliged to accept any product that meets basic quality criteria. The last time this happened was in 1986.
Normally EU sugar surpluses are dumped on the world market with the assistance of what is in effect an export subsidy system. But traders are unhappy about the current EU export refund rate for sugar which they think is not enough to let them sell their surpluses at a profitable price. In particular the weakness of the $ against the € has caused problems in world markets. Hence, the intervention sales are as much a political ploy as anything else.
As far as the Commission was concerned, 'It shows once again the urgent need to reform the system.'
Normally EU sugar surpluses are dumped on the world market with the assistance of what is in effect an export subsidy system. But traders are unhappy about the current EU export refund rate for sugar which they think is not enough to let them sell their surpluses at a profitable price. In particular the weakness of the $ against the € has caused problems in world markets. Hence, the intervention sales are as much a political ploy as anything else.
As far as the Commission was concerned, 'It shows once again the urgent need to reform the system.'
Sunday, February 13, 2005
Thinking the unthinkable
Support for co-financing farm subsidies in the future is growing. Under such an arrangement member states would bear a proportion of the subsidies to their own farmers. The context is the demand by the EU's six leading paymasters that the budget from 2006 to 2013 should be capped at one per cent of gross national income. Any such deal would unstitch the 2002 agreement on farm spending and would also represent a further renationalisation of the CAP.
The plan has received unexpected support from Italy's prime minister Silvio Berlusconoi. This may just be a ploy to split the countries that want to restrain the budget.
However, there is also support in the European Parliament. MEPs argue that if member states are not to pay a share of the subsidies, farmers in the 25 member states will lose out when Romania and Bulgaria join the EU in 2007. Dutch Liberal Democrat Jan Mulder has advocated co-financing since 1999. 'It would put the agricultural budget in line with other parts. We have co-financing in rural development, in structural funds, in foreign policy: we should also have it in agricultural policy.' But he insists that topping up by member states should be made compulsory, not optional, so that farmers get parity of treatment.
The new member states are likely to reject the suggestion giving that their payments are being phased in up to 2013. Mulder argues that the poorer states could get a higher percentage from Brussels, but that proposal would be unlikely to attract support from the richer states. However, a budgetary crunch does look likely after 2006 and some change is going to be necessary.
The plan has received unexpected support from Italy's prime minister Silvio Berlusconoi. This may just be a ploy to split the countries that want to restrain the budget.
However, there is also support in the European Parliament. MEPs argue that if member states are not to pay a share of the subsidies, farmers in the 25 member states will lose out when Romania and Bulgaria join the EU in 2007. Dutch Liberal Democrat Jan Mulder has advocated co-financing since 1999. 'It would put the agricultural budget in line with other parts. We have co-financing in rural development, in structural funds, in foreign policy: we should also have it in agricultural policy.' But he insists that topping up by member states should be made compulsory, not optional, so that farmers get parity of treatment.
The new member states are likely to reject the suggestion giving that their payments are being phased in up to 2013. Mulder argues that the poorer states could get a higher percentage from Brussels, but that proposal would be unlikely to attract support from the richer states. However, a budgetary crunch does look likely after 2006 and some change is going to be necessary.
Monday, January 31, 2005
No more nasty surprises says Fischer Boel
EU farmers need not fear fresh unsettling novelties in agricultural policy once sugar reform is complete, farm commissioner Mariann Fischer Boel told women farmers; representatives during Berlin's Green Week. 'I have no further reform package in my briefcase to shake everything up again,' she said.
She also told farmers that she was having second thoughts about letting sugar quota remove across national borders, one of the key parts of the proposed sugar reform. The move has been opposed by a group of ten less efficient countries led by Spain, but backed by UK growers and processors as one possible way of maintaining scale in the British sugar industry.
One might also think that not allowing quotas to move across borders is incompatible with the idea of an internal market, although dairy quotas cannot be traded from one country to another. However, the prevailing mindset among farmers was illustrated by German farm leader Gerd Sonnleiter who urged Mrs Fischer Boel to 'restrict calls for the destruction of what has been an effective means of regulating the market.'
Mrs Fischer Boel may yet be forced into further reform by tight budgetary constraints. Budget commissioner Dalia Grybauskaité, commenting on proposals to cap the EU budget at one per cent of gross national income, described farm spending as an area 'far from competitiveness, only pretending to be competitive, except maybe for the rural development programmes.'
She also told farmers that she was having second thoughts about letting sugar quota remove across national borders, one of the key parts of the proposed sugar reform. The move has been opposed by a group of ten less efficient countries led by Spain, but backed by UK growers and processors as one possible way of maintaining scale in the British sugar industry.
One might also think that not allowing quotas to move across borders is incompatible with the idea of an internal market, although dairy quotas cannot be traded from one country to another. However, the prevailing mindset among farmers was illustrated by German farm leader Gerd Sonnleiter who urged Mrs Fischer Boel to 'restrict calls for the destruction of what has been an effective means of regulating the market.'
Mrs Fischer Boel may yet be forced into further reform by tight budgetary constraints. Budget commissioner Dalia Grybauskaité, commenting on proposals to cap the EU budget at one per cent of gross national income, described farm spending as an area 'far from competitiveness, only pretending to be competitive, except maybe for the rural development programmes.'
Monday, January 24, 2005
Uncommon Agricultural Policy?
Ever since the 2003 reforms of the CAP, there has been concern about renationalisation of the CAP. Within certain limits, the reforms allowed member states to decide how far they would decouple payments for different commodities. The basis on which the Single Farm Payment was made also varies between (and within) member states. The availability of 'national envelopes' for special payments to particular categories of producer also raises competition issues within a supposedly single market.
Now the issue of co-financing for 'Pillar One' of the CAP has raised its head, particularly in Germany. (The second pillar is subject to co-financing). It has been argued that it should be on a 75-25 basis with member states having to find €25 from their own funds for every €75 they wanted from Brussels. This could be a means of holding down EU spending and allowing net conributor states to keep spending down to one per cent or less of gross national income.
The talk has rung alarm bells in the Commission which has moved swiftly to knock the idea on the head. Commissioner Mariann Fischer Boel has argued that if co-financing was compulsory, it would mean a complete renationalisation of the CAP. If it was made compulsory, then the bottom line would always be the same. Resorting to the old argument that the CAP is the foundation stone of the EU, she declared, 'agricultural policy is the only common policy we do have in the EU and this would be the end of it.'
The renationalisation genie is, however, out of the bottle and we may not have heard the last of this idea.
Now the issue of co-financing for 'Pillar One' of the CAP has raised its head, particularly in Germany. (The second pillar is subject to co-financing). It has been argued that it should be on a 75-25 basis with member states having to find €25 from their own funds for every €75 they wanted from Brussels. This could be a means of holding down EU spending and allowing net conributor states to keep spending down to one per cent or less of gross national income.
The talk has rung alarm bells in the Commission which has moved swiftly to knock the idea on the head. Commissioner Mariann Fischer Boel has argued that if co-financing was compulsory, it would mean a complete renationalisation of the CAP. If it was made compulsory, then the bottom line would always be the same. Resorting to the old argument that the CAP is the foundation stone of the EU, she declared, 'agricultural policy is the only common policy we do have in the EU and this would be the end of it.'
The renationalisation genie is, however, out of the bottle and we may not have heard the last of this idea.
MEPs probe butter fraud
The budgetary control committee of the European Parliament is to probe a fraud scandal involving fake Italian butter that dates back five years. The Italburro affair became public after police discovered that a milk processing plant in Naples had produced large quantities of artificial butter using synthetic ingredients. This led to the payment of hundreds of millions of euros in production and export subsidies in Italy, France, Germany and Belgium
MEPs want the Commission to be more proactive in recovering the money. Legal proceedings were not begun in Belgium until 2003 and action has been confined to administrative fines in Germany. That is, however, more progress than has been made in France where the fraudulently claimed subsidies amount to €100m, but no court case has been brought against anyone involved.
Twelve people are now behind bars in Italy, but not before there had been two members linked to the case.
MEPs want the Commission to be more proactive in recovering the money. Legal proceedings were not begun in Belgium until 2003 and action has been confined to administrative fines in Germany. That is, however, more progress than has been made in France where the fraudulently claimed subsidies amount to €100m, but no court case has been brought against anyone involved.
Twelve people are now behind bars in Italy, but not before there had been two members linked to the case.
Friday, January 14, 2005
Royal family farm subsidies may be made public
Under Britain's new Freedom of Information Act, the subsidies members of the royal family receive from the Common Agricultural Policy are likely to be made public. Farm minister Lord Whitty has said that he can see no reason why single farm payments should not be subject to disclosure. At present the only member state in which this happens is Denmark.
In practice the figures may be less interesting than supposed. The Duchy of Lancaster and the Duchy of Cornwall estates are farmed by individual tenants so the payments go to them rather than the Queen or the Prince of Wales.
However, last year Oxfam estimated that seven of Britain's richest men collectively earn more than £2m a year in payouts from the EU. It was estimated that the Duke of Marlborough receives £369,000 for his arable farm on the Blenheim Estate in Oxfordshire while the Duke of Westminster, one of the richest men in the country, receives £326,000. One of the largest claimants is in fact The Co-operative Society that owns 100 farms covering 85,000 acres.
In practice the figures may be less interesting than supposed. The Duchy of Lancaster and the Duchy of Cornwall estates are farmed by individual tenants so the payments go to them rather than the Queen or the Prince of Wales.
However, last year Oxfam estimated that seven of Britain's richest men collectively earn more than £2m a year in payouts from the EU. It was estimated that the Duke of Marlborough receives £369,000 for his arable farm on the Blenheim Estate in Oxfordshire while the Duke of Westminster, one of the richest men in the country, receives £326,000. One of the largest claimants is in fact The Co-operative Society that owns 100 farms covering 85,000 acres.
Monday, January 10, 2005
Polish farmers gain from EU membership
The impact on Polish farmers of the first eight months of EU membership has been broadly positive, accordance to senior Polish agriculture official Waldemar Guba addressing the Oxford Farming Conference. Before enlargement farmers were concerned about the differences in technologies, the effect on the labour and land markets and what was seen as the unfairness of the accession package.
Farmers had benefited from increased trade, extra investment in food processing, some improvement in land prices, only a moderate loss of jobs but, above all, from a rapid rise in prices. Since accession pig prices had climbed 21%, cattle prices 37% and poultry by 32%. There had only been a two per cent increase in milk prices and wheat prices, affected by drought, actually fell by three per cent.
Total agri-food exports in the first six months after accession rose by 34.7% compared with the same period in 2003. There has also been a significant increase in investment in the Polish agri-food sector. This was helping to prepare the 600 or so food processing plants which are not yet compliant with EU health and hygiene regulations but have to be by 2006.
The biggest problem Poland has faced since accession has been on the currency frint, with the zloty appreciating strongly against the euro. This had hit export competition and lowered the value of subsidies.
Farmers had benefited from increased trade, extra investment in food processing, some improvement in land prices, only a moderate loss of jobs but, above all, from a rapid rise in prices. Since accession pig prices had climbed 21%, cattle prices 37% and poultry by 32%. There had only been a two per cent increase in milk prices and wheat prices, affected by drought, actually fell by three per cent.
Total agri-food exports in the first six months after accession rose by 34.7% compared with the same period in 2003. There has also been a significant increase in investment in the Polish agri-food sector. This was helping to prepare the 600 or so food processing plants which are not yet compliant with EU health and hygiene regulations but have to be by 2006.
The biggest problem Poland has faced since accession has been on the currency frint, with the zloty appreciating strongly against the euro. This had hit export competition and lowered the value of subsidies.
Subscribe to:
Posts (Atom)