East Anglia is one of England's most productive and intensively farmed regions but it may not be producing arable crops in quantity for much longer if a report from the rural advisory service ADAS is to be believed.
Farming is the most important diffuse source of water pollution in the EU and tough new targets to reduce it have been set by the EU's framework directive on water quality. According to ADAS, the pollution from chemically intensive farming is proving highly difficult to control. Despite an overall reduction in the use of fertiliser and pesticide additives avross the region, levels of diffuse nutrient pollutants in UK waters are continuing to rise, posing a significant threat to acquatic wildlife and, in the long term, public water supplies.
The problem is particularly serious in East Anglia because of the relatively dry regional climate, which is gradually becoming drier and warmer because of global warming. This means that there is less rainwater available to dilute water contaminants.
ADAS concludes that the problem can only be addressed by significant changes in land use, including the removal of sizeable tracts of farmland from production. As much as half of the arable land in East Anglia could have to be converted into unfertilised restorative grassland or forest.
NFU sources are sceptical, however, that the problem is quite that serious, arguing that there is a get out clause that takes account of economic impact.
Tuesday, April 25, 2006
Doha prospects look bleak
The prospects for progress in the Doha Round trade talks are looking increasingly bleak with some analysts doubting whether a successful conclusion will be possible. The political shakeup in the Bush administration does not help. USTR Rob Portman will be leaving his job to head up Bush's budget team.
Portman was brought in by Bush 11 months ago to negotiate a successful outcome to the Doha Round. His replacement is being interpreted by some as a sign of reduced US interest in the round. His replacement, the current deputy Susan Schwab, is regarded as a knowledgeable trade lawyer but as lacking the political clout of her predecessor who was well connected in Congress.
There is concern about how far Europe can negotiate effectively given the weakness of the new government in Italy and the continuing political upheaval and uncertainty in France which faces presidential elections next year. German Chancellor Angela Merkel may be required to take a leadership role.
It is now clear that the April 30 for agreeing modalities in agriculture (i.e., hard numbers) which was set at the Hong Kong ministerial will now be missed. The only area where progress has been made is on the Blue Box where there is broad agreement that the figure at which spending would be capped could be reduced from 5 per cent to 2.5 per cent of domestic spending. But there is still an argument about whether this discipline can be made effective, e.g., by introducing commodity specific disciplines.
Portman was brought in by Bush 11 months ago to negotiate a successful outcome to the Doha Round. His replacement is being interpreted by some as a sign of reduced US interest in the round. His replacement, the current deputy Susan Schwab, is regarded as a knowledgeable trade lawyer but as lacking the political clout of her predecessor who was well connected in Congress.
There is concern about how far Europe can negotiate effectively given the weakness of the new government in Italy and the continuing political upheaval and uncertainty in France which faces presidential elections next year. German Chancellor Angela Merkel may be required to take a leadership role.
It is now clear that the April 30 for agreeing modalities in agriculture (i.e., hard numbers) which was set at the Hong Kong ministerial will now be missed. The only area where progress has been made is on the Blue Box where there is broad agreement that the figure at which spending would be capped could be reduced from 5 per cent to 2.5 per cent of domestic spending. But there is still an argument about whether this discipline can be made effective, e.g., by introducing commodity specific disciplines.
Wednesday, March 29, 2006
Irish farming faces big shake up
Irish farm minister Mary Coughlan
One sign of the onset of big changes in European farming is a radical shake up in Irish farm policy. Ireland has generally been a staunch ally of France on CAP issues, while constituency politics reinforced by the STV voting system has ensured that farm interests have been paid due regard by policy makers.
However, farm minister Mary Coughlan has launched a new agri-food policy. She said that policy needed to reflect the reality of decoupled payments, different consumer lifestyles and increasing competition arising from a new WTO deal. Competitiveness, she said, was a life and death issue for farms and food firms.
Her message has been reinforced by the Assistant Secretary General of the Department of Food and Agriculture, Tony Burke. He warned in a speech in London that Ireland would have to be flexible in facing up to the shock of lower producer prices and increased imports in the years to come. 'Agriculture has to become a modern, hi-tech, consumer-drive process', he declared. In a country that produces nine times as much beef as it needs, 12,000 tonnes were imported from South America last year, reflecting the growth of fierce competition on the world market.
The first consequence of the new policy has been the establishment of a commercial milk quota exchange. Coughlan argued that a new, market-led approach to quota transfer was required to put the dairy sector on a competitive footing for the future. At present less than 4% of the milk produced in Ireland is restructured annually and there is little incentive to transfer quota.
However, traditional rural lobby, the Irish Creamery Suppliers' Association, described the move as 'rash' and 'utter madness'. Which probably means that Coughlan has got it about right.
France reasserts CAP leadership
France has sort to reassert its traditional leadership of European agricultural policy with a paper presented to the latest Farm Council setting out a vision for the future of the CAP. The paper can be seen as a riposte to the liberal agenda set out by Britain in a paper of its own last November.
The French paper received a far more favourable reception than that from Britain. Only Denmark, Sweden, Latvia and Britain spoke out against the French paper which was endorsed by Germany, Italy and Spain among other countries. A centrepiece of the paper was a call to shore up the incomes of farmers in the face of increasingly tough markets.
Meanwhile, Commissioner Fischer Boel's head of cabinet, Poul Skytte Christopherssen implicitly criticised Britain by stating that 'complex questions about the future of agricultural policy are not boiled down to the single issue of money.' However, he insisted that his boss 'has always been a reformer. She remains, and will remain, a reformer.' Maybe. But she is no Franz Fischler in terms of having a comprehensive vision for the overhaul of the CAP.
The French paper received a far more favourable reception than that from Britain. Only Denmark, Sweden, Latvia and Britain spoke out against the French paper which was endorsed by Germany, Italy and Spain among other countries. A centrepiece of the paper was a call to shore up the incomes of farmers in the face of increasingly tough markets.
Meanwhile, Commissioner Fischer Boel's head of cabinet, Poul Skytte Christopherssen implicitly criticised Britain by stating that 'complex questions about the future of agricultural policy are not boiled down to the single issue of money.' However, he insisted that his boss 'has always been a reformer. She remains, and will remain, a reformer.' Maybe. But she is no Franz Fischler in terms of having a comprehensive vision for the overhaul of the CAP.
Monday, March 27, 2006
Now Arla enrages Danes in cartoons row
Danish dairy giant Arla has been trying to placate consumers in the Middle East insulted by the publication of cartoons of the Prophet Mohammad. But in trying to build bridges with Islam it has upset some consumers in Denmark.
Arla placed adverts in 25 Middle Eastern newspapers rejecting the widely held Danish view that the publication of the drawings was defensible as freedom of expression and should not be apologised for. The action was praised by a meeting of influential Islamic sholars in Bahrain. The conference decided to open talks with the company which could pave the way for an end to a boycott that Arla says is likely to cost it €53.6m in lost sales this year.
Back in Denmark, howver, some domestic consumers are outraged at what they see as an abandonment of Danish values, arguing that Arla's need to make money has been put before freedom of expression. 'Some of our consumers are furious', admitted an Arla spokesman. 'We don't often get this many consumer responses about the same issue within a few days.'
Arla placed adverts in 25 Middle Eastern newspapers rejecting the widely held Danish view that the publication of the drawings was defensible as freedom of expression and should not be apologised for. The action was praised by a meeting of influential Islamic sholars in Bahrain. The conference decided to open talks with the company which could pave the way for an end to a boycott that Arla says is likely to cost it €53.6m in lost sales this year.
Back in Denmark, howver, some domestic consumers are outraged at what they see as an abandonment of Danish values, arguing that Arla's need to make money has been put before freedom of expression. 'Some of our consumers are furious', admitted an Arla spokesman. 'We don't often get this many consumer responses about the same issue within a few days.'
Sunday, March 19, 2006
Tescophobia
This term will not mean much to the preponderantly international readership of this blog, so some explanation is necessary. Britain has a highly concentrated grocery retail sector with some 30% of the market held by one firm, Tesco (which has some international presence in Eastern Europe, Thailand etc.) The next two biggest players in terms of market share are Sainsbury's and Asda which is owned by Wal-Mart.
Some versions of the theory of monopoly would argue that 30% comes close to being a dominant position and the UK's Competition Commission has launched yet another investigation into the retail grocery market.
Tesco used to be known as the 'pile it high and sell it cheap' store in comparison to the more up market Sainsbury's, but it has cleverly positioned itself in mid-market, overtaking the faltering (although now recovering) Sainsbury's in the process. Marks and Spencers and Waitrose (part of the John Lewis Partnership) tend to be more up market, the Co-op appeals to the ethical consumer, while Asda and Morrisons compete on price.
A number of charges are laid against Tesco and the other big supermarkets. One is that they use their market dominant position to squeeze the margins offered to processors and farmers, while continually requiring higher quality standards. However, their suppliers are understandably unwilling to come forward with evidence of demands for a range of additional payments, e.g., for store openings.
Another charge, and one that has led to the current investigation, is that by opening smaller outlets in town centres (rather than their usual edge of town locations) they are driving out of business convenience (or what Americans call 'mom and pop') stores. This has received a receptive hearing from the media and legislators, although in my experience many of these stores offer high prices and poor service. However, never let market forces get in the way of an emotive argument.
I have to confess that we do our shopping at Tesco's every week. There are those who argue that it would be cheaper if one went to a succession of small shops and that one would also get better quality produce. This may be the case, but the only specialist shop we use regularly is a fishmonger. What the critics forget is the time costs that specialist shopping entails. In today's society where many people are cash rich and time poor, that is a relevant consideration.
Government has also been very reluctant to act against the supermarkets because they bring benefits to consumers by holding down prices through competition and the use of their market position. This helps to restrain inflation and particularly benefits a key New Labour constituency, working people with families.
Tescophobia is rife among the 'chattering classes', i.e., the articulate and well educated members of the class with access to the media. But, as Tesco themselves say, what shoppers do is more important than what they say and they continue to pour through the doors of the supermarkets.
Where Tesco may be vulnerable to a competition enquiry is its possession of 'land banks' of attractive retail sites which it is alleged it hoards to keep rivals out of the market. Sometimes land is very scarce in prime locations, however. Gerrards Cross is one of the richest communities in England. The only place Tesco could find to build a store was over the railway line. They built a tunnel over it which then collapsed, fortunately with no trains going through it.
Supermarkets like Tesco are trying to expand their global reach, while France has relaxed laws designed to protect small shops, so these are not purely British issues.
Globalisation and concentration in retailing is likely to be a continuing trend.
Some versions of the theory of monopoly would argue that 30% comes close to being a dominant position and the UK's Competition Commission has launched yet another investigation into the retail grocery market.
Tesco used to be known as the 'pile it high and sell it cheap' store in comparison to the more up market Sainsbury's, but it has cleverly positioned itself in mid-market, overtaking the faltering (although now recovering) Sainsbury's in the process. Marks and Spencers and Waitrose (part of the John Lewis Partnership) tend to be more up market, the Co-op appeals to the ethical consumer, while Asda and Morrisons compete on price.
A number of charges are laid against Tesco and the other big supermarkets. One is that they use their market dominant position to squeeze the margins offered to processors and farmers, while continually requiring higher quality standards. However, their suppliers are understandably unwilling to come forward with evidence of demands for a range of additional payments, e.g., for store openings.
Another charge, and one that has led to the current investigation, is that by opening smaller outlets in town centres (rather than their usual edge of town locations) they are driving out of business convenience (or what Americans call 'mom and pop') stores. This has received a receptive hearing from the media and legislators, although in my experience many of these stores offer high prices and poor service. However, never let market forces get in the way of an emotive argument.
I have to confess that we do our shopping at Tesco's every week. There are those who argue that it would be cheaper if one went to a succession of small shops and that one would also get better quality produce. This may be the case, but the only specialist shop we use regularly is a fishmonger. What the critics forget is the time costs that specialist shopping entails. In today's society where many people are cash rich and time poor, that is a relevant consideration.
Government has also been very reluctant to act against the supermarkets because they bring benefits to consumers by holding down prices through competition and the use of their market position. This helps to restrain inflation and particularly benefits a key New Labour constituency, working people with families.
Tescophobia is rife among the 'chattering classes', i.e., the articulate and well educated members of the class with access to the media. But, as Tesco themselves say, what shoppers do is more important than what they say and they continue to pour through the doors of the supermarkets.
Where Tesco may be vulnerable to a competition enquiry is its possession of 'land banks' of attractive retail sites which it is alleged it hoards to keep rivals out of the market. Sometimes land is very scarce in prime locations, however. Gerrards Cross is one of the richest communities in England. The only place Tesco could find to build a store was over the railway line. They built a tunnel over it which then collapsed, fortunately with no trains going through it.
Supermarkets like Tesco are trying to expand their global reach, while France has relaxed laws designed to protect small shops, so these are not purely British issues.
Globalisation and concentration in retailing is likely to be a continuing trend.
Friday, March 17, 2006
Big shakeup faces EU dairy sector
Shoppers visiting Asda (Wal-Mart owned) stores in the UK have been greeted by dairy farmers complaining about the low prices they receive for their milk and the margin claimed by the processors and retailers.
Some dairy farmers are certainly finding it hard to make a profit, but bleaker times may be ahead for the sector across the European Union. If the planned phase out of export subsidies goes ahead, let alone tariff reductions, dairying will be hard hit. It depends to a large degree to the export of surplus product on to the world market under written by EU subsidies.
The EU is closely behind the climatically favoured Kiwis as the world's leading exporter of butter and skimmed milk powder. However, whereas New Zealand's success reflects its lush pastures and absence of really cold weather in most of the country, the EU spends close to €1 billion a year to help its exports on the world market. When export subsidies go 11% of total EU butter production and 18% of skimmed milk powder will have to be absorbed on the domestic market.
When the current reform programme is completed in July 2007 the EU butter intervention price will stand at €2463 per tonne. Calculating the world market price is notoriously difficult because in practice there is no one world price, but Dairy Markets estimate it at around €1570 to €1650 per tonne. The world market price could well go up, particularly if dairy production falls in Europe, but not to an extent that would close a gap of €800 a tonne or more.
There may be particular implications for the UK market. Dairy UK chairman David Curry has warned that 'There is a danger that if the export route is closed, big volumes of Irish milk will be seeking a home on the British market at heavily discounted prices.'
All this helps to explain why the EU is so keen to keep as many tariff lines as possible within the 'sensitive' products designation in the Doha Round talks and also to ensure that any tariff cuts for sensitive products are as low as possible. What the EU wants is to limit the amount of trade in the sector while retaining as high a level of domestic support as possible. One reason it has painted itself into a corner is the decision to retain dairy quotas, an artificial market restraint if there ever was one, until the middle of the next decade.
However, other products like beef and poultry meat also have claims for 'sensitive' treatment, so dairying is unlikely to get all the protection it wants. Which is perhaps why it is the most efficient and innovative dairy farmers in the UK are getting out of the business and employing their capital where it can earn a better return. Those who cannot think of any alternative activity tend to stay on and try to eke out a living. They are the farmers likely to be found demonstrating at Asda (although some of their fellow farmers have argued that they should be dropped as Asda suppliers). The irrationality of exit patterns could be regarded as a market failure.
Some dairy farmers are certainly finding it hard to make a profit, but bleaker times may be ahead for the sector across the European Union. If the planned phase out of export subsidies goes ahead, let alone tariff reductions, dairying will be hard hit. It depends to a large degree to the export of surplus product on to the world market under written by EU subsidies.
The EU is closely behind the climatically favoured Kiwis as the world's leading exporter of butter and skimmed milk powder. However, whereas New Zealand's success reflects its lush pastures and absence of really cold weather in most of the country, the EU spends close to €1 billion a year to help its exports on the world market. When export subsidies go 11% of total EU butter production and 18% of skimmed milk powder will have to be absorbed on the domestic market.
When the current reform programme is completed in July 2007 the EU butter intervention price will stand at €2463 per tonne. Calculating the world market price is notoriously difficult because in practice there is no one world price, but Dairy Markets estimate it at around €1570 to €1650 per tonne. The world market price could well go up, particularly if dairy production falls in Europe, but not to an extent that would close a gap of €800 a tonne or more.
There may be particular implications for the UK market. Dairy UK chairman David Curry has warned that 'There is a danger that if the export route is closed, big volumes of Irish milk will be seeking a home on the British market at heavily discounted prices.'
All this helps to explain why the EU is so keen to keep as many tariff lines as possible within the 'sensitive' products designation in the Doha Round talks and also to ensure that any tariff cuts for sensitive products are as low as possible. What the EU wants is to limit the amount of trade in the sector while retaining as high a level of domestic support as possible. One reason it has painted itself into a corner is the decision to retain dairy quotas, an artificial market restraint if there ever was one, until the middle of the next decade.
However, other products like beef and poultry meat also have claims for 'sensitive' treatment, so dairying is unlikely to get all the protection it wants. Which is perhaps why it is the most efficient and innovative dairy farmers in the UK are getting out of the business and employing their capital where it can earn a better return. Those who cannot think of any alternative activity tend to stay on and try to eke out a living. They are the farmers likely to be found demonstrating at Asda (although some of their fellow farmers have argued that they should be dropped as Asda suppliers). The irrationality of exit patterns could be regarded as a market failure.
Monday, March 13, 2006
Be very, very afraid
David Richardson is an East Anglian arable farmer who has a regular column in Farmers Weekly. I met him once and he is a nice guy. But he is also an eloquent exponent of the notion that farmers are hard done by and should continue to receive substantial subsidies from a grateful population. One of his regular arguments is that the food security arguments used when the common market was founded are just as valid today, only now the threat comes from terrorists rather than the Soviet Union. Exactly what terrorist incident would disrupt the food supply chain on a massive scale is never quite explained.
So one has to be very worried when Richardson, who is usually whingeing about the failure of Defra to 'back' farmers, praises a speech by an EU commissioner. Even more so when the commissioner in question is Peter Mandelson who has recently been showing his protectionist colours by using anti-dumping legislation to stop European consumers enjoying cheap shoes from China. 'Is Mandelson our mate?' is the heading on Richardson's column who is depicted with the kind of stick that was once used for poking pigs and the kind of cloth cap that only elderly farmers wear.
Well, is Mandy the farmers' new friend? What he did tell the National Farmers' Union annual conference was that the CAP is not obsolete and that agriculture as a sector cannot be treated like all others. Why not? Because 'It is too intimately connected to wider issues such as the environment, food security and the future of the countryside.' The reference to food security was particularly worrying as it can be used as a portmenteau justification for limitless subsidies, whereas one can attempt some valuation of beneficial externalities such as cherished landscapes.
The CAP has rightly been under the cosh for its impact on the Global South in recent years, but Mandy gave it large in the manner of his famous 'I am not a quitter' speech to all those softies with a misplaced concern about poor farmers. 'I am not going to be swayed by lazy political correctness into giving ground in agriculture simply because this will please a vociferous lobby that has misunderstood what is really need to tackle word poverty.' So Oxfam and all the other Global South NGOs can tear up their research right now.
Where he did encourage reformers was his declaration that it didn't make sense to spend over 40% of the Community budget on agriculture. He also recognised the reality that China was becoming the industrial workshop of the world, Brazil its most competitive supplier of bulk commodities and India a great service provider. The future for Europe was in providing top quality, knowledge intensive, value added food among other goods and services. In that he is right and David Richardson with his calls for shoring up self-sufficiency and cutting imports is wrong. The global food economy is here, there is plenty of room for high quality local products (backed up by a system of Geographical Indications), but this is time to cut back agricultural protectionism not to reinforce it. There is still everything to play for in the Doha Round.
So one has to be very worried when Richardson, who is usually whingeing about the failure of Defra to 'back' farmers, praises a speech by an EU commissioner. Even more so when the commissioner in question is Peter Mandelson who has recently been showing his protectionist colours by using anti-dumping legislation to stop European consumers enjoying cheap shoes from China. 'Is Mandelson our mate?' is the heading on Richardson's column who is depicted with the kind of stick that was once used for poking pigs and the kind of cloth cap that only elderly farmers wear.
Well, is Mandy the farmers' new friend? What he did tell the National Farmers' Union annual conference was that the CAP is not obsolete and that agriculture as a sector cannot be treated like all others. Why not? Because 'It is too intimately connected to wider issues such as the environment, food security and the future of the countryside.' The reference to food security was particularly worrying as it can be used as a portmenteau justification for limitless subsidies, whereas one can attempt some valuation of beneficial externalities such as cherished landscapes.
The CAP has rightly been under the cosh for its impact on the Global South in recent years, but Mandy gave it large in the manner of his famous 'I am not a quitter' speech to all those softies with a misplaced concern about poor farmers. 'I am not going to be swayed by lazy political correctness into giving ground in agriculture simply because this will please a vociferous lobby that has misunderstood what is really need to tackle word poverty.' So Oxfam and all the other Global South NGOs can tear up their research right now.
Where he did encourage reformers was his declaration that it didn't make sense to spend over 40% of the Community budget on agriculture. He also recognised the reality that China was becoming the industrial workshop of the world, Brazil its most competitive supplier of bulk commodities and India a great service provider. The future for Europe was in providing top quality, knowledge intensive, value added food among other goods and services. In that he is right and David Richardson with his calls for shoring up self-sufficiency and cutting imports is wrong. The global food economy is here, there is plenty of room for high quality local products (backed up by a system of Geographical Indications), but this is time to cut back agricultural protectionism not to reinforce it. There is still everything to play for in the Doha Round.
Monday, February 27, 2006
Don't panic say Euro leaders as bird flu hits
EU farm and health bosses have called on European consumers not to panic as avian flu hit an indoor turkey farm in France despite efforts to prevent its spread from wild birds. The H5 virus is certainly not tranmissable in poultry cooked at over 70 degrees C., but consumer panic is difficult to stop and poultry sales are already estimated to be 30% down in France. Large quantities of French meat have been diverted to the UK wholesale market. There has been a 20% fall in Germany, but there has been a worse hit in Italy where retailers have experienced a 70% drop in consumption. In the UK Tesco reported that there had been no decline in demand for eggs and poultry meat with the message getting through that this is not a food safety issue.
So far the only humans who have caught the virus have been in close contact with flocks not kept in modern conditions. However, the influenza virus is susceptible to mutation and it is at least possible that the avian flu could combine with human strains to create a new pandemic (an influenza pandemic is overdue in any case). Stocking vaccine might be of little help as it might not be able to counteract a new version.
Additional deaths in the UK in the event of a pandemic are estimated at least 50,000 and there would be considerable economic disruption from people failing to report for work. The food supply chain would certainly be affected. The fact of the matter is that just because we are in the 21st century there is no technological silver bullet that can stop a flu pandemic, any more than anyone could stop the pandemic that killed my grandmother at the end of the First World War.
As far as animal health is concerned, the EU has allowed France and Germany to vaccinate poultry. The decision marks the first significant application of the EU's new policy, adopted after the 2001 foot and mouth outbreak, of allowing selective vaccination of farm animals despite the possible impact on trade. The EU's view is that because bird flu is a global problem vaccination is unlikely to hit trade.
However, opinion on the vaccination issue is divided. Countries such as Germany believe that the advantages are outweighed by the costs (around €0.2 to €0.3 on a commercial farm) and the fear that the symptoms of the virus can simply be masked rather than eliminated.
In Britain Defra's view is that the vaccines currently available are slow to work and do not stop infected birds transmitting the disease to others. Fred Landeg, deputy chief veterinary officer at DEFRA said, 'Though these vaccines protect against the disease, they will not prevent birds from becoming infected and shedding virus. It can take up to three weeks to develop immunity, and some poultry require two doses.'
So far the only humans who have caught the virus have been in close contact with flocks not kept in modern conditions. However, the influenza virus is susceptible to mutation and it is at least possible that the avian flu could combine with human strains to create a new pandemic (an influenza pandemic is overdue in any case). Stocking vaccine might be of little help as it might not be able to counteract a new version.
Additional deaths in the UK in the event of a pandemic are estimated at least 50,000 and there would be considerable economic disruption from people failing to report for work. The food supply chain would certainly be affected. The fact of the matter is that just because we are in the 21st century there is no technological silver bullet that can stop a flu pandemic, any more than anyone could stop the pandemic that killed my grandmother at the end of the First World War.
As far as animal health is concerned, the EU has allowed France and Germany to vaccinate poultry. The decision marks the first significant application of the EU's new policy, adopted after the 2001 foot and mouth outbreak, of allowing selective vaccination of farm animals despite the possible impact on trade. The EU's view is that because bird flu is a global problem vaccination is unlikely to hit trade.
However, opinion on the vaccination issue is divided. Countries such as Germany believe that the advantages are outweighed by the costs (around €0.2 to €0.3 on a commercial farm) and the fear that the symptoms of the virus can simply be masked rather than eliminated.
In Britain Defra's view is that the vaccines currently available are slow to work and do not stop infected birds transmitting the disease to others. Fred Landeg, deputy chief veterinary officer at DEFRA said, 'Though these vaccines protect against the disease, they will not prevent birds from becoming infected and shedding virus. It can take up to three weeks to develop immunity, and some poultry require two doses.'
Monday, February 06, 2006
Danish dairy firm hit by cartoons row
Trade between Denmark and the Middle East may take years to recover from the row resulting from the Danish newspaper Jyllands-Posten publishing cartoons featuring the prophet Mohammed. This has sparked a boycott of Arla's products in Muslim countries.
The boycott is reported to have cost Arla Foods £1 million a day and by the end of last week it was reported to have lost between £40m and £50m. Some 170 employees across Denmark have been sent home due to the impact of reduced sales. Arla Foods is also a big player in the UK dairy market, but no effects have reported there.
The widespread boycott of Danish goods by Muslim consumers led to an almost complete halt in sales in the region leading Arla to suspend production at its Saudi Arabian plant. Arla products have been removed from shelves completely in Kuwait, Qatar and the United Arab Emirates. The company describes the situation as 'critical' in Yemen, Egypt and Lebanon and notes that there have been demonstrations in Algeria.
Arla's executive director Finn Hansen said it would take a long time for the Danish dairy giant to re-establish the business and good trading relations it had in the Middle East which was its main market outside Europe. Establishing a presence in such markets is an essential part of the EU dairy industry's strategy to survive the phasing out of export subsidies and likely tariff reductions as a result of eventual agreement in the Doha Round.
The boycott is reported to have cost Arla Foods £1 million a day and by the end of last week it was reported to have lost between £40m and £50m. Some 170 employees across Denmark have been sent home due to the impact of reduced sales. Arla Foods is also a big player in the UK dairy market, but no effects have reported there.
The widespread boycott of Danish goods by Muslim consumers led to an almost complete halt in sales in the region leading Arla to suspend production at its Saudi Arabian plant. Arla products have been removed from shelves completely in Kuwait, Qatar and the United Arab Emirates. The company describes the situation as 'critical' in Yemen, Egypt and Lebanon and notes that there have been demonstrations in Algeria.
Arla's executive director Finn Hansen said it would take a long time for the Danish dairy giant to re-establish the business and good trading relations it had in the Middle East which was its main market outside Europe. Establishing a presence in such markets is an essential part of the EU dairy industry's strategy to survive the phasing out of export subsidies and likely tariff reductions as a result of eventual agreement in the Doha Round.
Monday, January 30, 2006
Grain mountain growing
There is a common assumption that intervention mountains are a thing of the past. This is not necessarily the case. The EU's grain mountain is growing fast and looks like getting bigger.
It is now at a highest level for nearly a decade. At the start of the 2004/5 there were just 5mt in store. By the start of the 2005/6 marketing year this had trebled to 15.48mt. By mid-January, assuming that all grain submitted into intervention, the potential total was 18.6mt. And with nearly five months of the buying in season left, the stockpile could rise to 20mt or more by the end of May.
The problem is concentrated primarily in five countries in the middle of Europe - Germany, Poland, Hungary, the Czech Republic and Slovakia. These five countries accounted for 93 per cent of the nearly 7mt offered in intervention between November and mid-January.
These countries have experienced two strong successive grain harvests? One might think that they could have sold the grain to drought hit Spain, but transport costs by road were roo high. The rationalisation of the region's pig and poultry markets prior to EU accession has limited the size of the feed market. And to the east, competition from the main Black Sea producers is fiercer than ever before.
So those, like the Austrian presidency, who are calling for a period of stability in CAP reform should remember that many of the old problems are still with us.
It is now at a highest level for nearly a decade. At the start of the 2004/5 there were just 5mt in store. By the start of the 2005/6 marketing year this had trebled to 15.48mt. By mid-January, assuming that all grain submitted into intervention, the potential total was 18.6mt. And with nearly five months of the buying in season left, the stockpile could rise to 20mt or more by the end of May.
The problem is concentrated primarily in five countries in the middle of Europe - Germany, Poland, Hungary, the Czech Republic and Slovakia. These five countries accounted for 93 per cent of the nearly 7mt offered in intervention between November and mid-January.
These countries have experienced two strong successive grain harvests? One might think that they could have sold the grain to drought hit Spain, but transport costs by road were roo high. The rationalisation of the region's pig and poultry markets prior to EU accession has limited the size of the feed market. And to the east, competition from the main Black Sea producers is fiercer than ever before.
So those, like the Austrian presidency, who are calling for a period of stability in CAP reform should remember that many of the old problems are still with us.
Tuesday, January 03, 2006
2014 could be zero hour
The year 2014 could be zero hour for a new look CAP argues Agra Europe. By then export subsidies should have been phased out and the current financial perspectives agreement will have expired.
The EU budget deal does contain provision for a wide ranging review of the CAP in 2008/9, but no timetable for reform is built into it. France has effectively locked the CAP into current spending patterns with the deal it secured in 2002. What has changed, however, is that spending on new member states Romania and Bulgaria will have to be accommodated within the budget ceiling originally agreed for 25 member states.
Meanwhile Commissioner Fischer Boel has revived the idea of a €300,000 limit per farming enterprise (what actually constitues a 'farm' is not easy to define) on CAP payments for discussion in the 2008/9 review. This is like a red rag to a bull with the UK who scuppered the idea along with Germany in the 2002 negotiations. The UK's argument was that such a ceiling would penalise 'efficient' farmers, but its real concern was that it would hit the many large-scale farmers in Britain, including members of the aristocracy and the royal family.
The EU budget deal does contain provision for a wide ranging review of the CAP in 2008/9, but no timetable for reform is built into it. France has effectively locked the CAP into current spending patterns with the deal it secured in 2002. What has changed, however, is that spending on new member states Romania and Bulgaria will have to be accommodated within the budget ceiling originally agreed for 25 member states.
Meanwhile Commissioner Fischer Boel has revived the idea of a €300,000 limit per farming enterprise (what actually constitues a 'farm' is not easy to define) on CAP payments for discussion in the 2008/9 review. This is like a red rag to a bull with the UK who scuppered the idea along with Germany in the 2002 negotiations. The UK's argument was that such a ceiling would penalise 'efficient' farmers, but its real concern was that it would hit the many large-scale farmers in Britain, including members of the aristocracy and the royal family.
Tuesday, December 27, 2005
Analysis not matched by outcome
The UK Government produced a good critique of the CAP as part of its efforts to secure further reform in the EU budget negotitations. Unfortunately, it had little impact on the outcome. As The Economist has commented, 'Despite the promised review in 2098, the deal puts off any further serious reform of the CAP until 2013.'
Nevertheless, the key arguments are worth reproducing. The paper makes the key point that the reforms that have taken place so far are only partial for three main reasons:
1. A mass of market intervention and support measures remain in place
2. High tariffs, production quotas, set-aside, export subsidies (albeit now to be phased out by 2013), intervention purchase and other mechanisms distort markets
3. To many options remain for member states to continue with coupled direct production-linked payment schemes, albeit reduced in scale
The paper sees the capitalisation of subsidy and support values into the price of land as a major obstacle to change. Much of the money paid out doesn't benefit farmers because of capitalisation of land values and the charges of suppliers of other inputs. In France, for example, where much of the land is owned by non-farmers, the actual value of susbidies remaining with farmers is as low as 20 per cent of the original payment.
The paper also has a welcomed pop at the much repeated and rarely criticised argument about the environmental impact of 'food miles'. Research commissioned by Defra shows that the transport of imported agricultural produce by sea accounts for only 1.5 per cent of the total external costs associated with food transport to and within the UK. This is mainly because fewer long journeys of large ships replace many short journeys by HGVs. One might add that much of the global warming effect results from trips made by car to out-of-town supermarkets.
The paper argues that the challenge for the EU is to ensure that agriculture is treated no differently from other sectors of the economy. This is where there is a fundamental division between the UK and its opponents who argue that the CAP produces food security benefits, high quality food, preserves cherished landscape and maintains the fabric of rural society.
There is, perhaps, a tension here with the UK government's stated objective of an agriculture that is 'socially responsive to the needs of local communities.' That is where rural development policy comes in, but it has taken a hit under the budget agreement.
Nevertheless, the key arguments are worth reproducing. The paper makes the key point that the reforms that have taken place so far are only partial for three main reasons:
1. A mass of market intervention and support measures remain in place
2. High tariffs, production quotas, set-aside, export subsidies (albeit now to be phased out by 2013), intervention purchase and other mechanisms distort markets
3. To many options remain for member states to continue with coupled direct production-linked payment schemes, albeit reduced in scale
The paper sees the capitalisation of subsidy and support values into the price of land as a major obstacle to change. Much of the money paid out doesn't benefit farmers because of capitalisation of land values and the charges of suppliers of other inputs. In France, for example, where much of the land is owned by non-farmers, the actual value of susbidies remaining with farmers is as low as 20 per cent of the original payment.
The paper also has a welcomed pop at the much repeated and rarely criticised argument about the environmental impact of 'food miles'. Research commissioned by Defra shows that the transport of imported agricultural produce by sea accounts for only 1.5 per cent of the total external costs associated with food transport to and within the UK. This is mainly because fewer long journeys of large ships replace many short journeys by HGVs. One might add that much of the global warming effect results from trips made by car to out-of-town supermarkets.
The paper argues that the challenge for the EU is to ensure that agriculture is treated no differently from other sectors of the economy. This is where there is a fundamental division between the UK and its opponents who argue that the CAP produces food security benefits, high quality food, preserves cherished landscape and maintains the fabric of rural society.
There is, perhaps, a tension here with the UK government's stated objective of an agriculture that is 'socially responsive to the needs of local communities.' That is where rural development policy comes in, but it has taken a hit under the budget agreement.
Wednesday, December 07, 2005
Big farms still take biggest share of the loot
A small handful of big farms received a big proportion of EU direct aid payments under the old CAP regime according to recently released Commisson figures. Of the €27.2 billion in subsidies paid out to some 5.2 million EU farmers in 2002, over €1 billion was handed out to just 1,140 large farms. And each of these fortunate recipients received over €500,000 each.
Germany had the highest number of farms receiving payments of over €0.5 million each with 960 farmers receiving €0.9 billion between them. This reflects the survival in private hands of what were big collective farms in the former East Germany. At the other end of the scale, well over half the farms receiving CAP aid in 2002 (some 2.9 million) received annual aid cheques of less than €1,250. Of these farms, 2.3 million were situtaed in either Italy, Greece or Spain.
The largest overall recipient of direct aid continued to be France which received €6.9 billion in 2002. Of this amount, €2.6 million was shared out between fewer than ten of the biggest farms. It is sometimes forgotten that France is not a land of peasants or even medium-sized family farms, but has some very big agribusinesses.
We have heard of a new webiste that aims to give detailed information about the recipients of EU farms subsidies. Visit Subsidies .
Germany had the highest number of farms receiving payments of over €0.5 million each with 960 farmers receiving €0.9 billion between them. This reflects the survival in private hands of what were big collective farms in the former East Germany. At the other end of the scale, well over half the farms receiving CAP aid in 2002 (some 2.9 million) received annual aid cheques of less than €1,250. Of these farms, 2.3 million were situtaed in either Italy, Greece or Spain.
The largest overall recipient of direct aid continued to be France which received €6.9 billion in 2002. Of this amount, €2.6 million was shared out between fewer than ten of the biggest farms. It is sometimes forgotten that France is not a land of peasants or even medium-sized family farms, but has some very big agribusinesses.
We have heard of a new webiste that aims to give detailed information about the recipients of EU farms subsidies. Visit Subsidies .
Thursday, November 24, 2005
Sweeteners lead to sugar deal
In a rare success for the UK presidency, EU farm ministers have agreed to a reformed sugar regime to operate from next July. Sufficient sweeteners had to be offered to the most vociferous opponents to get them to accept a deal, although one had to be reached before too long given the WTO deadline of next May and the fact that the regime itself would expire in the summer.
Ministers agreed to a slight cut in the depth of the price cut, and to an increase in the rate of compensation. The European Commission and ministers compromised on a 36% cut in the price of sugar (a relative marginal reduction in the original figure of 39%), and a 4.2% increase in compensation for farmers. They will thus now receive compensation covering 64.2% of the loss incurred by the price cut. There is a also a more generous compensation scheme for inefficient European sugar producers who will be forced to halt production because of the price drop. Extra compensation will be given to farmers in countries that give up 50 per cent of their production, a move that will principally benefit Italy and Spain.
Finland benefits from a special deal that allows beet farmers in one of the least competitive sugar producer countries in Europe a special aid of €350m so they can continue supplying he one remaining beet producer in the country. Why not import sugar from elsewhere which is what mostly happens anyway.
However, these side payments should not distract attention from a substantial reduction in the guaranteed price. In other words, a deal has been struck that will not bust the budget or fail to curb uneconomic production in the sector.
The new compromise proposal – the second to be tabled at this week's EU farm Council – offers significant sweeteners for various countries, in particular Italy, one of the most vociferous opponents of the reform. Poland, Latvia and Greece still refused to endorse the compromise. The producer price for sugar will be reduced in four stages, with a cumulative reduction over four years of 20%, 25%, 30% and 36%.
The deal has come under criticism from both third world NGOs and industrial suger users. Some development experts suggested that the EU had been forced to offer more compensation to inefficient European farmers at the expense of their more vulnerable sugar cane rivals. 'Developing countries have been sacrificed in order for Europe to reach a deal', said Luis Morago, head of Oxfam International in Brussels.
The UK Industrial Sugar Users Group deplored last-minute concessions that would still leave the EU price about double that in the rest of the world. 'This deal takes the easy way out by simply dumping increased compensation costs on consumers and industrial users.' In fact the EU internal reference price will be €404 per tonne, about 40 per cent above the current spot price. Moreover, the world price could rise if uneconomic EU production is withdrawn and bioethanol actually takes off in a significant way.
For all the criticism, the deal was probably as good as could be obtained given the opposition and will bolster the EU's position in world trade talks.
Ministers agreed to a slight cut in the depth of the price cut, and to an increase in the rate of compensation. The European Commission and ministers compromised on a 36% cut in the price of sugar (a relative marginal reduction in the original figure of 39%), and a 4.2% increase in compensation for farmers. They will thus now receive compensation covering 64.2% of the loss incurred by the price cut. There is a also a more generous compensation scheme for inefficient European sugar producers who will be forced to halt production because of the price drop. Extra compensation will be given to farmers in countries that give up 50 per cent of their production, a move that will principally benefit Italy and Spain.
Finland benefits from a special deal that allows beet farmers in one of the least competitive sugar producer countries in Europe a special aid of €350m so they can continue supplying he one remaining beet producer in the country. Why not import sugar from elsewhere which is what mostly happens anyway.
However, these side payments should not distract attention from a substantial reduction in the guaranteed price. In other words, a deal has been struck that will not bust the budget or fail to curb uneconomic production in the sector.
The new compromise proposal – the second to be tabled at this week's EU farm Council – offers significant sweeteners for various countries, in particular Italy, one of the most vociferous opponents of the reform. Poland, Latvia and Greece still refused to endorse the compromise. The producer price for sugar will be reduced in four stages, with a cumulative reduction over four years of 20%, 25%, 30% and 36%.
The deal has come under criticism from both third world NGOs and industrial suger users. Some development experts suggested that the EU had been forced to offer more compensation to inefficient European farmers at the expense of their more vulnerable sugar cane rivals. 'Developing countries have been sacrificed in order for Europe to reach a deal', said Luis Morago, head of Oxfam International in Brussels.
The UK Industrial Sugar Users Group deplored last-minute concessions that would still leave the EU price about double that in the rest of the world. 'This deal takes the easy way out by simply dumping increased compensation costs on consumers and industrial users.' In fact the EU internal reference price will be €404 per tonne, about 40 per cent above the current spot price. Moreover, the world price could rise if uneconomic EU production is withdrawn and bioethanol actually takes off in a significant way.
For all the criticism, the deal was probably as good as could be obtained given the opposition and will bolster the EU's position in world trade talks.
Tuesday, November 15, 2005
Changing shape of budget
The CAP budget for agricultural markets and the SFP has been scaled back to a mere €43,280 million in 2006, or €51,051 million when one adds in rural development. However, it is the composition of the budget that is in some ways more interesting. Of course, by far the greater part these days goes on direct aids to farmers (€34,817m).
If one looks at the market support budget, the largest budget line is now for fruit and vegetables at €1,544m, followed by €1,494m for the wine lake and €1376m for sugar. 'Textile plants', effectively cotton subsidies, come fourth at €969m: these are, of course, very controversial in the current WTO talks in terms of their impact on poor West African countries.
Milk products and cereals, once the biggest items, now come 5th and 6th respectively, although it should be remembered that payments now largely take the form of direct aids.
If one looks at the market support budget, the largest budget line is now for fruit and vegetables at €1,544m, followed by €1,494m for the wine lake and €1376m for sugar. 'Textile plants', effectively cotton subsidies, come fourth at €969m: these are, of course, very controversial in the current WTO talks in terms of their impact on poor West African countries.
Milk products and cereals, once the biggest items, now come 5th and 6th respectively, although it should be remembered that payments now largely take the form of direct aids.
DG Agri has a French head again
For a long time, DG-Agri was known as a French fiefdom with a French head of the bureaucracy, many French and Francophone staff and even a canteen that was supposed to serve the best food in the Commission! For some time now DG Agri has had a Spanish head, but on 1 January he will be replaced one of his deputies, French national Jean-Luc Demarty.
However, this may not be a sign of a return to old style agricultural politics. An alternative view is that it reflects the decreased significance of DG Agri with the real power over the future of Europe's farmers now in the hands of DG Trade. Indeed, Le Figaro has claimed that Paris lobbied without success to get a French head of trade - the job has gone to Irishman David O'Sullivan.
However, this may not be a sign of a return to old style agricultural politics. An alternative view is that it reflects the decreased significance of DG Agri with the real power over the future of Europe's farmers now in the hands of DG Trade. Indeed, Le Figaro has claimed that Paris lobbied without success to get a French head of trade - the job has gone to Irishman David O'Sullivan.
Sunday, November 06, 2005
Where does the CAP cash go?
In a letter to European Voice CAP campaigner Terry Wynn MEP points out that little information is made available on who gets the large sums of money spent on CAP. Only Denmark, the UK, Estonia, Sweden and Slovenia (now joined by Belgium) make the information available.
When it is made available, it is quite revealing. Wynn points out that UK figures show that Lincolnshire receives three times more in agricultural subsidies than the north-west of England combined and has only a third of the number of farms. He points out that there is no disclosure of where the money goes in France despite the fact that it receives a quarter of CAP expenditure.
The Belgian payment agency, BIRB, has now posted details of the recepients of CAP money. At the top of the list is the sugar refinery in Tienen which received €91.9 million in 2004. At the bottom is the Sacred Heart pyschiatric hospital in Ypres which received €148.70.
There was considerable political resistance to the publication of the information. The agriculture minister in the federal government is Sabine Laruelle, a Walloon Liberal, who happens to be a former president of the Walloon farmers' union. She said she would not release names and amounts and that what was happening 'leads only to a witch hunt', pointing out that 'People focus on examples such as the Queen of England.'
Meanwhile, Yves Leterme, the Christian Democrat head of the Flemish regional government complained about efforts by commissioners Fischer Boel and Slim Kallas (audit and anti-fraud) to get national governments to disclose who gets what from the CAP regime. Leterme said that if the Commissioners were minded to make statements 'which intrude against our constitutional rights to the protection of privacy, then they had better keep their mouths shut.' However, Belgian prime minister Guy Verhofstadt decided in favour of disclosure.
This is public money and EU citizens are entitled to know where it is going. Publication may also serve as a deterrent to fraud which remains a persistent problem in the CAP.
When it is made available, it is quite revealing. Wynn points out that UK figures show that Lincolnshire receives three times more in agricultural subsidies than the north-west of England combined and has only a third of the number of farms. He points out that there is no disclosure of where the money goes in France despite the fact that it receives a quarter of CAP expenditure.
The Belgian payment agency, BIRB, has now posted details of the recepients of CAP money. At the top of the list is the sugar refinery in Tienen which received €91.9 million in 2004. At the bottom is the Sacred Heart pyschiatric hospital in Ypres which received €148.70.
There was considerable political resistance to the publication of the information. The agriculture minister in the federal government is Sabine Laruelle, a Walloon Liberal, who happens to be a former president of the Walloon farmers' union. She said she would not release names and amounts and that what was happening 'leads only to a witch hunt', pointing out that 'People focus on examples such as the Queen of England.'
Meanwhile, Yves Leterme, the Christian Democrat head of the Flemish regional government complained about efforts by commissioners Fischer Boel and Slim Kallas (audit and anti-fraud) to get national governments to disclose who gets what from the CAP regime. Leterme said that if the Commissioners were minded to make statements 'which intrude against our constitutional rights to the protection of privacy, then they had better keep their mouths shut.' However, Belgian prime minister Guy Verhofstadt decided in favour of disclosure.
This is public money and EU citizens are entitled to know where it is going. Publication may also serve as a deterrent to fraud which remains a persistent problem in the CAP.
Tuesday, November 01, 2005
Group opposed to sugar reform grows
Poland has joined the eleven countries led by Spain who are opposed to the Commission's proposals for reform of the sugar regime. Just four of the opposing countries - Greece, Italy, Poland and Spain - would be enough to block reform under the qualified majority system.
This latest development is causing concern in the Commission and the UK presidency. The WTO has declared the current regime illegal and the current regulation expires next June which would lead to chaos if nothing is put in its place.
The Commission has to think of some way of buying off opposition without rendering the whole reform pointless. The opposing states are calling for smaller price cuts over a longer period with more compensation and it is difficult to see how this can be squared with the WTO judgement or the EU budget.
It might be possible to include the option of partial decoupling for states such as Italy who feel they are worst hit by the price reduction, although it is questionable whether keeping small Italian sugar producers in business is compatible with the spirit of the reform. Certainly national compensation envelopes for sugar producers are still under consideration, but the sweetener would have to be significant.
A further complicating factor is that the opposition countries are suggesting that cuts should be applied initially just to regions with a surplus of production. If one interprets that as countries with B quotas, leading sugar producers would be hit, notably France and Germany where up to 20 per cent of overall production quotas are B quotas.
So this is all about winners and losers rather than a rational reform strategy that would be helpful for the EU as a whole. As June approaches, no doubt some sort of reform, with more side payments, will be devised.
This latest development is causing concern in the Commission and the UK presidency. The WTO has declared the current regime illegal and the current regulation expires next June which would lead to chaos if nothing is put in its place.
The Commission has to think of some way of buying off opposition without rendering the whole reform pointless. The opposing states are calling for smaller price cuts over a longer period with more compensation and it is difficult to see how this can be squared with the WTO judgement or the EU budget.
It might be possible to include the option of partial decoupling for states such as Italy who feel they are worst hit by the price reduction, although it is questionable whether keeping small Italian sugar producers in business is compatible with the spirit of the reform. Certainly national compensation envelopes for sugar producers are still under consideration, but the sweetener would have to be significant.
A further complicating factor is that the opposition countries are suggesting that cuts should be applied initially just to regions with a surplus of production. If one interprets that as countries with B quotas, leading sugar producers would be hit, notably France and Germany where up to 20 per cent of overall production quotas are B quotas.
So this is all about winners and losers rather than a rational reform strategy that would be helpful for the EU as a whole. As June approaches, no doubt some sort of reform, with more side payments, will be devised.
Bulgaria, Romania accession in trouble
Preparations for integration into the CAP remain 'areas of serious concern' for both Bulgaria and Romania just fourteen months away from their planned accession to the EU. To those who say cynically 'we have been here before', noting that outstanding problems when ten member states joined were glossed over, two points need to be borne in mind:
1. The EU is a much less confident and ferbile state following the effective failure of the Constitution
2. The problems with Bulgaria and Romania are more serious than those in the earlier wave of East European entrants.
Food safety is a major area of concern, with the Commission noting deficiencies in both countries in terms of animal disease control and regulations relating to BSE. Romania has made a little more progress in some areas, but both countries have failed to make progress in setting up an Integrated Administration and Control System.
The tone of the Commission report suggests that the warnings issued may be more than the usual routine pleas to get a move on. The situation is to be reviewed in April/May of next year when the postponement of accession by one year may be recommended.
1. The EU is a much less confident and ferbile state following the effective failure of the Constitution
2. The problems with Bulgaria and Romania are more serious than those in the earlier wave of East European entrants.
Food safety is a major area of concern, with the Commission noting deficiencies in both countries in terms of animal disease control and regulations relating to BSE. Romania has made a little more progress in some areas, but both countries have failed to make progress in setting up an Integrated Administration and Control System.
The tone of the Commission report suggests that the warnings issued may be more than the usual routine pleas to get a move on. The situation is to be reviewed in April/May of next year when the postponement of accession by one year may be recommended.
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