Some of Britain's wealthiest aristocrats would be hit by a plan to revive caps on farm subsidies, a proposal fought off by Britain and Germany in 2002. However, farm commissioner Mariann Fischer Boel is proposing to revive the plan next year.
Farmsubsidy.org, a group that monitors CAP payments, calculated that the Commission's original proposal for a €300,000 (£207,000) cap would have hit 1,880 farms in the old EU 15. 1,430 were actually in Germany, many of them former collective farms in East Germany. There were 330 farms in Britain and just 30 in France. British landowners that would be hit include the Duke of Westminster and Duke of Marlborough.
The British government hit back at the proposal, claiming that blue blooded gentry were exponents of modern, large-scale efficient agriculture. A Defra spokesman said that the main objective of CAP reform was to make the EU more competitive in world agricultural markets. 'To achieve that it needs to reward farmers who are the most efficient', he said. 'There is no point in CAP subsidies propping up a failing market.'
Others would argue that the CAP is not there to help farms that are capable of being internationally competitive without large subsidies, but rather to promote rural development and help more marginal, peripheral farmers survive. One solution might be to taper subsidies above the €300,000 level.
In any case the policy might be difficult to implement. The legal definition of a 'farm' is far from clear. Jack Thurston of farmsubsidy.org warned that large farms might simply split up ownership to get round a cap.
Wednesday, June 07, 2006
Sunday, May 28, 2006
Prices rise as demand for food for fuel grows
Earlier this week I gave evidence to an informal session of the House of Commons Environment, Food and Rural Affairs Committee. One issue that was raised was likely future trends in food prices, particularly after a further reform of the CAP.
However, long before that happens, mounting competition between fuel and food could drive up the cost of food. It would be a nasty shock for western consumers who have been used to falling real food prices for a long time, but the real hit would be on poorer people living in developing countries.
The US, the world's largest exporter of corn (maize) will convert as much or more of the grain into ethanol next year than it will sell abroad according to the United States Department of Agriculture. As petrol (gas) prices climb, farmers are diverting more of their harvest towards producing fuel rather than food or feedstock for animals.
Prices of corn have risen by close to 20 per cent as world grain stocks have fallen to their lowest level since the early 1970s. There has also been a substantial impact on world sugar prices which have doubled over the past year to a 25-year high. About 10 per cent of world sugar output is now used to produce ethanol. The figure is just 3 per cent for corn but it is rising fast.
Good world harvests over the past few years have concealed the impact of rising demand for ethanol. US energy legislation requires ethanol production to increase to 7.5bn gallons by 2012, requiring about 68 million tonnes of grain, more than the total grain harvest of Canada. Keith Colins, chief economist at USDA, noted, 'We are embarking on a profound change in our agricultural economy.'
However, long before that happens, mounting competition between fuel and food could drive up the cost of food. It would be a nasty shock for western consumers who have been used to falling real food prices for a long time, but the real hit would be on poorer people living in developing countries.
The US, the world's largest exporter of corn (maize) will convert as much or more of the grain into ethanol next year than it will sell abroad according to the United States Department of Agriculture. As petrol (gas) prices climb, farmers are diverting more of their harvest towards producing fuel rather than food or feedstock for animals.
Prices of corn have risen by close to 20 per cent as world grain stocks have fallen to their lowest level since the early 1970s. There has also been a substantial impact on world sugar prices which have doubled over the past year to a 25-year high. About 10 per cent of world sugar output is now used to produce ethanol. The figure is just 3 per cent for corn but it is rising fast.
Good world harvests over the past few years have concealed the impact of rising demand for ethanol. US energy legislation requires ethanol production to increase to 7.5bn gallons by 2012, requiring about 68 million tonnes of grain, more than the total grain harvest of Canada. Keith Colins, chief economist at USDA, noted, 'We are embarking on a profound change in our agricultural economy.'
Thursday, May 25, 2006
Milk quota rules may face court challenge
Given that there's an internal market, it's always been a mystery why milk quota can't be traded across national borders (although some member states restrict trading within their own borders). Some farmers don't have enough quota, others have quota they would like to sell at a decent price and use the capital for other activities. Above all, trading quota would prevent the structure of the dairy industry in the EU ossifying in a way that made it even less internationally competitive than it is already.
Now the milk quota rules may be subject to a case in the European Court of Justice based on the principle of the free movement and trade of people, goods and services across EU borders. In February British milk quota trader Ian Potter managed to transfer several million litres of quota from Britain to Italy. Italy is only 56 per cent self-sufficient in milk production and the high price of quota is forcing dairy farmers out of business. The British farmers got more than they would have done in the depressed British market.
Potter was encouraged in this course of action by the sale of 200,000 litres of quota from Hungary to Italy last year. Following the signing of the quota transfer contracts in the Potter deal, forms were lodged with the Italian authorities and the English Rural Payments Agency. The RPA duly rejected the transfers, but the Italian authorities were less definite, saying that they did not believe that the transfer requests that were being used quite conformed to the current EU law.
While the self-styled Italian Milk Warriors wait for their day in court, the Italian authorities appear to be prepared to recognise the transfers for the time being and will not seek to collect superlevy from the fifteen Italian farms involved.
Now the milk quota rules may be subject to a case in the European Court of Justice based on the principle of the free movement and trade of people, goods and services across EU borders. In February British milk quota trader Ian Potter managed to transfer several million litres of quota from Britain to Italy. Italy is only 56 per cent self-sufficient in milk production and the high price of quota is forcing dairy farmers out of business. The British farmers got more than they would have done in the depressed British market.
Potter was encouraged in this course of action by the sale of 200,000 litres of quota from Hungary to Italy last year. Following the signing of the quota transfer contracts in the Potter deal, forms were lodged with the Italian authorities and the English Rural Payments Agency. The RPA duly rejected the transfers, but the Italian authorities were less definite, saying that they did not believe that the transfer requests that were being used quite conformed to the current EU law.
While the self-styled Italian Milk Warriors wait for their day in court, the Italian authorities appear to be prepared to recognise the transfers for the time being and will not seek to collect superlevy from the fifteen Italian farms involved.
Sunday, May 21, 2006
EU may give ground on tariffs in Doha Round
The EU has indicated that it may give further ground on the crucial issue of tariffs in the Doha Round of trade negotiations which are at increasing risk of collapsing altogether. However, by doing so, they have encountered resistance from some member states, while American sources think that the likely offer is insufficient. Hence the EU finds itself caught between a rock and a hard place.
The EU's current offer is to cut farm tariffs by an average of 39 per cent, an offer substantially diluted by its insistence that 8 per cent of tariff lines should be designated as sensitive and hence exempted from the cuts. The G20 group of emerging countries led by Brazil has asked for a 54 per cent overall cut, while the US is holding out for 66 per cent.
Press reports in Brussels suggest that the EU might increase its average cut to around 50 per cent. A spokesman for EU trade commissioner Peter Mandelson said that a 54 per cent cut was out of the question, but did not deny the possibility of an offer in the region of 50 per cent. There has, however, been no indication of a reduction in the percentage of tariff lines to be designated as sensitive.
The EU is also insisting on a quid pro quo, in particular a much lower ceiling for industrial good tariffs than the 30 per cent proposed by India and Brazil. The EU and US have previously asked for 15 per cent, but may be prepared to raise that figure by a few percentage points.
However, France has made it clear that it does not want further reductions in farm tariffs or subsidies without substantial concessions elsewhere. Moreover, a spokesman for the Austrian agriculture ministry (Austria is the current president) declared that 'Member states would be very surprised should there be a new EU offer on the table. A majority of member states have grave concerns.'
The office of the USTR confirmed that the EU proposal would fall well short of American demands. The US view that the EU should agree cuts of between 54 and 66 per cent and designate just 1 per cent of tariff lines as sensitive. It is this latter issue that is the difficult one as the EU could make quite substantial cuts in high tariffs and still maintain effective protection. Charles Grassley, the Iowa senator who chairs the finance committee which has lead responsibility for trade policy in the Senate, has stated, 'If Plan B is a minimalist approach, then don't bring Plan B to me.'
There's a long way to go and time is slipping away.
The EU's current offer is to cut farm tariffs by an average of 39 per cent, an offer substantially diluted by its insistence that 8 per cent of tariff lines should be designated as sensitive and hence exempted from the cuts. The G20 group of emerging countries led by Brazil has asked for a 54 per cent overall cut, while the US is holding out for 66 per cent.
Press reports in Brussels suggest that the EU might increase its average cut to around 50 per cent. A spokesman for EU trade commissioner Peter Mandelson said that a 54 per cent cut was out of the question, but did not deny the possibility of an offer in the region of 50 per cent. There has, however, been no indication of a reduction in the percentage of tariff lines to be designated as sensitive.
The EU is also insisting on a quid pro quo, in particular a much lower ceiling for industrial good tariffs than the 30 per cent proposed by India and Brazil. The EU and US have previously asked for 15 per cent, but may be prepared to raise that figure by a few percentage points.
However, France has made it clear that it does not want further reductions in farm tariffs or subsidies without substantial concessions elsewhere. Moreover, a spokesman for the Austrian agriculture ministry (Austria is the current president) declared that 'Member states would be very surprised should there be a new EU offer on the table. A majority of member states have grave concerns.'
The office of the USTR confirmed that the EU proposal would fall well short of American demands. The US view that the EU should agree cuts of between 54 and 66 per cent and designate just 1 per cent of tariff lines as sensitive. It is this latter issue that is the difficult one as the EU could make quite substantial cuts in high tariffs and still maintain effective protection. Charles Grassley, the Iowa senator who chairs the finance committee which has lead responsibility for trade policy in the Senate, has stated, 'If Plan B is a minimalist approach, then don't bring Plan B to me.'
There's a long way to go and time is slipping away.
Saturday, May 06, 2006
Grain mountain problem grows
The arable sector was the first commodity regime within the CAP to be reformed and it is often assumed that all the major problems are behind us, particularly with the abolition of rye intervention in the Fischler reforms, a product often grown just to sell into intervention.
Unfortunately, not all the problems have been solved. Support prices have been cut by around 45 per cent, but intervention stocks at the end of the last buying season were at their highest level for twelve years, 15,482 million tonnes and they look likely to rise again this year.
Much of current grain production in Eastern Europe is being grown with intervention in mind and doing anything about it is seen as a political hot potato as there is a reluctance to cause trouble with the new member states who are already feeling sore about other issues. Hungary has invested considerable sums of money in increasing grain storage capacity in anticipation of the increase in intervention stocks.
Franz Fischler was the first major figure to question whether one can really have a common policy in such a diverse agricultural region as Europe. A recent study for the Commission by consultants LMC argues that a single intervention price is a barrier to the flow of cereal from surplus regions, particularly landlocked regions like East-Central Europe, to the main grain deficit area, the Iberian peninsula.
The report also criticises set aside (the rate is 10 per cent in western Europe) as a blunt policy instrument which mainly benefits the United States. Set aside land is generally 30 per cent less productive than land not set aside (our local farmer has chosen his worst drained and smallest field) and producers in East-Central Europe are exempt until at least 2009. The US goverment gains because set aside pushes up world prices and hence cuts their outlays on deficiency payments.
The report has some sensible but radical solutions such as having only one intervention price based on common wheat, getting rid of set aside, limiting support payments to the grain barons and purchasing only breadmaking wheat and then just in Spain and Portugal.
Unfortunately these ideas would upset the powerful big grain producers in the EU and are hence unlikely to be adopted, so the grain mountain will just keep on growing.
Unfortunately, not all the problems have been solved. Support prices have been cut by around 45 per cent, but intervention stocks at the end of the last buying season were at their highest level for twelve years, 15,482 million tonnes and they look likely to rise again this year.
Much of current grain production in Eastern Europe is being grown with intervention in mind and doing anything about it is seen as a political hot potato as there is a reluctance to cause trouble with the new member states who are already feeling sore about other issues. Hungary has invested considerable sums of money in increasing grain storage capacity in anticipation of the increase in intervention stocks.
Franz Fischler was the first major figure to question whether one can really have a common policy in such a diverse agricultural region as Europe. A recent study for the Commission by consultants LMC argues that a single intervention price is a barrier to the flow of cereal from surplus regions, particularly landlocked regions like East-Central Europe, to the main grain deficit area, the Iberian peninsula.
The report also criticises set aside (the rate is 10 per cent in western Europe) as a blunt policy instrument which mainly benefits the United States. Set aside land is generally 30 per cent less productive than land not set aside (our local farmer has chosen his worst drained and smallest field) and producers in East-Central Europe are exempt until at least 2009. The US goverment gains because set aside pushes up world prices and hence cuts their outlays on deficiency payments.
The report has some sensible but radical solutions such as having only one intervention price based on common wheat, getting rid of set aside, limiting support payments to the grain barons and purchasing only breadmaking wheat and then just in Spain and Portugal.
Unfortunately these ideas would upset the powerful big grain producers in the EU and are hence unlikely to be adopted, so the grain mountain will just keep on growing.
EU isolated on sensitive products
The EU is looking increasingly isolated over the question of 'sensitive' products in the stuttering Doha Round, even though it may be prepared to give ground on its insistence that eight per cent of product lines should be deemed 'sensitive' and given special levels of protection. However, it is now the only major player insisting that tariff quota increases for such products be calculated as a percentage of imports rather than a percentage of domestic consumption.
The World Bank has pointed out that the designation of only 2 per cent of products in developed countries and 4 per cent in developing countries as sensitive would 'virtually eliminate the poverty impacts of a Doha agreement.'
Of course, what 'sensitive' means is 'politically sensitive in the EU and in particular in key member states'. Sugar is a very likely candidate for this treatment. However, the EU confectionery industry is arguing against further protection, pointing out that it is being undermined by imports of cheap confectionery from Asia. They argue that if sugar became a sensitive product it could cost them €1.2bn a year which would go into the pockets of the sugar industry.
As it so happens, the world price sugar is increasing anyway because of rising oil prices and the consequent diversion of greater quantities of sugar, in particular in major producer Brazil, for ethanol production.
The World Bank has pointed out that the designation of only 2 per cent of products in developed countries and 4 per cent in developing countries as sensitive would 'virtually eliminate the poverty impacts of a Doha agreement.'
Of course, what 'sensitive' means is 'politically sensitive in the EU and in particular in key member states'. Sugar is a very likely candidate for this treatment. However, the EU confectionery industry is arguing against further protection, pointing out that it is being undermined by imports of cheap confectionery from Asia. They argue that if sugar became a sensitive product it could cost them €1.2bn a year which would go into the pockets of the sugar industry.
As it so happens, the world price sugar is increasing anyway because of rising oil prices and the consequent diversion of greater quantities of sugar, in particular in major producer Brazil, for ethanol production.
Tuesday, April 25, 2006
Threat to farming in East Anglia
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.
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.
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 .
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