The speech by Defra secretary of state Caroline Spelman has clearly hit a raw nerve with farm commissioner Dacian Ciolos: Ciolos
In essence what Ciolos is saying is that this was a speech made for domestic consumption, but it will cut no ice in Europe. Depressingly, he is probably right, but the secretary of state was still right to set out her stall. She may be able to have some impact on the details of any deal, particularly when the budget dimension is brought into play.
Once again food shortages and volatile prices are in the news. If nothing else, this is a case for doing something about the high tariff barriers which surround the EU in the food area, particularly on so-called 'sensitive' products. If developing countries could get more access to developed markets, they would be incentivised to move towards more commercial agricultures which would feed more people both at home and abroad.
There are, of course, a lot of complex issues here and there are undoubtedly some areas of the world where improving semi-subsistence agriculture is the best way forward. But no one is going to become genuinely prosperous that way.
Friday, January 14, 2011
Friday, January 07, 2011
The big politics behind the CAP deal
Why was Dave Cameron willing to do a deal with France and Germany on CAP subsidies given that he is genuinely an Eurosceptic? This article (which was easy to miss as it came out on Boxing Day) explains the big politics behind the deal and opens with some amusing remarks about CAP subsidies: CAP deal
Wednesday, January 05, 2011
Call for fundamental CAP reform
In a major speech at the Oxford conference, secretary of state Caroline Spelman has called for a more ambitious approach to CAP reform and a fundamental change in the nature of the CAP: Spelman
She's talking the talk like former secretaries of state, but walking the walk is always more difficult. Only in very special circumstances has it been possible to build anything like a winning coalition for reform. Current thinking reinforces the trend towards protectionism she rightly criticises.
She's talking the talk like former secretaries of state, but walking the walk is always more difficult. Only in very special circumstances has it been possible to build anything like a winning coalition for reform. Current thinking reinforces the trend towards protectionism she rightly criticises.
Monday, December 20, 2010
Has a grand deal been done?
The future of the Common Agricultural Policy depends on what is decided about the EU budget. And the broad shape of the EU budget is usually decided in grand deals between the leading countries of Europe. Indeed, in the past, the future of the CAP has effectively been decided over lunch between French and German ministers. However, in a larger EU, that is not as simple, although the Franco-German axis is still very strong.
However, this time it looks as if a grand deal may have been done between Britain, France and Germany. David Cameron has been quite an effective negotiator in Europe and for understandable reasons he wants the EU budget frozen in real terms. It's very difficult to inflict misery at home when there is apparent profligacy in Brussels (a lesson that the European Parliament seems slow to learn).
Britain is denying it, but essentially what seems to have been agreed is that Britain's budget rebate, won by Mrs Thatcher, will stay intact although the original justification for it has been undermined. In return France will be able to keep the CAP more or less unscathed. Germany has already sold the pass, as it usually does, by signing up to a joint declaration with France calling for a strong CAP.
Needless to say, the accession states, and in particular Poland, are furious. They want the budget to be maintained and subsidies to their farmers brought in line with the rest of Europe. To some extent that could be achieved within the current budget envelope, although farmers in other member states would lose out.
There is a lot of hard negotiation to come, but it may be, despite denials, that the basic outlines of a deal have been agreed. If that is so, it will be a disappointment, but not a surprise, for the CAP reform camp.
However, this time it looks as if a grand deal may have been done between Britain, France and Germany. David Cameron has been quite an effective negotiator in Europe and for understandable reasons he wants the EU budget frozen in real terms. It's very difficult to inflict misery at home when there is apparent profligacy in Brussels (a lesson that the European Parliament seems slow to learn).
Britain is denying it, but essentially what seems to have been agreed is that Britain's budget rebate, won by Mrs Thatcher, will stay intact although the original justification for it has been undermined. In return France will be able to keep the CAP more or less unscathed. Germany has already sold the pass, as it usually does, by signing up to a joint declaration with France calling for a strong CAP.
Needless to say, the accession states, and in particular Poland, are furious. They want the budget to be maintained and subsidies to their farmers brought in line with the rest of Europe. To some extent that could be achieved within the current budget envelope, although farmers in other member states would lose out.
There is a lot of hard negotiation to come, but it may be, despite denials, that the basic outlines of a deal have been agreed. If that is so, it will be a disappointment, but not a surprise, for the CAP reform camp.
Wednesday, December 15, 2010
Alliances and stances over CAP reform
The process of CAP reform is always marked by informal alignments or alliances between member states and there seems to be something of a rapprochement between Britain and Poland: Poland
Both countries support a shift of spending from pillar one (direct payments to farmers) to pillar two (more public goods oriented). However, the UK wants pillar one to be phased out, while Poland wants an equal split between the two pillars.
The two countries agree in principle that subsidies for farmers in older member states and the accession states must be equalised, a key agenda item for East European countries. However, Britain doubts whether it will be possible to go as far as a flat rate.
However, in a different alignment, Austria is backing France and Germany in calls for a strong farm budget, but opposes Warsaw's idea of a fixed rate of subsidies. France is confident that its stance is gaining broad support and that the CAP budget can be retained at around the current level: France
Both countries support a shift of spending from pillar one (direct payments to farmers) to pillar two (more public goods oriented). However, the UK wants pillar one to be phased out, while Poland wants an equal split between the two pillars.
The two countries agree in principle that subsidies for farmers in older member states and the accession states must be equalised, a key agenda item for East European countries. However, Britain doubts whether it will be possible to go as far as a flat rate.
However, in a different alignment, Austria is backing France and Germany in calls for a strong farm budget, but opposes Warsaw's idea of a fixed rate of subsidies. France is confident that its stance is gaining broad support and that the CAP budget can be retained at around the current level: France
Monday, December 13, 2010
Carry on intervening
Conservative MEP and spokesman for agriculture Richard Ashworth has called for the return of intervention purchasing in the CAP in the interests of food security. He told a conference at the Royal Agricultural College: 'It's absolutely vital to have some sort of instrument through which you can intervene in the market - a tool or lever the Commission can use in times of crisis'. The only 'tried and tested' way to do this was through intervention.
Historically, intervention purchasing was a highly distorting policy instrument which was why there was a shift of guarantee expenditure to Single Farm Payments. It gave farmers a risk free market for their produce at a price which generally exceeded the marginal cost of production. Hence, farmers were incentivised to over produce, depressing the market price. It also encouraged more intensive forms of farming which inflicted environmental damage.
I suppose the argument could be that food security demands that we produce more in Europe. Leaving aside the implications for other parts of the world that would like to export to Europe, intervention buying is a crude and imperfect mechanism to achieve this objective.
There is a case for intervention in times of crisis to prevent the market for a particular commodity collapsing completely with damaging effects on production in the longer term. But there is also a risk of temporary help in crisis being converted to a permanent subsidy. All such interventions must be for a clearly defined time period and limited in scope.
Interestingly, Mr Ashworth did admit that a recent analysis showed that only 18 per cent of CAP spending delivered value in the areas of jobs, growth and competitiveness. This would make the current CAP share of the EU budget difficult to defend and he thought it might well drop to around 37.5 per cent.
Historically, intervention purchasing was a highly distorting policy instrument which was why there was a shift of guarantee expenditure to Single Farm Payments. It gave farmers a risk free market for their produce at a price which generally exceeded the marginal cost of production. Hence, farmers were incentivised to over produce, depressing the market price. It also encouraged more intensive forms of farming which inflicted environmental damage.
I suppose the argument could be that food security demands that we produce more in Europe. Leaving aside the implications for other parts of the world that would like to export to Europe, intervention buying is a crude and imperfect mechanism to achieve this objective.
There is a case for intervention in times of crisis to prevent the market for a particular commodity collapsing completely with damaging effects on production in the longer term. But there is also a risk of temporary help in crisis being converted to a permanent subsidy. All such interventions must be for a clearly defined time period and limited in scope.
Interestingly, Mr Ashworth did admit that a recent analysis showed that only 18 per cent of CAP spending delivered value in the areas of jobs, growth and competitiveness. This would make the current CAP share of the EU budget difficult to defend and he thought it might well drop to around 37.5 per cent.
Why there is a case for county farms
The demographic profile of farmers in Europe, not least in Britain, is an ageing one. To some extent the figures may be misleading as younger members of a family may be involved in the farm enterprise, but as junior partners or salaried employees. Tensions between the generations are a recurrent theme in fictional programmes like The Archers. They happen in real life on farms, too.
Farming does need an influx of younger people who are not only more energetic but are open to new ideas and new ways of farming and have a recognition of the importance of dialogue with the consumer. Some older farmers have modified their views and taken new initiatives, but they are often more resitance to change and accustomed to a world in the task was maximising production with generous assistance from the taxpayer.
It is, however, very difficult to get into farming except through inheritance. Of course, you can be a farm manager and many go down that route. But ownership or even tenancy is more difficult. The entry price in terms of start up capital is too high a barrier for many.
That is why county farms have played an important role. They were originally provide for under the 1908 Smallholdings and Allotment Acts, although most of them were created between the two world wars to provide smallholding opportunities for landless agricultural workers and soldiers returning home from the war.
They are rented out by county councils and sometimes it is possible to progress from a smaller holding to a larger one and then eventually to your own farm. Of course, many farmers stay on the county council farm.
Many of them are not really large enough to support a family. Most of the county estates are made up of farms of around 100 acres, too small to compete with larger farms, but arguably too large for smallholding type enterprises serve the local market. In practice the tenant often relies on the farmer's partner (usually a woman) obtaining paid employment as, for example, a teacher or a nurse.
This week the full extent of the cuts being made to local government budgets will be made known, but it is evident that local authorities are going to taken a big, front loaded hit. Some county councils have already sold off their farms, e.g., Oxfordshire, while others such as Buckinghamshire and Somerset look like going down that route.
It's a way of paying down debts, but it potentially harms the structure of farming. When asked about the sale of county farms the leader of Somerset County Council argued, 'It's not our core business.' Maybe it isn't, but it is still arguably worthwhile business for rural county councils.
The case for these farms is made by Simon Fairlie in a special issue on Land in the latest edition of the excellent Food Ethics journal published by the Food Ethics Council. See: Food Ethics
I'm not sure I agree with Fairlie's argument that there is an opportunity for the revival of smallholdings to meet demand for local food. To me this seems like a reversion to the nostalgic idea of spade husbandry advocated by some Chartists in the early 19th century.
Semi-subsistence farming is not the way ahead for the Global South or developed countries, but there is a case for providing opportunities for motivated and innovative farmers to pursue farming as a career. The case for government intervention can be made on food security grounds.
Farming does need an influx of younger people who are not only more energetic but are open to new ideas and new ways of farming and have a recognition of the importance of dialogue with the consumer. Some older farmers have modified their views and taken new initiatives, but they are often more resitance to change and accustomed to a world in the task was maximising production with generous assistance from the taxpayer.
It is, however, very difficult to get into farming except through inheritance. Of course, you can be a farm manager and many go down that route. But ownership or even tenancy is more difficult. The entry price in terms of start up capital is too high a barrier for many.
That is why county farms have played an important role. They were originally provide for under the 1908 Smallholdings and Allotment Acts, although most of them were created between the two world wars to provide smallholding opportunities for landless agricultural workers and soldiers returning home from the war.
They are rented out by county councils and sometimes it is possible to progress from a smaller holding to a larger one and then eventually to your own farm. Of course, many farmers stay on the county council farm.
Many of them are not really large enough to support a family. Most of the county estates are made up of farms of around 100 acres, too small to compete with larger farms, but arguably too large for smallholding type enterprises serve the local market. In practice the tenant often relies on the farmer's partner (usually a woman) obtaining paid employment as, for example, a teacher or a nurse.
This week the full extent of the cuts being made to local government budgets will be made known, but it is evident that local authorities are going to taken a big, front loaded hit. Some county councils have already sold off their farms, e.g., Oxfordshire, while others such as Buckinghamshire and Somerset look like going down that route.
It's a way of paying down debts, but it potentially harms the structure of farming. When asked about the sale of county farms the leader of Somerset County Council argued, 'It's not our core business.' Maybe it isn't, but it is still arguably worthwhile business for rural county councils.
The case for these farms is made by Simon Fairlie in a special issue on Land in the latest edition of the excellent Food Ethics journal published by the Food Ethics Council. See: Food Ethics
I'm not sure I agree with Fairlie's argument that there is an opportunity for the revival of smallholdings to meet demand for local food. To me this seems like a reversion to the nostalgic idea of spade husbandry advocated by some Chartists in the early 19th century.
Semi-subsistence farming is not the way ahead for the Global South or developed countries, but there is a case for providing opportunities for motivated and innovative farmers to pursue farming as a career. The case for government intervention can be made on food security grounds.
Monday, November 29, 2010
The Commission stance
The final version of the Commission Communication on the CAP does not differ that much from the original leaked version. Some of the language has been watered down a bit, e.g., on the 'capping' of payments to large farms. Probably it is in there in the first place to give something that Britain and Germany will have to use up political capital on. It's an idea that has been around a long time, but is flawed in all sorts of ways.
The paper is a typical Commission compromise which pleases no one: reformers, farmers or environmentalists. However, no doubt the Commission would say that it offers a basis for an eventual settlement. In other words, EU politics is all about messy compromise and not about good policy. It's a realistic stance, but not a very politically attractive one if one hopes for visionary thinking from the EU (if anyone still does).
At the end of the day it is the discussions on the budget that will determine what sort of CAP we will have after 2013. It will probably somewhat greener; fairer in the distribution of income between member states; but still reliant on subsidy and protection.
The paper is a typical Commission compromise which pleases no one: reformers, farmers or environmentalists. However, no doubt the Commission would say that it offers a basis for an eventual settlement. In other words, EU politics is all about messy compromise and not about good policy. It's a realistic stance, but not a very politically attractive one if one hopes for visionary thinking from the EU (if anyone still does).
At the end of the day it is the discussions on the budget that will determine what sort of CAP we will have after 2013. It will probably somewhat greener; fairer in the distribution of income between member states; but still reliant on subsidy and protection.
Thursday, November 18, 2010
NFU criticises Commission paper
The European Commission has now issued its Communication on the future of the CAP and the NFU has made a critical response. It argues that the Commisson's proposals may entrench inefficiency rather than boosting competitiveness. It thinks that the Commission may have tried to please too many audiences, possibly leading to a rather incoherent document:
'Today’s future of CAP Communication has identified the challenges that European agriculture and the EU Common Agricultural Policy face over the next ten years. However the measures proposed in the EU Commission’s document are unlikely to help farmers rise to these challenges, the NFU has argued today.
The paper, which sets out the direction of the next reform of the CAP due to take place after 2013, describes the context for the next reform and argues that European agriculture must address concerns about food security, the environment, climate change and the economic viability of fragile areas. While these challenges are accurate, the NFU believes that the measures suggested in the paper to considerably reshape direct payments may harm the competitiveness of farming, as well as undermine efforts to simplify the CAP and make it more comprehensible to taxpayers.
NFU President Peter Kendall said that while these ideas come at a very early stage of the reform process it was difficult to take a firm judgment on the document.
“While today’s paper is not without good intentions or ideas, it does not appear to present the best approach to reform for the post 2013 period,” said Mr Kendall. “The proposals outlined in the paper are understandably general and will require considerable clarification.
“The Communication does provide a fair assessment of the economic, environmental and societal challenges facing farming and I am pleased that it recognises the importance of Europe to global food security and of farming to the economy, society and the environment. I am also pleased to see that the Commission supports the maintenance of a common European approach to agricultural policy.
“However when we set out our policy on the CAP in May we argued that any reform must be driven by core principles; commonality, market orientation, competitiveness and simplicity. It is against these principles that the proposals should be measured. When I look at ideas such as a tiered approach to payments, capping of support with labour adjustment and a significant flexibility measure, I tend to see a recipe for complexity, distortion and a risk of undermining efforts to help farmers become less reliant on support.
“This is the key long-term strategic challenge; to get farmers to a place where they can depend on the market for their income.
“We also must recognise the budgetary and political pressure the CAP will be under - and use the resources wisely. My worry is that the Commission’s proposals may actually entrench support and inefficiency in European farming rather than boost competitiveness.
“I believe that the Commission should build on the progressive direction of previous reforms, developing the two-pillar structure for the CAP and ensuring that each instrument has a clear objective – putting competitive agriculture at its heart.
“The Communication rightly dwells on the future of direct payments which, as the largest component of CAP spending, are a focal point for the next reform. However the complicated ideas from today confuse the role of direct support which should be about underpinning the economics of farm production and helping farmers deal with higher costs and volatility rather than delivering environmental goods. This is the role of rural development policies and I’m really surprised to see the Commission omit any reference to agri-environment schemes.
“I fear that the Commission has fallen into the trap of trying to please as many people as possible, in order to justify the money it spends, rather than adopting a clear direction for European agriculture. It is rare that a clear policy pleases all of the people all of the time but I fear that what we have here will end up as a confused proposal that suits no-one.”
This blog will provide further analysis and comment in the coming days, but at first sight the paper does not seem to differ greatly from the draft version leaked last month.
'Today’s future of CAP Communication has identified the challenges that European agriculture and the EU Common Agricultural Policy face over the next ten years. However the measures proposed in the EU Commission’s document are unlikely to help farmers rise to these challenges, the NFU has argued today.
The paper, which sets out the direction of the next reform of the CAP due to take place after 2013, describes the context for the next reform and argues that European agriculture must address concerns about food security, the environment, climate change and the economic viability of fragile areas. While these challenges are accurate, the NFU believes that the measures suggested in the paper to considerably reshape direct payments may harm the competitiveness of farming, as well as undermine efforts to simplify the CAP and make it more comprehensible to taxpayers.
NFU President Peter Kendall said that while these ideas come at a very early stage of the reform process it was difficult to take a firm judgment on the document.
“While today’s paper is not without good intentions or ideas, it does not appear to present the best approach to reform for the post 2013 period,” said Mr Kendall. “The proposals outlined in the paper are understandably general and will require considerable clarification.
“The Communication does provide a fair assessment of the economic, environmental and societal challenges facing farming and I am pleased that it recognises the importance of Europe to global food security and of farming to the economy, society and the environment. I am also pleased to see that the Commission supports the maintenance of a common European approach to agricultural policy.
“However when we set out our policy on the CAP in May we argued that any reform must be driven by core principles; commonality, market orientation, competitiveness and simplicity. It is against these principles that the proposals should be measured. When I look at ideas such as a tiered approach to payments, capping of support with labour adjustment and a significant flexibility measure, I tend to see a recipe for complexity, distortion and a risk of undermining efforts to help farmers become less reliant on support.
“This is the key long-term strategic challenge; to get farmers to a place where they can depend on the market for their income.
“We also must recognise the budgetary and political pressure the CAP will be under - and use the resources wisely. My worry is that the Commission’s proposals may actually entrench support and inefficiency in European farming rather than boost competitiveness.
“I believe that the Commission should build on the progressive direction of previous reforms, developing the two-pillar structure for the CAP and ensuring that each instrument has a clear objective – putting competitive agriculture at its heart.
“The Communication rightly dwells on the future of direct payments which, as the largest component of CAP spending, are a focal point for the next reform. However the complicated ideas from today confuse the role of direct support which should be about underpinning the economics of farm production and helping farmers deal with higher costs and volatility rather than delivering environmental goods. This is the role of rural development policies and I’m really surprised to see the Commission omit any reference to agri-environment schemes.
“I fear that the Commission has fallen into the trap of trying to please as many people as possible, in order to justify the money it spends, rather than adopting a clear direction for European agriculture. It is rare that a clear policy pleases all of the people all of the time but I fear that what we have here will end up as a confused proposal that suits no-one.”
This blog will provide further analysis and comment in the coming days, but at first sight the paper does not seem to differ greatly from the draft version leaked last month.
Monday, November 15, 2010
Greece criticised for 'systematic' cheating
The EU Court of Auditors has criticised Greece for 'systematic' cheating. Athens was criticised for overpaying farmers by €866m (£747m) over several years, including submitting false claims for pasture land subsidies when aerial photographs 'clearly show a significant density of trees and rocks.'
Although aerial photo checks on CAP claims became mandatory in 2009, the system in Greece was not still not fully operational in December 2009. Spot checks revealed that money had been paid out for land with 'different locations, different uses, different shape and perimeter' from thosee claimed by Greek farmers.
The auditors found that 'In Greece the bulk of administrative cross checks ... is carried out under a procedure that leaves no audit trail.' They found that Greece systematically calculated single farm payments incorectly.
Specific sums to be recovered from Greece include:
•€ 210.9 million charged to Greece for poor LPIS-GIS and deficiencies in on-the spot controls in respect of claim year 2006 for area-aids expenditure, including area-based rural development measures;
•€ 54.7 million charged to Greece with regard to dried grapes for reductions in the minimum yield, plot specialisation, ineffective vineyard register and weaknesses in scheme management and control for the financial years 2003-2007;
•€ 50.16 million charged to Greece for failure to reduce aid payments for non respect of veterinary requirements regarding the maintenance of sheep registers, for deficiencies in on-the-spot and administrative checks and for absence of specific risk criteria for Less Favoured Area additional premium controls;
Although aerial photo checks on CAP claims became mandatory in 2009, the system in Greece was not still not fully operational in December 2009. Spot checks revealed that money had been paid out for land with 'different locations, different uses, different shape and perimeter' from thosee claimed by Greek farmers.
The auditors found that 'In Greece the bulk of administrative cross checks ... is carried out under a procedure that leaves no audit trail.' They found that Greece systematically calculated single farm payments incorectly.
Specific sums to be recovered from Greece include:
•€ 210.9 million charged to Greece for poor LPIS-GIS and deficiencies in on-the spot controls in respect of claim year 2006 for area-aids expenditure, including area-based rural development measures;
•€ 54.7 million charged to Greece with regard to dried grapes for reductions in the minimum yield, plot specialisation, ineffective vineyard register and weaknesses in scheme management and control for the financial years 2003-2007;
•€ 50.16 million charged to Greece for failure to reduce aid payments for non respect of veterinary requirements regarding the maintenance of sheep registers, for deficiencies in on-the-spot and administrative checks and for absence of specific risk criteria for Less Favoured Area additional premium controls;
Sunday, November 14, 2010
Aristos own a third of all land in England and Wales
Almost a third of all land in England and Wales is still owned by aristocrats who will receive substantial payments from the CAP. Wealthy people and their estates are thought to control about 20 million of the country's 60 million acres.
Research by Country Life found that 36,000 members of the Country Land and Business Association, whose members are mainly individuals and estates, collectively own half of all rural land in England and Wales.
The Forestry Commission is the country's biggest landowner, owning about 2.6m acres. It is followed by the National Trust which has 630,000 acres, while Defence Estates has 593,000 acres. Pension funds collectively control 550,000 acres.
Research by Country Life found that 36,000 members of the Country Land and Business Association, whose members are mainly individuals and estates, collectively own half of all rural land in England and Wales.
The Forestry Commission is the country's biggest landowner, owning about 2.6m acres. It is followed by the National Trust which has 630,000 acres, while Defence Estates has 593,000 acres. Pension funds collectively control 550,000 acres.
Wednesday, November 10, 2010
Blow for farm policy reformers
CAP reformers have used the publication of detailed figures about who gets what under the farm policy to draw attention to the extent to which big companies and large-scale farmers are beneficiaries.
However, the drive for more transparency suffered a setback yesteday after the European Court of Justice ruled that publication of databases listing recipients of agricultural subsidies breached farmers' human rights. The ECJ struck down rules that make it compulsory for member states to identify all recipients of CAP money.
The court sided with German farmers behind the action. They argued that publishing the name, address and details of how much money an individual received on a website did not strike the right balance between promoting transparency and the beneficiary's right to privacy. Governments will no longer be able to list individual recipients of public money, but companies listing funds should still be listed.
Jack Thurston of farmsubsidy.org, who has campaigned for the information to be made readily available, argued that disclosure of information was an important check against fraud and abuse, a perennial problem with the CAP. He commented that the decision went 'against the tide of public opinion, which is for ever more transparency and more accountability.'
However, the drive for more transparency suffered a setback yesteday after the European Court of Justice ruled that publication of databases listing recipients of agricultural subsidies breached farmers' human rights. The ECJ struck down rules that make it compulsory for member states to identify all recipients of CAP money.
The court sided with German farmers behind the action. They argued that publishing the name, address and details of how much money an individual received on a website did not strike the right balance between promoting transparency and the beneficiary's right to privacy. Governments will no longer be able to list individual recipients of public money, but companies listing funds should still be listed.
Jack Thurston of farmsubsidy.org, who has campaigned for the information to be made readily available, argued that disclosure of information was an important check against fraud and abuse, a perennial problem with the CAP. He commented that the decision went 'against the tide of public opinion, which is for ever more transparency and more accountability.'
Wednesday, October 27, 2010
CAP budget may be cut less than expected
Reports are suggesting that the CAP budget may be cut less than expected: Budget
The Commission had at one time been talking of cuts of between 10 and 20 per cent and was seen as a potential ally by reform minded member states. However, these demands appear to have been watered down and a cut of a few billion euros may suffice.
The Commission had at one time been talking of cuts of between 10 and 20 per cent and was seen as a potential ally by reform minded member states. However, these demands appear to have been watered down and a cut of a few billion euros may suffice.
Tuesday, October 19, 2010
Weimar triangle fails to work
Informal groupings of member states have played a key role in the evolution of the CAP at different times. e.g., the 'Aachen five' which tackled agrimonetary questions. Before the publication of the recent Franco-German position paper, it had been suggested that it might take the form of a 'Weimar triangle' of France, Germany and Poland. Indeed, Poland was in talks with France and Germany, but they went ahead and published their joint text before Poland finalised its position.
Now Poland has criticised the Franco-German position paper as an unsuccessful attempt to exert undue pressure on other member states. Polish minister Marek Sawicki described the paper as a 'very conservative one', only signalling slight modifications of the historical criteria for direct payments. It defended the interests of French and German farmers but not of those from other member states.
Frandce and Germany have made it clearer that shifting towards a flat rate payment which would suit accession states is not acceptable to them and a clear red line in the negotiations.
Now Poland has criticised the Franco-German position paper as an unsuccessful attempt to exert undue pressure on other member states. Polish minister Marek Sawicki described the paper as a 'very conservative one', only signalling slight modifications of the historical criteria for direct payments. It defended the interests of French and German farmers but not of those from other member states.
Frandce and Germany have made it clearer that shifting towards a flat rate payment which would suit accession states is not acceptable to them and a clear red line in the negotiations.
Fischler emphasises need for reform
Former EU farm commissioner Franz Ficshler has emphasised the need for continuing reform of the CAP: Fischler
It was Fischler who carried out the most thorough reform of the CAP. But he points out that a strong farm lobby could halt the forward momentum of reform. He also emphasises the need for investment in research and development.
It was Fischler who carried out the most thorough reform of the CAP. But he points out that a strong farm lobby could halt the forward momentum of reform. He also emphasises the need for investment in research and development.
Friday, October 08, 2010
The devil is in the detail
This post looks at some of the more detailed proposals in the leaked draft Commission communication on the future of the CAP.
The Commission believes that the CAP should be continue to be framed around two pillars. The idea of a third pillar focusing on climate change had been floated, but is evidently not being pursued.
The difference between the two pillars is seen as one of payment structure with Pillar 1 made up mainly of annual payments to farmers and Pillar 2 beuing multi-annual in nature. Is this the right distinction? Or should Pillar 1 be about the economics of agriculture production, while Pillar 2 focuses on 'additionality' with a particular emphasis on improving sustainability?
The rejection by commissioner Ciolos of a single flat payment is upheld, but it is not clear how the question of equity between member states will be addressed. This is likely to be one of the most difficult political issues in the negotiations given that there are wide discrepancies between member states. Those who don't get very much at the moment will want a bigger slice of the cake and those who have a big slice will want to hold on to it. The only concrete option presented is moving towards an arrangement whereby farmers in all member states would receive a minimum share of the EU-average level of direct payments (about €250/hectare).
It is proposed that there would be a cap on payments to large farms. This would have an impact on competitiveness, as large farms tend to be more efficient. It would also particularly hit Britain, Germany and the Czech Republic.
What makes it worse is a suggestion to link payments to employment levels. In other words, a farm that was employing labour inefficiently would receive more support. This would certainly undermine competitiveness, but then the document as a whole tends to give lip service to that concept.
The proposals as a whole also increase complexity when there is supposed to be a move towards simplification. They would increase transaction costs for farmers and the already substantial costs of operating the policy.
The Commission believes that the CAP should be continue to be framed around two pillars. The idea of a third pillar focusing on climate change had been floated, but is evidently not being pursued.
The difference between the two pillars is seen as one of payment structure with Pillar 1 made up mainly of annual payments to farmers and Pillar 2 beuing multi-annual in nature. Is this the right distinction? Or should Pillar 1 be about the economics of agriculture production, while Pillar 2 focuses on 'additionality' with a particular emphasis on improving sustainability?
The rejection by commissioner Ciolos of a single flat payment is upheld, but it is not clear how the question of equity between member states will be addressed. This is likely to be one of the most difficult political issues in the negotiations given that there are wide discrepancies between member states. Those who don't get very much at the moment will want a bigger slice of the cake and those who have a big slice will want to hold on to it. The only concrete option presented is moving towards an arrangement whereby farmers in all member states would receive a minimum share of the EU-average level of direct payments (about €250/hectare).
It is proposed that there would be a cap on payments to large farms. This would have an impact on competitiveness, as large farms tend to be more efficient. It would also particularly hit Britain, Germany and the Czech Republic.
What makes it worse is a suggestion to link payments to employment levels. In other words, a farm that was employing labour inefficiently would receive more support. This would certainly undermine competitiveness, but then the document as a whole tends to give lip service to that concept.
The proposals as a whole also increase complexity when there is supposed to be a move towards simplification. They would increase transaction costs for farmers and the already substantial costs of operating the policy.
Thursday, October 07, 2010
CAP reform paper leaked
A draft of the EU Commission's 'Communication' on the future of the CAP after 2013 has been leaked. It is scheduled for publication on 17 November. This post examines the overall objectives and directions for reform. A subsequent post will look at some of the more detailed proposals.
The paper sets out three challenges and objectives for agriculture, two of which are not very surprising: food security, leading to an objective of viable farm production; and environment and climate change, leading to an objective of sustainable management of natural resources. So far so good, although clearly a question remains about whether these are seen as equivalent objectives or there is some kind of hierarchy (and how one resolves tensions between them).
The puzzle is the third objective, territorial balance. It's a bit difficult to work out what means, but it seems to be moving in the direction of making the CAP a social policy. Many would argue that is what it has been all along, but it has never been spelt out as such, leading to all sorts of inefficiencies.
Under this heading, the Commission talks about economic (boosting the rural economy) and social (local traditions and social identity) objectives. There is reference to supporting rural employment (i.e., motherhood and apple pie), promoting diversification and 'allowing for structural diversity in farming systems' which could be a code phrase for tolerating inefficiency.
The whole notion is not easy to grasp and may be honed in the final version of the paper now that this kite has been flown. What seems to be going on here is a (probably mistaken) attempt to mould economic and social objectives into one. It also implies a policy that is more locally-led and flexible in its approach.
What could this lead to is all sorts of special pleading for subsidies of various kinds which satisfied local client groups. It also does not seem to fit to well with declarations about preventing the renationalisation of policy. Indeed, the paper reiterates the case for an EU-led policy rather than a national one.
The paper sets out three broad policy options:
1. Enhanced status quo: adjusting the current instruments and delivering a more equitable distribution direct payments. This is viewed within the Commission as a missed opportunity to make the CAP more legitimate.
2. More 'balanced targeted and sustinable support': a fairly significant adjustment of direct payments, especially 'greening' the first pillar. This would seem to be the Commission's preferred route.
3. Abolish all market and income support and focus delivery on public goods/climate change: essentially the British approach and dismissed pretty much out of hand.
One important dog fails to bark in the nighttime. The paper remains largely silent on the scale of the budget. It is decisions on the budget that will shape the next phase of the CAP.
The paper talks of the need to improve competitiveness, but there are no measures set out to achieve it, indeed some proposals (discussed in a later post) could have a damaging effect. One critic has remarked that, taken as a whole, the document is neither very common nor very agricultural. But nor does it particularly emphasise sustainability.
In other words, it's a bit of a mish mash. Why I am not surprised?
The paper sets out three challenges and objectives for agriculture, two of which are not very surprising: food security, leading to an objective of viable farm production; and environment and climate change, leading to an objective of sustainable management of natural resources. So far so good, although clearly a question remains about whether these are seen as equivalent objectives or there is some kind of hierarchy (and how one resolves tensions between them).
The puzzle is the third objective, territorial balance. It's a bit difficult to work out what means, but it seems to be moving in the direction of making the CAP a social policy. Many would argue that is what it has been all along, but it has never been spelt out as such, leading to all sorts of inefficiencies.
Under this heading, the Commission talks about economic (boosting the rural economy) and social (local traditions and social identity) objectives. There is reference to supporting rural employment (i.e., motherhood and apple pie), promoting diversification and 'allowing for structural diversity in farming systems' which could be a code phrase for tolerating inefficiency.
The whole notion is not easy to grasp and may be honed in the final version of the paper now that this kite has been flown. What seems to be going on here is a (probably mistaken) attempt to mould economic and social objectives into one. It also implies a policy that is more locally-led and flexible in its approach.
What could this lead to is all sorts of special pleading for subsidies of various kinds which satisfied local client groups. It also does not seem to fit to well with declarations about preventing the renationalisation of policy. Indeed, the paper reiterates the case for an EU-led policy rather than a national one.
The paper sets out three broad policy options:
1. Enhanced status quo: adjusting the current instruments and delivering a more equitable distribution direct payments. This is viewed within the Commission as a missed opportunity to make the CAP more legitimate.
2. More 'balanced targeted and sustinable support': a fairly significant adjustment of direct payments, especially 'greening' the first pillar. This would seem to be the Commission's preferred route.
3. Abolish all market and income support and focus delivery on public goods/climate change: essentially the British approach and dismissed pretty much out of hand.
One important dog fails to bark in the nighttime. The paper remains largely silent on the scale of the budget. It is decisions on the budget that will shape the next phase of the CAP.
The paper talks of the need to improve competitiveness, but there are no measures set out to achieve it, indeed some proposals (discussed in a later post) could have a damaging effect. One critic has remarked that, taken as a whole, the document is neither very common nor very agricultural. But nor does it particularly emphasise sustainability.
In other words, it's a bit of a mish mash. Why I am not surprised?
Monday, October 04, 2010
Comprehensive and authoritative review of CAP
Review of Arie Oskam, Gerrit Meester and Huib Silvis (eds),EU policy for agriculture, food and rural areas. Published by Wageningen Academic Publishers, ISBN: 978-90-8686-118-7, €40, $60.
This book offers a comprehensive, authoritative and up-to-date review of EU agriculture, food and rural policy. One of the things I liked about it was that it covered areas that are often neglected such as animal health and welfare policy and plant diseases policy that are likely to assume a growing importance in the coming years.
The book is divided into six sections. It starts with an overview and then turns to the context of EU policies, with particular emphasis on the differences in decision-making before and after the Lisbon Treaty. The third section looks at the policies in more detail including alternative options such as the bond scheme and the fourth is concerned with food policy including developments related to food quality and safety. The fifth part provides a well informed analysis of a wide range of aspects of rural policy. The book culminates with a section which looks at the role of the CAP in European integration more generally and possible future scenarios.
The book does not set out to provide a theoretical treatment of the CAP and in that sense it is accessible to the general reader. Although there is material in the book which would be of value to the specialist researcher, particularly in the area of rural policy, this is a book which could be used with students approaching the subject for the first time. Indeed, it has been developed in relation to courses taught at Wageningen Business School, although the price militates against it being used as a text.
Given that there is a foreword by Mariann Fischer Boel, one would not expect this to be a highly critical treatment, although she points out that she does not share all the views expressed by the authors. The chapter authors are certainly prepared to be critical of current policy.
In a concluding chapter, Cees Veerman states that we should be cautious with the agricultural production capacity in the EU in both a quantitative and qualitative sense. He points out, 'EU surpluses are not the ultimate answer to food shortages elsewhere in the world, as they have never been. The battle against hunger can only be won by strengthening rural development in poor countries and supporting the spending capacity of their populations, and by creating fair and open markets'.
This book is a very useful contribution to the literature on the CAP.
This book offers a comprehensive, authoritative and up-to-date review of EU agriculture, food and rural policy. One of the things I liked about it was that it covered areas that are often neglected such as animal health and welfare policy and plant diseases policy that are likely to assume a growing importance in the coming years.
The book is divided into six sections. It starts with an overview and then turns to the context of EU policies, with particular emphasis on the differences in decision-making before and after the Lisbon Treaty. The third section looks at the policies in more detail including alternative options such as the bond scheme and the fourth is concerned with food policy including developments related to food quality and safety. The fifth part provides a well informed analysis of a wide range of aspects of rural policy. The book culminates with a section which looks at the role of the CAP in European integration more generally and possible future scenarios.
The book does not set out to provide a theoretical treatment of the CAP and in that sense it is accessible to the general reader. Although there is material in the book which would be of value to the specialist researcher, particularly in the area of rural policy, this is a book which could be used with students approaching the subject for the first time. Indeed, it has been developed in relation to courses taught at Wageningen Business School, although the price militates against it being used as a text.
Given that there is a foreword by Mariann Fischer Boel, one would not expect this to be a highly critical treatment, although she points out that she does not share all the views expressed by the authors. The chapter authors are certainly prepared to be critical of current policy.
In a concluding chapter, Cees Veerman states that we should be cautious with the agricultural production capacity in the EU in both a quantitative and qualitative sense. He points out, 'EU surpluses are not the ultimate answer to food shortages elsewhere in the world, as they have never been. The battle against hunger can only be won by strengthening rural development in poor countries and supporting the spending capacity of their populations, and by creating fair and open markets'.
This book is a very useful contribution to the literature on the CAP.
Lib Dems lack say in farm policy-making
Defra is just one of three government departments that does not include a Lib Dem minister. Moreover, all the ministers in the department have strong farming links, inclining them towards a productionist agenda.
Lib Dem farm spokesman Andrew George, the MP for West Cornwall and the Isles of Scilly, has criticised the Conservative stranglehold on posts. Differences have emerged on the proposed badger cull and the decision to abolish the Agricultural Wages Board.
Mr George has been trying to work with the Secretary of State, Caroline Spelman, to have some say about how budget cuts are made. However, he has admitted that he was 'not yet in the inner circle of Defra ministers'.
Most disagreements are likely to be over matters of domestic policy such as the two that arisen already, rather than attitudes towards the CAP where both parties share a relatively liberal, market oriented stance. However, the Lib Dems are particularly attuned to the concerns of smaller farmers from whom they receive electoral support.
Lib Dem farm spokesman Andrew George, the MP for West Cornwall and the Isles of Scilly, has criticised the Conservative stranglehold on posts. Differences have emerged on the proposed badger cull and the decision to abolish the Agricultural Wages Board.
Mr George has been trying to work with the Secretary of State, Caroline Spelman, to have some say about how budget cuts are made. However, he has admitted that he was 'not yet in the inner circle of Defra ministers'.
Most disagreements are likely to be over matters of domestic policy such as the two that arisen already, rather than attitudes towards the CAP where both parties share a relatively liberal, market oriented stance. However, the Lib Dems are particularly attuned to the concerns of smaller farmers from whom they receive electoral support.
Sunday, September 19, 2010
Livestock farmers rely on subsidies
With crop prices rising worldwide, arable farmers should be in for a good spell, although individual returns will depend on how they have sold their crops forward. However, many medium-sized livestock businesses still rely on subsidy payments to make a profit according to farm busienss consultant Andersons.
Latest results from its notional Meadow Farm model, which is typical of many mixed farming businesses, suggest that while better market returns are expected to lead to an improvement in margins in 2010/11, the farm will only achieve a surplus once single payment and agri-environment receipts are included. The farm, like many others, has been hit by higher feed, straw and forage costs, which havepushed this season's variable costs up by almost 14 per cent on 2009/10.
Profitability of Andersons' hypothetical dairy farm - Fresian Farm - was also tight, although the situation had improved following recent milk price increases. The 150-cow unit was predicted to make a small 0.7p/litre margin from production in 2010/11, despite cost of production increasing by 0.6p/litre. With the single payment and ELS money added in, that surplus was boosted to more than 3p/litre.
Dairy processors Robert Wiseman have issued a warning that their profits could fall by about a third. They are major suppliers of milk to supermarkets. Tesco have increased the price they pay to farmers by a little over 1p a litre.
Latest results from its notional Meadow Farm model, which is typical of many mixed farming businesses, suggest that while better market returns are expected to lead to an improvement in margins in 2010/11, the farm will only achieve a surplus once single payment and agri-environment receipts are included. The farm, like many others, has been hit by higher feed, straw and forage costs, which havepushed this season's variable costs up by almost 14 per cent on 2009/10.
Profitability of Andersons' hypothetical dairy farm - Fresian Farm - was also tight, although the situation had improved following recent milk price increases. The 150-cow unit was predicted to make a small 0.7p/litre margin from production in 2010/11, despite cost of production increasing by 0.6p/litre. With the single payment and ELS money added in, that surplus was boosted to more than 3p/litre.
Dairy processors Robert Wiseman have issued a warning that their profits could fall by about a third. They are major suppliers of milk to supermarkets. Tesco have increased the price they pay to farmers by a little over 1p a litre.
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