The Less Favoured Areas directive is one of the few examples of British influence on the design of the CAP. It was originally conceived as the Mountain Areas Directive with France pressing for a definition that would have excluded Britain's hills and uplands. But the British emphasis on latitude rather than altitude won the day in 1975. Other member states saw the Less Favoured Areas directive as a good route to justify more cash for their farmers and by 1995 56 per cent of the utilised area of the EU was designated as less favoured. In Scotland, 85 per cent of the farmed area has LFA status.
Not surprisingly, the Commission thinks that too many farmers get rewarded under the directive. As part of the 2005 reform of rural development policy, it tried to remove all socio-economic considerations from the delineation of the LFAs and to cut the rates of payment. But this was fiercely resisted by many member states and the issue was 'parked'.
Now the Commission has come up with fresh proposals for a new LFA system by the end of 2008. A consultation suggests only four options:
Option 1. Maintain the status quo linking LFAs to areas of natural handicap, but excluding socio-economic criteria. This option is effectively dimissed by the Commission as failing to meet Courts of Aufitors criticisms, but farming unions are saying it is the only one that is acceptable, but even then consideration must be given to socio-economc criteria.
Option 2. Set certain 'common criteria' for LFAs relating to natural handicaps, such as temperature, soil drainage and slope.
Option 3. As Option 2, but with each farm assessed for its environmental contribution.
Option 4. As Option 3, but with payments further limited to High Nature Value farmland.
COPA has expressed the hope that because the issue is so complex it will get bogged down in the decision-making process. However, the time has surely come to take a long, hard look at these arrangements and to see whether they deliver realistic objectives.
Saturday, May 31, 2008
Saturday, May 24, 2008
Health check contains few surprises
The CAP Health Check proposals have been trailed and leaked so extensively that the package contained few suprises. As Gareth Morgan, the head of agriculture policy at RSPB commented, 'The CAP is long past its use-by date and the Commission should be creating a policy fit for 21st century challenges.'
A few points are worth picking out. A new definition of 'farmer' is to be introduced to prevent companies with marginal farming interests from claiming subsidy. It will be interesting to see how 'mud on the boots' is translated into Community legal jargon.
The idea of capping payments has been dropped as anticipated. However, there will be higher compulsory modulation levels for larger farms: an extra 3 per cent for farms receiving €100,000 a year, 6 per cent for those receiving more than €200,000 and 9 per cent for those receiving more than €300,000. Predictably, this hasn't gone down too well in Britain.
The so-called Article 68 measures are a concern given that they are intended to buy off French opposition. These will allow member states to skim another 10 per cent off Single Farm Payments to pay for certain strategic programmes. The chances are that some countries will use this money for targeted, production-linked subsidies rather than environmental programmes.
On the positive side, the money could be used for crop insurance schemes and animal disease programmes. But it is also available to help milk, sheep and beef producers in disadvantaged regions like France's Massif Central. As a French farmer was saying on television earlier this week without such help there would be no sheep left in France. Would this be a national catastrophe?
A few points are worth picking out. A new definition of 'farmer' is to be introduced to prevent companies with marginal farming interests from claiming subsidy. It will be interesting to see how 'mud on the boots' is translated into Community legal jargon.
The idea of capping payments has been dropped as anticipated. However, there will be higher compulsory modulation levels for larger farms: an extra 3 per cent for farms receiving €100,000 a year, 6 per cent for those receiving more than €200,000 and 9 per cent for those receiving more than €300,000. Predictably, this hasn't gone down too well in Britain.
The so-called Article 68 measures are a concern given that they are intended to buy off French opposition. These will allow member states to skim another 10 per cent off Single Farm Payments to pay for certain strategic programmes. The chances are that some countries will use this money for targeted, production-linked subsidies rather than environmental programmes.
On the positive side, the money could be used for crop insurance schemes and animal disease programmes. But it is also available to help milk, sheep and beef producers in disadvantaged regions like France's Massif Central. As a French farmer was saying on television earlier this week without such help there would be no sheep left in France. Would this be a national catastrophe?
Sunday, May 18, 2008
Farm land price boom
The cost of agricultural holdings across the EU has risen to record levels. However, this is not entirely good news for farmers. It makes it even harder for those who do not inherit to enter the industry, while only farmers wanting to retire can cash in. Tenant farmers face higher prices making life more difficult for them.
Several funds have been set up to buy farmland, particularly in the UK where prices have risen 40 per cent over the last year. Manchester-based group Braemar had to close a fund it launched after two weeks. Higher commodity prices have also attracted institutional investors such as Blackrock and Schroeder.
Good quality arable land in the UK is fetching £6,000-£8,500 an acre in many parts of the country. Buyers from Denmark and Ireland have been piling into the UK for several years. Some estimates suggest that as many as 30 to 40 per cent of buyers in the eastern countries of England are coming from overseas.
Land prices fell between 1997 and 2003 in the UK after the BSE and foot and mouth crises. The price could rise to £8,000 - £10,000 an acre, close to the price in parts of Denmark, but industry experts predict that it will rise more slowly from now. One factor who has been 'lifestyle buyers' who run farms as hobbies rather than businesses, while field sports are a factor in purchases within reach of London.
There are considerable variations in land prices across the EU. In Lithuania a hectare of agricultural land cost €734 in 2006 compared with €164,340 in Luxembourg, the most expensive country. In Poland the average price rose 60 per cent between 2003 and 2006. Foreigners cannot buy land in Poland until 2016 but it is easy for investors to set up a local company to bypass the rules.
In France land is about €6,000 a hectare because it must be offered first to young local farmers. However, land prices are still 50 per cent up on 2003.
Several funds have been set up to buy farmland, particularly in the UK where prices have risen 40 per cent over the last year. Manchester-based group Braemar had to close a fund it launched after two weeks. Higher commodity prices have also attracted institutional investors such as Blackrock and Schroeder.
Good quality arable land in the UK is fetching £6,000-£8,500 an acre in many parts of the country. Buyers from Denmark and Ireland have been piling into the UK for several years. Some estimates suggest that as many as 30 to 40 per cent of buyers in the eastern countries of England are coming from overseas.
Land prices fell between 1997 and 2003 in the UK after the BSE and foot and mouth crises. The price could rise to £8,000 - £10,000 an acre, close to the price in parts of Denmark, but industry experts predict that it will rise more slowly from now. One factor who has been 'lifestyle buyers' who run farms as hobbies rather than businesses, while field sports are a factor in purchases within reach of London.
There are considerable variations in land prices across the EU. In Lithuania a hectare of agricultural land cost €734 in 2006 compared with €164,340 in Luxembourg, the most expensive country. In Poland the average price rose 60 per cent between 2003 and 2006. Foreigners cannot buy land in Poland until 2016 but it is easy for investors to set up a local company to bypass the rules.
In France land is about €6,000 a hectare because it must be offered first to young local farmers. However, land prices are still 50 per cent up on 2003.
Germany backs 'European preference'
Germany has signalled its support for France's 'European preference' programme, possibly reflecting a mood in Germany which is critical of business and market liberalism. Horst Seehofer, Germany's farm minister, has said that China, India and the US should be forced to adopt higher environmental and health standards if they want to export to the EU. Poorer developing countries would not be affected.
British Chancellor Alastair Darling has claimed that the CAP is exacerbating the world food crisis. He is calling for the dismantling of the CAP, claiming it is costing consumers in Europe billions of pounds a year in higher food bills, while hurting farmers in the developing world.
Mr Seehofer dismissed Alastair Darling's arguments as 'complete rubbish'. We can rely on a lively debate, if not a very constructive or productive one.
British Chancellor Alastair Darling has claimed that the CAP is exacerbating the world food crisis. He is calling for the dismantling of the CAP, claiming it is costing consumers in Europe billions of pounds a year in higher food bills, while hurting farmers in the developing world.
Mr Seehofer dismissed Alastair Darling's arguments as 'complete rubbish'. We can rely on a lively debate, if not a very constructive or productive one.
Saturday, May 17, 2008
Richest farmers benefit from CAP funding
An approximate 80:20 Pareto rule continues to apply to the funding of EU farmers from the CAP. Roughly 82 per cent of CAP farms receiving direct payments in 2006 received less than €5000 whilst just 23,000 of the 7.33 million farms claiming aid received more than €100,000.
The Czech Republic heads the proportion of farms receiving more than €100,000 at 3.5 per cent followed by the UK with 2.9 per cent and Slovakia with 1.9 per cent. In total 84.5% of CAP funds went to just 17.9 per cent of farms.
The Czech Republic heads the proportion of farms receiving more than €100,000 at 3.5 per cent followed by the UK with 2.9 per cent and Slovakia with 1.9 per cent. In total 84.5% of CAP funds went to just 17.9 per cent of farms.
Thursday, May 15, 2008
Loss of pesticides threatens EU food production
European arable cropping could be made uneconomic if proposed EU legislation to reform pesticides approvals is passed, a group of leading European scientists and researchers have warned. Drawn from seven countries, they issued a 'Declaration of Ljubljana' warning that the sustainability of European farming was at risk.
The ongoing EU re-registration process has already eliminated 530 out of 952 existing products, but the revision of that legislation could go much further. When the European Parliament discussed an EU Commission proposal for the revision of 91/414 in October 2007, they added criteria that would potentially remove 70 to 85 per cent of the remaining active substances.
I have some personal knowledge of this subject as I am on a stakeholders committee concerned with the implementation strategy of the Pesticides Safety Directorate. At a recent meeting, there was a discussion of the fact that we were now down to two actives to deal with carrot fly and one of those is not entirely desirable in terms of its impact on watercourses.
Pesticides are toxic and they need stringent regulation, which they receive. However, there has to be a balance in terms of food security, the availability of fruit and vegetables in particular at affordable prices and the desirability of a healthy and balanced diet. New detection methods can pick up miniscule residues which pose no threat to health. Indeed, where there are problems, they tend to be with produce imported from outside the EU.
Biopesticides can make a contribution, particularly in protected crops: See our RELU research project page Biopesticides . Despite what advocates claim, all our food needs cannot be met economically through organic production (which in any case uses so-called 'traditional compounds'). Synthetic pesticides are a precious resource that need to be used sparingly within a philosophy of integrated pest management. But we couldn't do without them.
The ongoing EU re-registration process has already eliminated 530 out of 952 existing products, but the revision of that legislation could go much further. When the European Parliament discussed an EU Commission proposal for the revision of 91/414 in October 2007, they added criteria that would potentially remove 70 to 85 per cent of the remaining active substances.
I have some personal knowledge of this subject as I am on a stakeholders committee concerned with the implementation strategy of the Pesticides Safety Directorate. At a recent meeting, there was a discussion of the fact that we were now down to two actives to deal with carrot fly and one of those is not entirely desirable in terms of its impact on watercourses.
Pesticides are toxic and they need stringent regulation, which they receive. However, there has to be a balance in terms of food security, the availability of fruit and vegetables in particular at affordable prices and the desirability of a healthy and balanced diet. New detection methods can pick up miniscule residues which pose no threat to health. Indeed, where there are problems, they tend to be with produce imported from outside the EU.
Biopesticides can make a contribution, particularly in protected crops: See our RELU research project page Biopesticides . Despite what advocates claim, all our food needs cannot be met economically through organic production (which in any case uses so-called 'traditional compounds'). Synthetic pesticides are a precious resource that need to be used sparingly within a philosophy of integrated pest management. But we couldn't do without them.
Sunday, May 11, 2008
EU rejects French call to limit food imports
France and the European Commission have clashed over the future of farming with the European Commission dismissing French calls to curtail food imports as self-defeating and backward-looking. 'Autarky is not the future. We are not aiming at a closed market where we are self-sufficient,' a spokesman for farm commissioner Mariann Fischer Boel stated.
French farm minister Michel Barnier favours domestic production and requiring imports to match EU welfare needs - moves the spokesman said would invite retaliation: 'It is not in our interests to become a fortress. If we erect new barriers, so will our trade partners,' he said. 'We are a major trader in agricultural products. We are the biggest exporter and importer of farm products in the world. What we believe in is trade. We are seeing increasing exports of our high-quality food products.'
In 2007, the EU exported €75bn of produce and imported €77.3bn. France's trade surplus with non-EU members was €8.3bn.
New protectionism
Imports had to meet basic health and safety standards, said Ms Ficsher Boel's spolesman, adding 'That does not mean we can impose on our trading partners to put in place exactly the same legislation we have.'
However, French proposals on 'European preference' that are expected to be circulated to agriculture ministers next month were gaining support. 'There is a growing feeling it is only fair and reasonable that imports are subjected to the same technical standards as our own producers,' an EU official said. The point is, of course, that it would be difficult for developing countries to meet these standards, and for many of them agricultural exports offer the best route to prosperity which would then enable them to import more manufactured goods.
EU farmers complain that their costs are rising because of increased environmental and animal welfare rules that the rest of the world do not have to meet. After a recent vocal campaign by cattle farmers, the Commission restricted imports of beef from Brazil, where foot-and-mouth disease is rampant.
The Barnier interview
The present debate was started by an interview with Michel Barnier in the Financial Times. He recommended that Africa and Latin America should adopt their own version of the CAP which would be the first time a policy disaster has been exported. However, Mr Barnier believes that the developing world should form self-sufficient regional blocs with a redirection of development aid.
Mr Barnier claimed, 'What we are now witnessing in the world is the consequence of too much free-market liberalism. We can't leave feeding people to the mercy of the market. We need a public policy, a means of stabilisation and intervention.'
This reveals the fundamental difference between British and French perspectives. Britain has a history of liberalism, France one of state intervention and protectionism. From a British perspective, the market is an effective way of transmitting consumer preferences through the price mechanism. The market should be able to supply food like any commodity. The only qualification is the effect that weather fluctuations have on production. But this does not justify an elaborate apparatus of subsidy and protection, rather the development of new and innovative mechanisms for offsetting risk.
Predictably, Mr Barnier criticised the WTO, stating that he was 'not sure' that it was 'the right place to discuss the relationship between food and agriculture.' He noted that the agriculture budget would be 37 per cent of the EU's budget, down from 81 per cent in 1985. However, that is still a considerable multiple of the sector's contribution, even if one adds in food processing which uses some imported ingredients anyway.
Farmers are already responding to high prices and strong demand for grain. According to the US Department of Agriculture, the world will produce a record 656m tonnes of wheat in the year starting in July, up 8.2 per cent on the previous year. However, this may not be enough to restore a comfortable supply buffer to the world market given that global wheat stocks have shrunk to their lowest level since 1978.
However, the report did project that global soyabean stocks would decline. There has been a large increase in US land devoted to soyabean production, but global demand is rising even faster. Moreover, corn (maize) output is expected to fall 7.3 per cent this year while demand for ethanol use is expected to rise by one-third. Ethanol will eat up 33 per cent of next year's US corn harvest, up from 22.9 per cent in 2007-8. All this suggests continuing upward pressure on prices.
French farm minister Michel Barnier favours domestic production and requiring imports to match EU welfare needs - moves the spokesman said would invite retaliation: 'It is not in our interests to become a fortress. If we erect new barriers, so will our trade partners,' he said. 'We are a major trader in agricultural products. We are the biggest exporter and importer of farm products in the world. What we believe in is trade. We are seeing increasing exports of our high-quality food products.'
In 2007, the EU exported €75bn of produce and imported €77.3bn. France's trade surplus with non-EU members was €8.3bn.
New protectionism
Imports had to meet basic health and safety standards, said Ms Ficsher Boel's spolesman, adding 'That does not mean we can impose on our trading partners to put in place exactly the same legislation we have.'
However, French proposals on 'European preference' that are expected to be circulated to agriculture ministers next month were gaining support. 'There is a growing feeling it is only fair and reasonable that imports are subjected to the same technical standards as our own producers,' an EU official said. The point is, of course, that it would be difficult for developing countries to meet these standards, and for many of them agricultural exports offer the best route to prosperity which would then enable them to import more manufactured goods.
EU farmers complain that their costs are rising because of increased environmental and animal welfare rules that the rest of the world do not have to meet. After a recent vocal campaign by cattle farmers, the Commission restricted imports of beef from Brazil, where foot-and-mouth disease is rampant.
The Barnier interview
The present debate was started by an interview with Michel Barnier in the Financial Times. He recommended that Africa and Latin America should adopt their own version of the CAP which would be the first time a policy disaster has been exported. However, Mr Barnier believes that the developing world should form self-sufficient regional blocs with a redirection of development aid.
Mr Barnier claimed, 'What we are now witnessing in the world is the consequence of too much free-market liberalism. We can't leave feeding people to the mercy of the market. We need a public policy, a means of stabilisation and intervention.'
This reveals the fundamental difference between British and French perspectives. Britain has a history of liberalism, France one of state intervention and protectionism. From a British perspective, the market is an effective way of transmitting consumer preferences through the price mechanism. The market should be able to supply food like any commodity. The only qualification is the effect that weather fluctuations have on production. But this does not justify an elaborate apparatus of subsidy and protection, rather the development of new and innovative mechanisms for offsetting risk.
Predictably, Mr Barnier criticised the WTO, stating that he was 'not sure' that it was 'the right place to discuss the relationship between food and agriculture.' He noted that the agriculture budget would be 37 per cent of the EU's budget, down from 81 per cent in 1985. However, that is still a considerable multiple of the sector's contribution, even if one adds in food processing which uses some imported ingredients anyway.
Farmers are already responding to high prices and strong demand for grain. According to the US Department of Agriculture, the world will produce a record 656m tonnes of wheat in the year starting in July, up 8.2 per cent on the previous year. However, this may not be enough to restore a comfortable supply buffer to the world market given that global wheat stocks have shrunk to their lowest level since 1978.
However, the report did project that global soyabean stocks would decline. There has been a large increase in US land devoted to soyabean production, but global demand is rising even faster. Moreover, corn (maize) output is expected to fall 7.3 per cent this year while demand for ethanol use is expected to rise by one-third. Ethanol will eat up 33 per cent of next year's US corn harvest, up from 22.9 per cent in 2007-8. All this suggests continuing upward pressure on prices.
Wednesday, April 23, 2008
Ag Committee To Give It Large
The European Parliament's Agriculture Committee is preparing to flex its muscles with the new powers given to it in the Lisbon Trety, which will give the committee co-decision in many areas. MEPs on the committee have served notice on the Commission that they would battle to get their full powers under the new Treaty, fighting issue in the European Court of Justice if necessary.
The Committee also decided to have a turf fight with the Environment, Public Health and Food Safety Committee to get the lead on related dossiers.
UK MEP Neil Parish, who chairs the Agriculture Committee, said that after the Parliament elections next year, he expected there to be stronger demand for membership of the Committee because of its new powers. The key question is: will these new members represent rural constituencies, or have links to the farming and food industries, like many existing members. Or will they be interested in pushing forward the reform debate forward?
The Committee also decided to have a turf fight with the Environment, Public Health and Food Safety Committee to get the lead on related dossiers.
UK MEP Neil Parish, who chairs the Agriculture Committee, said that after the Parliament elections next year, he expected there to be stronger demand for membership of the Committee because of its new powers. The key question is: will these new members represent rural constituencies, or have links to the farming and food industries, like many existing members. Or will they be interested in pushing forward the reform debate forward?
Sunday, April 20, 2008
Colbert lives!
France has launched a political campaign to restore protectionism to the CAP. French farm minister Michel Barnier has called on Europe to establish a food security plan and to resist further cuts in the EU agriculture budget. The EU should resist WTO pressure to cut farm subsidies. In contrast, Gordon Brown has called for a world trade deal that cuts subsidies to richer countries.
One might think that tighter supply and demand, producing higher food prices would mean that farmers would need fewer subsidies to carry out the commercial aspect of their work as they would be better placed to obtain a return from the market. Admittedly, the buying power of supermarkets that allows them to be price makers and often makes farmers price takers is an issue, especially in the UK, but what that requires is a more effective application of competition policy. Input costs are also rising, but smarter farmers are working out what they can do to use fertilisers more sparingly and more intelligently.
As the Financial Times commented last week, 'The bias towards home production in richer countries betrays ... a historic affection for farming that is often bound up with emotional attachments to culture, cuisine and landscape.' Interventionist measures that boost farmers' incomes may create shortages in global markets, accentuating the problems of those who have to depend on imports: what has been called a 'starve your neighbour' policy.
France says that the EU should increase aid to farmers in developing countries, but that often does not really help the farmers themselves and is really a political fig leaf for continuing the European subsidies game. Just as it seemed as if the skids were under subsidies, a new set of justifications has appeared.
One might think that tighter supply and demand, producing higher food prices would mean that farmers would need fewer subsidies to carry out the commercial aspect of their work as they would be better placed to obtain a return from the market. Admittedly, the buying power of supermarkets that allows them to be price makers and often makes farmers price takers is an issue, especially in the UK, but what that requires is a more effective application of competition policy. Input costs are also rising, but smarter farmers are working out what they can do to use fertilisers more sparingly and more intelligently.
As the Financial Times commented last week, 'The bias towards home production in richer countries betrays ... a historic affection for farming that is often bound up with emotional attachments to culture, cuisine and landscape.' Interventionist measures that boost farmers' incomes may create shortages in global markets, accentuating the problems of those who have to depend on imports: what has been called a 'starve your neighbour' policy.
France says that the EU should increase aid to farmers in developing countries, but that often does not really help the farmers themselves and is really a political fig leaf for continuing the European subsidies game. Just as it seemed as if the skids were under subsidies, a new set of justifications has appeared.
Stefan speaks out
Professor Stefan Tangermann, Head of the OECD Department for Trade and Agriculture
Before he joined OECD, I would run into agricultural economist Stefan Tangermann from time to time at conferences. I was always impressed by his contributions so it is interesting to read his interview with Agra Focus, one of the latest in an excellent series. In a long interview, he had many interesting points to make and the publication itself is essential reading for those with a serious interest in agriculture and food policy. Below a few of his key themes are picked out.
Helping remote regions
This is a big item with the French presidency on the horizon. The French want to retain 'coupled' payments to areas like the Massif Central. Tangermann points out that coupling makes it harder for people to quit production if they want to. If one wants to maintain agricultural activity, a more efficient way of doing that would be to pay people to keep the land 'open' which means not allowing anything to grow above a given height. If this led to the disappearance of cows (or sheep in the UK case) tourists should be prepared to pay for them - it already happens in Austria, Tangermann points out.
Targeting
Payments need to be targeted, argues Tangermann (and the OECD). Payments need to be targeted towards specific objectives that have been well defined, and according to how much the farmer contributes to attaining these specific objectives. 'So it's a three-step process that our paradigm uses - old-fashioned directly coupled policies move to decoupling, and from decoupling to targeting. And in terms of the structure of EU policies, you find targeted policies much more in the 2nd pillar than the 1st pillar.'
Food security and biofuels
Biofuels add a further element of demand for agriculture products (and implicitly one that is under the control of policy-makers, unlike increasing demand in India and China). 'Moreover, it is extra demand which is very price-inelastic. In other words, demand is there irrespective of what the price is of these products.'
Tangermann states that according to OECD estimates the achievement of the EU's binding target of replacing 10 per cent of road fuel by biofuels would require something like 50 per cent of the area that is under the 'grand cultures' in the EU, i.e., cereals, oilseeds and sugar. [It should be noted that the EU estimate is much lower at 20 per cent]. 'So, all in all, the benefits of the current biofuels policy are relatively small, but the costs are obvious.'
New technology
Tangermann argues, 'It is high time that we put more resources into agricultural research and technology development. We must also make a better and more successful effort to explain to consumers and the general public what the benefit-risk ratio is in modern biotechnology and their products. People in Europe need to be aware that is a big luxury to say we don't want this modern food on our plates. And it is a luxury that will become more and more expensive.'
Wednesday, April 16, 2008
Who gets the money?
We are used to statistics that tell us that France is the biggest beneficiary of the CAP, but a novel way of looking at beneficiaries is to count subsidies per hectare. The EU-15 average is nearly €300 per hectare, but even extrapolating forward to full payments, it is less than €200 per ha for the twelve new member states, Latvia receiving less than €100 per ha.
This is less than 20 per cent of the rate in Greece and Malta, the top beneficiaries per hectare. Of course, Malta has a small agricultural area and the Greek figure reflects the high rate of aid formerly available for tobacco. It is interesting that the liberal (on the CAP) states of Denmark and the Netherlands receive nore than €400 per ha, along with Belgium. The UK is below the median.
In the EU-25, the average SFP payment is equivalent to €6000 a holding, but in Slovakia it is nearly €32 000 a farm and in the Czech Republic €50 000 a farm. The UK average is less than €25 000 a farm. Malta and Cyprus receive the smallest payments and there are eight countries in all, including Italy, which average less than €3000 a farm.
This is less than 20 per cent of the rate in Greece and Malta, the top beneficiaries per hectare. Of course, Malta has a small agricultural area and the Greek figure reflects the high rate of aid formerly available for tobacco. It is interesting that the liberal (on the CAP) states of Denmark and the Netherlands receive nore than €400 per ha, along with Belgium. The UK is below the median.
In the EU-25, the average SFP payment is equivalent to €6000 a holding, but in Slovakia it is nearly €32 000 a farm and in the Czech Republic €50 000 a farm. The UK average is less than €25 000 a farm. Malta and Cyprus receive the smallest payments and there are eight countries in all, including Italy, which average less than €3000 a farm.
If you had an empty sheet of paper ...
It is often observed that if you had an empty sheet of paper, you wouldn't design the Common Agricultural Policy as it is today. Of course, you probably wouldn't create it at all.
Agra Focus has been having a little bit of springtime fun thinking up a new name for the CAP on the lines of 'a rose by any other name.' The two most plausible suggestions to come forward were FARMER (Food, Agriculture and Rural Measures in the European Union) and SAFE (Sustainable Agriculture, Food and Environment). The latter suggestion certainly encompasses the direction in which the CAP should be going.
The agri-humourists were out in force and the old chestnut of Common Rural and Agricultural Policy came up, as did the newer suggestion of Agricultural, Rural and Sustainable Environment policy. Someone obviously worked hard on 'Special Agricultural and Rural Key Offensive for Zestful Yields.'
Perhaps the corny and somewhat flakey character of the CAP was embodied in COmmon Rural Network for Food, a Living Agriculture and Keeping the Environment Sustainable = CORNFLAKES to save you the bother of working it out.
Agra Focus has been having a little bit of springtime fun thinking up a new name for the CAP on the lines of 'a rose by any other name.' The two most plausible suggestions to come forward were FARMER (Food, Agriculture and Rural Measures in the European Union) and SAFE (Sustainable Agriculture, Food and Environment). The latter suggestion certainly encompasses the direction in which the CAP should be going.
The agri-humourists were out in force and the old chestnut of Common Rural and Agricultural Policy came up, as did the newer suggestion of Agricultural, Rural and Sustainable Environment policy. Someone obviously worked hard on 'Special Agricultural and Rural Key Offensive for Zestful Yields.'
Perhaps the corny and somewhat flakey character of the CAP was embodied in COmmon Rural Network for Food, a Living Agriculture and Keeping the Environment Sustainable = CORNFLAKES to save you the bother of working it out.
Tuesday, April 08, 2008
Food security fears mount
Fears of unrest are increasing in developing countries as shortages develop of staple foods or prices increase substantially. Governments have cut import tariffs to cope with the problem, but hoarding to take advantage of future price rises has exacerbated the difficulties being encountered.
Some of the most serious problems have arisen in relation to rice where prices have risen by 50 per cent in two weeks. Leading exporting countries including Vietnm, India, China and Egypt have banned foreign sales.
Another policy response is to resort to export taxes, a strategy being followed in Argentina, although raising revenue appears to be as much of a motive of ensuring domestic supply. Indeed, the strategy has backfired as farmers have gone on strike and mounted road blocks, emptying cattle markets so that Argentinians cannot get their steaks. President Cristina Fernandez has resorted to the classic Peronist trick of trying to rouse the 'masses' against an alleged privileged group, in this case the farmers.
Given the importance of Argentina as an agricultural exporter, increasing soyabean taxes from 35 per cent to 40 per cent affects world supplies. Grain exports have also been disrupted.
All this is grist to the mill of those who have been calling for self-sufficiency targets in Europe, backed up by the continuation of blanket subsidies. As we have suggested in earlier postings, this rhetoric has had a substantial influence on decision makers. There is a danger of a reversion to a simple minded productionist paradigm, already being celebrated with an element of triumphalism by some farming spokespersons.
A leading exponent of this position is Norfolk farmer and Farmers Weekly columnist David Richardson who has played his cards on this issue well. His paper on the issue suggests that 'it would not be much of an exaggeration to suggest that within the forseeable future it will be necessary to deal with the production of food as during the war.' In the UK it was, of course, the experience of wartime production which led to the 1947 Agriculture Act, creating privileged access to government for the National Farmers' Union and substantial subsidies for its members. Could these halcyon days return?
You can read David Richardson's full paper on line at Richardson . It's a concise statement of an increasingly influential viewpoint.
However, we must avoid a retreat into neo-Malthusian gloom. The gains available from new technology and better agronomic techniques must not be overlooked. Where there has been a policy error is in running down research on improving food production. The privatisation of the state extension service, something that was not done in the United States or, for example, Denmark, was also a mistake which means that there is no neutral body disseminating knowledge to farmers.
Some of the most serious problems have arisen in relation to rice where prices have risen by 50 per cent in two weeks. Leading exporting countries including Vietnm, India, China and Egypt have banned foreign sales.
Another policy response is to resort to export taxes, a strategy being followed in Argentina, although raising revenue appears to be as much of a motive of ensuring domestic supply. Indeed, the strategy has backfired as farmers have gone on strike and mounted road blocks, emptying cattle markets so that Argentinians cannot get their steaks. President Cristina Fernandez has resorted to the classic Peronist trick of trying to rouse the 'masses' against an alleged privileged group, in this case the farmers.
Given the importance of Argentina as an agricultural exporter, increasing soyabean taxes from 35 per cent to 40 per cent affects world supplies. Grain exports have also been disrupted.
All this is grist to the mill of those who have been calling for self-sufficiency targets in Europe, backed up by the continuation of blanket subsidies. As we have suggested in earlier postings, this rhetoric has had a substantial influence on decision makers. There is a danger of a reversion to a simple minded productionist paradigm, already being celebrated with an element of triumphalism by some farming spokespersons.
A leading exponent of this position is Norfolk farmer and Farmers Weekly columnist David Richardson who has played his cards on this issue well. His paper on the issue suggests that 'it would not be much of an exaggeration to suggest that within the forseeable future it will be necessary to deal with the production of food as during the war.' In the UK it was, of course, the experience of wartime production which led to the 1947 Agriculture Act, creating privileged access to government for the National Farmers' Union and substantial subsidies for its members. Could these halcyon days return?
You can read David Richardson's full paper on line at Richardson . It's a concise statement of an increasingly influential viewpoint.
However, we must avoid a retreat into neo-Malthusian gloom. The gains available from new technology and better agronomic techniques must not be overlooked. Where there has been a policy error is in running down research on improving food production. The privatisation of the state extension service, something that was not done in the United States or, for example, Denmark, was also a mistake which means that there is no neutral body disseminating knowledge to farmers.
Sunday, April 06, 2008
Farm subsidy disclosure angers farmers
The Farmers Union of Wales has attacked the decision of the EU to make all farm subsidy receipts public from next year. While farmers in Wales, Scotland and Northern Ireland already have their single farm payment details displayed on the devolved administrations' websites, it is intended to add full names, addresses and postcodes to the published details.
One objection is that this information could be used for criminal purposes such as identity fraud. It is also argued that such information is commercially sensitive. For her part, farm commissioner Mariann Fischer Boel argues that 'This is taxpayers' money, so it is very important that people know where it is being spent.'
The NFU's SPS adviser said that one key concern was whether the data was accurate. In the NFU's experience there were many inaccuracies. For example, a shortfall in the 2005 payment might be added to 2007 to give an inflated figure. (Strictly speaking, this is not an inaccuracy as it reflects the amount paid, but it could still be misleading).
He also complained that such information could raise the 'unwarranted' interest of the taxman, although I would have thought that if farmers have made an accurate declaration of their income there should not in principle be a problem. It has been argued, however, that the Revenue sometimes misuse their power to investigate the affairs of individual taxpayers.
The issue here is to balance conflict considerations such as transparency and privacy. Transparency is highly valued by economists and public policy analysts, while privacy is a value deeply embedded in British culture. For the information currently made available by some member states, visit Subsidies
Of course, the fundamental concern of some farmers is that more information could lead to more public demands for the abolition of subsidies. However, the relatively diffuse interests of consumers and taxpayers have always been overcome by the more concentrated interests of farmers. For all the criticism they sometimes receive from some farmers, the main farming organisations have done a very effective job of looking after their members' interests.
I was interested to read a letter by a farmer in Farmers' Weekly criticising the recent House of Lords report that called for farm subsidies to be ended. The writer makes the complaint that we are governed by 'intellectuals' which is news to me. I think what he really means is the political class.
He does make the valid point that farmers have become price takers because of the growth of retailer power. The remedy here would be effective competition policy rather than perpetuating subsidies, although politically this is not that easy to achieve.
One objection is that this information could be used for criminal purposes such as identity fraud. It is also argued that such information is commercially sensitive. For her part, farm commissioner Mariann Fischer Boel argues that 'This is taxpayers' money, so it is very important that people know where it is being spent.'
The NFU's SPS adviser said that one key concern was whether the data was accurate. In the NFU's experience there were many inaccuracies. For example, a shortfall in the 2005 payment might be added to 2007 to give an inflated figure. (Strictly speaking, this is not an inaccuracy as it reflects the amount paid, but it could still be misleading).
He also complained that such information could raise the 'unwarranted' interest of the taxman, although I would have thought that if farmers have made an accurate declaration of their income there should not in principle be a problem. It has been argued, however, that the Revenue sometimes misuse their power to investigate the affairs of individual taxpayers.
The issue here is to balance conflict considerations such as transparency and privacy. Transparency is highly valued by economists and public policy analysts, while privacy is a value deeply embedded in British culture. For the information currently made available by some member states, visit Subsidies
Of course, the fundamental concern of some farmers is that more information could lead to more public demands for the abolition of subsidies. However, the relatively diffuse interests of consumers and taxpayers have always been overcome by the more concentrated interests of farmers. For all the criticism they sometimes receive from some farmers, the main farming organisations have done a very effective job of looking after their members' interests.
I was interested to read a letter by a farmer in Farmers' Weekly criticising the recent House of Lords report that called for farm subsidies to be ended. The writer makes the complaint that we are governed by 'intellectuals' which is news to me. I think what he really means is the political class.
He does make the valid point that farmers have become price takers because of the growth of retailer power. The remedy here would be effective competition policy rather than perpetuating subsidies, although politically this is not that easy to achieve.
Sunday, March 23, 2008
The dilemma of Sunk Island
Sunk Island is neither an island nor is it sunken. See Sunk Island . It is a 600 acre area of land south-east of Hull reclaimed from the River Humber more than 200 years ago. A row about its future exemplifies current tensions between food security and environmental concerns.
Farmers there are angry that the prime agricultural land there could be surrendered to the Humber as part of the Department for the Environment's policy of managed realignment. Tenant farmer Geoff Buckie said, 'It is madness that they want to do away with such high-quality land apparently to create more wildlife habitat. They seem to care more about wildlife - at a time when English farming desperately needs to grow more food.'
I don't know enough about the specific case to comment about it, although I can see where the local farmers are coming from. However, in the rush to jump on the food security bandwagon, we must be careful not to start treating the environment as a luxury good again. Climate change deniers are looking increasingly intellectually isolated and a relatively small rise in sea levels could make low lying areas prohibitively expensive to defend.
Farmers there are angry that the prime agricultural land there could be surrendered to the Humber as part of the Department for the Environment's policy of managed realignment. Tenant farmer Geoff Buckie said, 'It is madness that they want to do away with such high-quality land apparently to create more wildlife habitat. They seem to care more about wildlife - at a time when English farming desperately needs to grow more food.'
I don't know enough about the specific case to comment about it, although I can see where the local farmers are coming from. However, in the rush to jump on the food security bandwagon, we must be careful not to start treating the environment as a luxury good again. Climate change deniers are looking increasingly intellectually isolated and a relatively small rise in sea levels could make low lying areas prohibitively expensive to defend.
Friday, March 21, 2008
Co-financing likely, says Parish
Co-financing of the CAP is likely to come in said Neil Parish, British Conservative chair of the European Parliament's Agriculture and Rural Development Committee in an interview with the excellent AgraFocus. This would reduce discrepancies between net contributors and net beneficiaries. However, he admitted that such a move could be difficult for the new member states, especially if they couldn't afford to introduce co-financing. It might therefore be necessary to have lower co-financing rates for them in the early years to make the change politically acceptable.
Parish noted the current turn towards food security commenting, 'The amazing thing is is that one year ago, most taxpayers would have been looking for a much more environmentally-based farm policy - not so much interested in the agriculture, but more in the landscape, which they still are. One year on, food security is back on the agenda. Taxpayers not only want a good environment, but if food supplies are tight, they will also be expecting the farmers to produce food.'
Other key points:
* It's proving difficult to get the CAP to work in the New Member States. Any further enlargement should be delayed until at least 2013 with the possible exception of Croatia.
* Taxpayers are 'questioning how we spend the money and why ... there has to be more transparency on how taxpayers are paid. In reality now with the SFP - in a lot of member states - you could go on to the websites and find out how much individual farmers are being paid.'
* He paid tribute to Mariann Fischer Boel as a very open Commissoner: 'I believe that a Danish Commissioner and a British Chairman is not a bad combination.'
Parish will be standing down after the next election as he is standing for the Westminster Parliament.
Parish noted the current turn towards food security commenting, 'The amazing thing is is that one year ago, most taxpayers would have been looking for a much more environmentally-based farm policy - not so much interested in the agriculture, but more in the landscape, which they still are. One year on, food security is back on the agenda. Taxpayers not only want a good environment, but if food supplies are tight, they will also be expecting the farmers to produce food.'
Other key points:
* It's proving difficult to get the CAP to work in the New Member States. Any further enlargement should be delayed until at least 2013 with the possible exception of Croatia.
* Taxpayers are 'questioning how we spend the money and why ... there has to be more transparency on how taxpayers are paid. In reality now with the SFP - in a lot of member states - you could go on to the websites and find out how much individual farmers are being paid.'
* He paid tribute to Mariann Fischer Boel as a very open Commissoner: 'I believe that a Danish Commissioner and a British Chairman is not a bad combination.'
Parish will be standing down after the next election as he is standing for the Westminster Parliament.
Saturday, March 15, 2008
Capping plan dropped
Capping payments to large farmers - which would have particularly hit the UK, Germany and the Czech Republic - appears to have been dropped from the latest version of the CAP 'health check' circulating in Brussels.
Farm commissioner Mariann Fischer Boel originally intended to make large, progressive cuts to farmer' single farm payments when she launched her health check last November. Her plan was to start with a 10 per cent cut on payments of more than €100,000 (£76,000) increasing to 45 per cent off for payments more than €300,000(£228,000).
The plan would have hit more than 6000 British farmers, including some of the most influential ones such as the Duke of Westminster and others such as Oliver Walston (who is one of the few farmers who opposes subsidies to the ire of the rest of them).
The money was to be retained by each member state and used for so-called 'Article 69' measures - Pillar 1 subsidies targeted at specific sectors. But the lobbyists (including no doubt UK PermRep in Brussels) have been at work and the plan is for additional rates of modulation for larger farmers instead of capping. These would range from 3 per cent modulation for payments in excess of €100,000 to 9 per cent for payments in excess of €300,000.
Of course all this is a sideshow to the need to get rid of subsidies. I was taken to task for this yesterday by someone who argued, quite reasonably, that the battered livestock subsidy could not survive without subsidy. That may be so. It is supposed to be a commercial activity, but the argument then is that we need subsidies for food security reasons.
Even Gordon Brown has bought into this discourse following the recent (good) Cabinet Office Strategy Unit report on food policy. The prime minister is an intelligent man who is justly proud of his academic origins. He should know better.
No one believes that subsidies should disappear overnight. Farmers have to be weaned off them. That is why I think a farmers' bond scheme is a good mechanism for getting rid of them once and for all.
Farm commissioner Mariann Fischer Boel originally intended to make large, progressive cuts to farmer' single farm payments when she launched her health check last November. Her plan was to start with a 10 per cent cut on payments of more than €100,000 (£76,000) increasing to 45 per cent off for payments more than €300,000(£228,000).
The plan would have hit more than 6000 British farmers, including some of the most influential ones such as the Duke of Westminster and others such as Oliver Walston (who is one of the few farmers who opposes subsidies to the ire of the rest of them).
The money was to be retained by each member state and used for so-called 'Article 69' measures - Pillar 1 subsidies targeted at specific sectors. But the lobbyists (including no doubt UK PermRep in Brussels) have been at work and the plan is for additional rates of modulation for larger farmers instead of capping. These would range from 3 per cent modulation for payments in excess of €100,000 to 9 per cent for payments in excess of €300,000.
Of course all this is a sideshow to the need to get rid of subsidies. I was taken to task for this yesterday by someone who argued, quite reasonably, that the battered livestock subsidy could not survive without subsidy. That may be so. It is supposed to be a commercial activity, but the argument then is that we need subsidies for food security reasons.
Even Gordon Brown has bought into this discourse following the recent (good) Cabinet Office Strategy Unit report on food policy. The prime minister is an intelligent man who is justly proud of his academic origins. He should know better.
No one believes that subsidies should disappear overnight. Farmers have to be weaned off them. That is why I think a farmers' bond scheme is a good mechanism for getting rid of them once and for all.
Thursday, March 13, 2008
Lords Slam CAP
Farm subsidies should be phased out for good and a significant proportion of the funds released channelled into rural development says a new report from the House of Lords European Union Committee: Lords
The report points out that farm subsidies in their present form are a poorly focused policy instrument. The committee therefore advocates a phased reduction in farm subsidies from 2014.
The chair of the committee, Lord Sewel (who was a junior agriculture minister in Scotland from 1997 to 1999) commented, 'Agricultural interests can no longer be equated with rural interests. Public money should be targeted directly at environmental benefits and rural development goals, rather than being spent on income support for farmers and landowners in the hope that this will produce the desired knock-on effects. We are not persuaded by the argument that the risk of future food shortages should be hedged against by freezing current production patterns.'
NFU economist Carmen Suarez specified five conditions that would have to be met before Pillar 1 supports were removed, including 'policies to enhance agricultural competitiveness' which could well be a device for subsidies under another name.
The report points out that farm subsidies in their present form are a poorly focused policy instrument. The committee therefore advocates a phased reduction in farm subsidies from 2014.
The chair of the committee, Lord Sewel (who was a junior agriculture minister in Scotland from 1997 to 1999) commented, 'Agricultural interests can no longer be equated with rural interests. Public money should be targeted directly at environmental benefits and rural development goals, rather than being spent on income support for farmers and landowners in the hope that this will produce the desired knock-on effects. We are not persuaded by the argument that the risk of future food shortages should be hedged against by freezing current production patterns.'
NFU economist Carmen Suarez specified five conditions that would have to be met before Pillar 1 supports were removed, including 'policies to enhance agricultural competitiveness' which could well be a device for subsidies under another name.
Sunday, March 09, 2008
The great land use debate
Do try and take part in the great RELU land use debate. I have in an effort to argue against attempts to revive productionist approaches to agriculture which threaten to reverse years of effort towards a more rational approach to farm policy. To find out about the debate, go here: RELU
Monday, February 25, 2008
The milk quotas mess
As the debate goes on in the EU about whether milk quotas can be increased by 2 per cent as part of the soft landing when they are eventually abolished in 2015, it is an opportunity to reflect how milk quotas have affected the UK dairy industry.
They were introduced in 1984 to ease the severe budgetary crisis brought about by the structural surplus of milk in Europe. They worked in terms of limiting production growth and coping with the budgetary crisis, but they brought a lot of unintended (or intended) problems in their wake.
The basic problem is that milk quotas ossify structures. Some member states do permit trading of milk quotas within their boundaries, but despite the existence of an internal market, they cannot be traded across national borders. Hence, it is difficult to transfer production from less efficient producers to the more efficient or from less efficient regions to the more efficient.
Of course, some politicians welcome this as a means of enabling farming to survive in these areas. French politicians proudly proclaim that quotas are the reason that milk is still produced in every corner of France. In many areas of Europe only the quota system can guarantee prices high enough to keep farmers in business.
But all this comes at a price. Europe's share of world dairy markets has been falling. Third country markets for dairy products are being captured by more efficient producers in North and South America.
Dairy farmers like them, of course. Their arrival gave them a windfall capital gain and a retirement pot that can be worth as much as €1m.
There was a bare qualified majority in the Special Committee on Agriculture for the quota increase. Germany with a Bavarian farm minister is against, as are Austria, Finland (where there are quite a lot of dairy farmers) and Malta (where there are very few). France would like to delay, but the change will probably be go through and a small step will have been taken towards a more market oriented system.
They were introduced in 1984 to ease the severe budgetary crisis brought about by the structural surplus of milk in Europe. They worked in terms of limiting production growth and coping with the budgetary crisis, but they brought a lot of unintended (or intended) problems in their wake.
The basic problem is that milk quotas ossify structures. Some member states do permit trading of milk quotas within their boundaries, but despite the existence of an internal market, they cannot be traded across national borders. Hence, it is difficult to transfer production from less efficient producers to the more efficient or from less efficient regions to the more efficient.
Of course, some politicians welcome this as a means of enabling farming to survive in these areas. French politicians proudly proclaim that quotas are the reason that milk is still produced in every corner of France. In many areas of Europe only the quota system can guarantee prices high enough to keep farmers in business.
But all this comes at a price. Europe's share of world dairy markets has been falling. Third country markets for dairy products are being captured by more efficient producers in North and South America.
Dairy farmers like them, of course. Their arrival gave them a windfall capital gain and a retirement pot that can be worth as much as €1m.
There was a bare qualified majority in the Special Committee on Agriculture for the quota increase. Germany with a Bavarian farm minister is against, as are Austria, Finland (where there are quite a lot of dairy farmers) and Malta (where there are very few). France would like to delay, but the change will probably be go through and a small step will have been taken towards a more market oriented system.
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