The UK Government has taken its first steps towards a national food security policy and abandoning its long-held stance of leaving supply to be determined by the market. However, it does not look as if it is going to ditch its support for reform of the CAP.
A discussion paper issued by Defra found 'the current global food security situation is a cause for deep concern', listing high energy prices, poor harvests, rising demand, biofuels and export bans in some countries as the main factors.
The government said it wanted to keep British farmers' productivity high, but insisted that the UK should not aim to be self-sufficient in food as that would make food supply too vulnerable to shocks, such as a poor harvest, floods or disease.
A food security policy, according to the document, would have to ensure a reliable supply of food; an efficient transport system; and that food was available at prices people could afford - in particular 'whether low-income consumers can afford enough nutritious food.' However, the paper was short on specifics on how the latter would be achieved.
The paper does not signal a revival of subsidies. Peter Kendall, president of the National Farmers' Union, attacked the government for failing to commit to 'concrete proposals' to help farmers.
Britain now relies less on food imports than during most of the last century. The UK is about 60 per cent self-sufficient in food, up from about 40 - 50 per cent in the 1950s which was the heyday of productivism and national subsidies. The UK's self-sufficiency was at its highest at more than 70 per cent in the 1980s when generous CAP subsidies encouraged farmers to over produce.
Sunday, July 20, 2008
Sunday, July 13, 2008
Biofuel targets in doubt
The pace at which biofuels are introduced into the UK transport sector should be slowed, according to the 'Gallagher review' from the Government's Renewable Fuels Agency.
In the review Professor Gallagher states that 'there is a future for a sustainable biofuels industry. But feedstock production must avoid agricultural land that would otherwise be used for food production ... and the introduction of biofuels should be significantly slowed until adequate controls to address displacement effects are implemented.'
The report suggests that the target for road transport fuels to include 5 per cent biofuels by 2010/11 should be extended to 2013/14 and only increased thereafter 'if biofuels are shown to be demonstrably sustainable.' It also says that the EU's separate target of a 10 per cent inclusion rate by 2020 is not justified, and should be cut to 5 to 8 per cent.
Only 1 per cent of the world's crop land is given over to biofuel production at preesnt, and the review found it was probable that there was enough agricultural land available in the world to grow food and fuels at least until 2020. The review found that biofuels would contribute about 15 per cent to rises in the price of grain in Europe by 2020, compared with 2006 prices, if current biofuels targets were followed through.
The review also found, however, that the price of vegetable oils and oilseed was vulnerable to competition from biofuels, and would rise as much as 70 per cent in the US by 2020. compared with 2006 prices, if biofuel targets were met.
In the review Professor Gallagher states that 'there is a future for a sustainable biofuels industry. But feedstock production must avoid agricultural land that would otherwise be used for food production ... and the introduction of biofuels should be significantly slowed until adequate controls to address displacement effects are implemented.'
The report suggests that the target for road transport fuels to include 5 per cent biofuels by 2010/11 should be extended to 2013/14 and only increased thereafter 'if biofuels are shown to be demonstrably sustainable.' It also says that the EU's separate target of a 10 per cent inclusion rate by 2020 is not justified, and should be cut to 5 to 8 per cent.
Only 1 per cent of the world's crop land is given over to biofuel production at preesnt, and the review found it was probable that there was enough agricultural land available in the world to grow food and fuels at least until 2020. The review found that biofuels would contribute about 15 per cent to rises in the price of grain in Europe by 2020, compared with 2006 prices, if current biofuels targets were followed through.
The review also found, however, that the price of vegetable oils and oilseed was vulnerable to competition from biofuels, and would rise as much as 70 per cent in the US by 2020. compared with 2006 prices, if biofuel targets were met.
Thursday, July 10, 2008
French press for EU summit on CAP
French farm leaders have asked President Sarkozy to organise a Special Summit of EU heads of government on 'EU ambitions for the agriculture and agri-food sectors.' Perhaps the word 'EU' should be replaced by 'French'.
French Farm Minister Michel Barnier has already made it clear that he wants to have an in-depth discussion on the post-2013 CAP at the Informal Farm Council in Annecy in late September. This has received a cool reception from Commissioner Mariann Fischer Boel who told Agra Focus, 'I am not sure that it is properly timed, to discuss this before we finalise the Health Check - but it is always a prerogatve of the Presidency to decide on the discussions during its tenure.'
Agra Focus also notes that during recent months 'French officials - and Farm Minister Michel Barnier in particular - have been omnipresent in Brussels, taking every occasion to raise issues, present memorandums or reports, and launch new initiatives. No one in our editorial team can remember a Member State ever being quite so keen to take office.'
France no doubt sees the food prices 'crisis' and the way that food security has moved up the political agenda as an opportunity to advance its agenda of subsidy and protection.
French Farm Minister Michel Barnier has already made it clear that he wants to have an in-depth discussion on the post-2013 CAP at the Informal Farm Council in Annecy in late September. This has received a cool reception from Commissioner Mariann Fischer Boel who told Agra Focus, 'I am not sure that it is properly timed, to discuss this before we finalise the Health Check - but it is always a prerogatve of the Presidency to decide on the discussions during its tenure.'
Agra Focus also notes that during recent months 'French officials - and Farm Minister Michel Barnier in particular - have been omnipresent in Brussels, taking every occasion to raise issues, present memorandums or reports, and launch new initiatives. No one in our editorial team can remember a Member State ever being quite so keen to take office.'
France no doubt sees the food prices 'crisis' and the way that food security has moved up the political agenda as an opportunity to advance its agenda of subsidy and protection.
Thursday, July 03, 2008
Thinking about food security
The Food Ethics Council has established an enviable reputation for reflective thinking about the challenges facing the food chain. It is therefore interesting to read a report from its Business Forum about food security.
The report points out that one reason that food security has risen up the political agenda is 'in part down to opportunism, as interest groups use a period of crisis to advance their agenda.' Although the report doesn't make this point, this has been particularly evident in relation to the CAP which its defenders seizing on rising food prices as a justification for maintaining subsidies, some even advocating the revival of discredited policy instruments such as intervention buying.
The report points out that 'Raised food prices may also put pressure on the environment, threatening to undo improvements in sustainability that have been achieved in recent decades. On the demand side, some consumers may "trade down", potentially compromising on premium products that make environmental, social and animal welfare claims. On the supply side, higher prices may drive producers to farm harder, potentially compromising biodiversity and other ecological benefits.'
The report commends the notion of 'food capacity' developed as an alternative to 'food security' by City University. In this approach, 'Building production capacity means improving the production base and supply chain governance, promoting labour skills and investing in R & D that supports sustainable agriculture.'
The report points out that one reason that food security has risen up the political agenda is 'in part down to opportunism, as interest groups use a period of crisis to advance their agenda.' Although the report doesn't make this point, this has been particularly evident in relation to the CAP which its defenders seizing on rising food prices as a justification for maintaining subsidies, some even advocating the revival of discredited policy instruments such as intervention buying.
The report points out that 'Raised food prices may also put pressure on the environment, threatening to undo improvements in sustainability that have been achieved in recent decades. On the demand side, some consumers may "trade down", potentially compromising on premium products that make environmental, social and animal welfare claims. On the supply side, higher prices may drive producers to farm harder, potentially compromising biodiversity and other ecological benefits.'
The report commends the notion of 'food capacity' developed as an alternative to 'food security' by City University. In this approach, 'Building production capacity means improving the production base and supply chain governance, promoting labour skills and investing in R & D that supports sustainable agriculture.'
Tuesday, June 24, 2008
Has rural development money been wasted?
This is the question posed by Professor Harald von Witzke, Chair for International Agricultural Trade and Development at Berlin's Humboldt University, in the latest of the Agra Focus series of interviews on the future of agricultural policy.
He argues that a lot of white elephants are being financed with 2nd pillar money because there is more money available than good projects. In particular, some job creation projects are not creating the jobs.
He considers that it would be better to shift money into research and development than rural development policy. Of the increase in production between 1961 and 2000, only 22 per cent was due to an increase in land area. The remaining 78 per cent was due to improvements in yields. That is why increasing productivity remains the key.
He points out that the justification for direct payments to farmers keeps shifting. Initially, he thought they were made in order to compensate farmers for quality regulations they have to observe that competitors outside the EU don't have to observe and that they are being compensated for the production of public goods.
However, he had not seen any analysis that suggested that the amount of public goods and the competitive disadvantage for farmers is as high as €400 a hectare. Farm payments should be reduced to a reasonable level that reflected the public goods being produced by agriculture and represent some compensation for the competitive disadvantage for quality regulations in the EU.
He argues that a lot of white elephants are being financed with 2nd pillar money because there is more money available than good projects. In particular, some job creation projects are not creating the jobs.
He considers that it would be better to shift money into research and development than rural development policy. Of the increase in production between 1961 and 2000, only 22 per cent was due to an increase in land area. The remaining 78 per cent was due to improvements in yields. That is why increasing productivity remains the key.
He points out that the justification for direct payments to farmers keeps shifting. Initially, he thought they were made in order to compensate farmers for quality regulations they have to observe that competitors outside the EU don't have to observe and that they are being compensated for the production of public goods.
However, he had not seen any analysis that suggested that the amount of public goods and the competitive disadvantage for farmers is as high as €400 a hectare. Farm payments should be reduced to a reasonable level that reflected the public goods being produced by agriculture and represent some compensation for the competitive disadvantage for quality regulations in the EU.
Sunday, June 22, 2008
Sarko blames Mandy for referendum result
French president Nicolas Sarkozy has blamed trade commissioner Peter Mandelson's stance on trade for the Irish referendum result. Sarkozy said, 'A child dies of starvation every 30 seconds and the Commission wanted to reduce European agricultural production by 21 per cent during World Trade Organisation talks. This was frankly counter productive.'
Apart from the fact that the Commission has never suggested a specific cut in production, which is beyond its control, only cuts in tariffs and subsidies, developing countries would be able to raise their standard of living if they had a more commercial agriculture which had better access to world markets.
Peter Mandelson hit back, saying'Any suggestion that Europe can turn its back on open trade or reverse globalisation is a dead end for the people of Europe.' He added, 'Europe cannot possibly feed the rest of the world but Europe can help the rest of the world to feed itself by reforming its trade-distoring agricultural policies.'
This does not bode well for the French presidency, although the likely delay to implementation of the Lisbon treaty would also postpone the introduction of co-decision to the CAP - which could make reform more difficult.
Apart from the fact that the Commission has never suggested a specific cut in production, which is beyond its control, only cuts in tariffs and subsidies, developing countries would be able to raise their standard of living if they had a more commercial agriculture which had better access to world markets.
Peter Mandelson hit back, saying'Any suggestion that Europe can turn its back on open trade or reverse globalisation is a dead end for the people of Europe.' He added, 'Europe cannot possibly feed the rest of the world but Europe can help the rest of the world to feed itself by reforming its trade-distoring agricultural policies.'
This does not bode well for the French presidency, although the likely delay to implementation of the Lisbon treaty would also postpone the introduction of co-decision to the CAP - which could make reform more difficult.
Wednesday, June 18, 2008
Animal welfare dilemmas
One of the advances made when Franz Fischler was farm commissioner was to recognise farm animals as sentient beings rather than agricultural products. This provided a basis for treating animal welfare as one of the planks of multifunctionality. However, a vet who is an animal welfare expert suggested in a talk (under Chatham House rules) that I attended that this could face a challenge under WTO rules at some point in the future.
She noted that most intensive, behaviourally restrictive systems had been or were being phased out – battery chickens, veal crates, sow tethers (the latter only in the UK). Things like veal crates were very obvious system which coud readily be understood by the interested public. The animal welfare problems we were running into now are more complex to do with breeds and genotypes of animals and whether they are fit for the systems they are in. Things like stocking density, length of journey, consciousness after being stunned were easy to measure. Which genotype was going to fit into a production system was more complex.
Of course there can be important differences between member states. The ban on sow tethering in the UK resulted from private members' legislation and did not apply in Denmark. Consumers in the UK seemed to be generally unaware of this difference in production methods. The UK pig industry was on its knees and got little reward for its more animal welfare friendly systems.
She noted that most intensive, behaviourally restrictive systems had been or were being phased out – battery chickens, veal crates, sow tethers (the latter only in the UK). Things like veal crates were very obvious system which coud readily be understood by the interested public. The animal welfare problems we were running into now are more complex to do with breeds and genotypes of animals and whether they are fit for the systems they are in. Things like stocking density, length of journey, consciousness after being stunned were easy to measure. Which genotype was going to fit into a production system was more complex.
Of course there can be important differences between member states. The ban on sow tethering in the UK resulted from private members' legislation and did not apply in Denmark. Consumers in the UK seemed to be generally unaware of this difference in production methods. The UK pig industry was on its knees and got little reward for its more animal welfare friendly systems.
Friday, June 13, 2008
The food price 'crisis'
An analysis of the factors underlying the recent increase in food prices is provided in a Commission document: Prices
The document notes that the largest increases in agricultural prices are observed in the wheat and rice markets, where the two major causes commonly used in the press to explain the recent price increases - demand for biofuels and increased demand in China/India - have had the mallest impact. For rice and wheat, supply side factors - both in terms of unfavourable climate conditions and lower yield growth - are the main causes.
In the cases of maize and soya, however, strong demand for biofuels and increasing imports in China explain most of the price rises. The failure of wheat and rice production to respond to increased market demand is in contrast to development in the maize sector.
Slow yield growth, most notably for wheat, has been an important factor. Combined with short term weather factors, world stocks have fallen to significantly low levels, stimulating the sharp increase in prices. Maize and soybean markets have been mainly driven by a strong growth in global demand - mainly for increased meat consumption (through feed use) and to a lesser extent for biofuels use. In 2007, the Australian drought, high temperatures in central and eastern Europe, and a cold spring in Ukraine and Russia substantially reduced harvests.
The failure of agricultural output to keep pace with demand growth, the Commission says, is likely to be linked globally to lack of public research in agriculture - notably in seed improvement, as well as to the rise in production cists and the decline in farming profitability (until recently) in developed countries. Environmental legislation in some countries, particularly in Europe, is also said to be likely to be hampering production increases.
The document notes that the largest increases in agricultural prices are observed in the wheat and rice markets, where the two major causes commonly used in the press to explain the recent price increases - demand for biofuels and increased demand in China/India - have had the mallest impact. For rice and wheat, supply side factors - both in terms of unfavourable climate conditions and lower yield growth - are the main causes.
In the cases of maize and soya, however, strong demand for biofuels and increasing imports in China explain most of the price rises. The failure of wheat and rice production to respond to increased market demand is in contrast to development in the maize sector.
Slow yield growth, most notably for wheat, has been an important factor. Combined with short term weather factors, world stocks have fallen to significantly low levels, stimulating the sharp increase in prices. Maize and soybean markets have been mainly driven by a strong growth in global demand - mainly for increased meat consumption (through feed use) and to a lesser extent for biofuels use. In 2007, the Australian drought, high temperatures in central and eastern Europe, and a cold spring in Ukraine and Russia substantially reduced harvests.
The failure of agricultural output to keep pace with demand growth, the Commission says, is likely to be linked globally to lack of public research in agriculture - notably in seed improvement, as well as to the rise in production cists and the decline in farming profitability (until recently) in developed countries. Environmental legislation in some countries, particularly in Europe, is also said to be likely to be hampering production increases.
Sunday, June 08, 2008
GM feed ban crisis
A row over the banning of GM feed by British supermarkets raises wider issues about how far new technology can be used to solve problems of world food shortage. There have been calls for a second 'green revolution', but the first green revolution was based on intensive use of fertilisers and irrigation. Fertilisers are rocketing in price while irrigation is a less environmentally friendly option in a time of climate change.
The next technological revolution is likely to involve GM crops, but they face intense resistance in Northern Europe with the concerns of consumers fanned by environmental groups. This applies as much to imports as to local production. The phrase 'Frankenstein foods' has lodged itself in consumers' minds.
Spiralling food prices are placing supermarkets under pressure from farmers' leaders to put poultry fed with genetically modified products back on the shelves. The English National Farmers' Union has held talks with the product managers of all the major supermarkets to explain that shortages of non-GM soyabeans - the key protien source for poultry - was making it both extremely expensive and increasingly difficult to source the GM-free products demanded by retailers.
There is no sign yet that the campaign has forced a change in policy. Supermarkets are very jealous of their green image which they see as giving them an edge over competitors, particular in value added markets where price is not the only differntiator. Sainsbury's have sad that they are investigating 'potential sustainable solutions.' Two of the greenest supermarkets, Marks and Spencer and Waitrose, have said that they will not change their policy.
As the world's biggest exporters have devoted more land to GM crops, the cost of unmodified soyabeans is rising. British farmers are currently paying around £276 per tonne for GM soya and £293/t for non-GM. With the US, the world's biggest producer, now 95 per cent GM, the UK has looked to Brazil for a GM-free alternative. But Brazil, the world's second biggest soya exporter, is expected to increase GM plantings from 54 per cent of its total crop to 65 per cent next year and 80 per cent over the next decade.
The next technological revolution is likely to involve GM crops, but they face intense resistance in Northern Europe with the concerns of consumers fanned by environmental groups. This applies as much to imports as to local production. The phrase 'Frankenstein foods' has lodged itself in consumers' minds.
Spiralling food prices are placing supermarkets under pressure from farmers' leaders to put poultry fed with genetically modified products back on the shelves. The English National Farmers' Union has held talks with the product managers of all the major supermarkets to explain that shortages of non-GM soyabeans - the key protien source for poultry - was making it both extremely expensive and increasingly difficult to source the GM-free products demanded by retailers.
There is no sign yet that the campaign has forced a change in policy. Supermarkets are very jealous of their green image which they see as giving them an edge over competitors, particular in value added markets where price is not the only differntiator. Sainsbury's have sad that they are investigating 'potential sustainable solutions.' Two of the greenest supermarkets, Marks and Spencer and Waitrose, have said that they will not change their policy.
As the world's biggest exporters have devoted more land to GM crops, the cost of unmodified soyabeans is rising. British farmers are currently paying around £276 per tonne for GM soya and £293/t for non-GM. With the US, the world's biggest producer, now 95 per cent GM, the UK has looked to Brazil for a GM-free alternative. But Brazil, the world's second biggest soya exporter, is expected to increase GM plantings from 54 per cent of its total crop to 65 per cent next year and 80 per cent over the next decade.
Thursday, June 05, 2008
Back to the bad old ways
In a paper I gave in Norwich last week, I rather optimistically expressed the view that even if the current 'food crisis' shored up existing protectionism and subsidies in the European Union, we would not see a reversion to old, discredited policy instruments. One such instrument I had in mind was intervention buying which created a risk free market for farmers and produced the notorious grain and butter mountains.
I may have spoken too soon. The latest edition of Food Ethics produced by the estimable Food Ethics Council is devoted entirely to the 'food crisis', although quite what the food crisis is remains undefined. However, the editorial calls for 'rebuilding public stocks, which provide an important buffer against price volatility.'
Inevitably, Moses gets brought into one of the articles. Another article calls for 'public stocks .. to be re-established, with planning for local, national and regional roles. Such stocks provide an important buffer against price spikes and food insecurity.' Of course, they also provide a buffer between consumers and producers because the price mechanism cannot function as a transmitter of information. The writer does admit that they are expensive and there is 'lost theoretical market efficiency'.
That lost efficiency is not theoretical in the abstract sense of the word, it has real implications for whether we make optimal use of scarce resources.
I may have spoken too soon. The latest edition of Food Ethics produced by the estimable Food Ethics Council is devoted entirely to the 'food crisis', although quite what the food crisis is remains undefined. However, the editorial calls for 'rebuilding public stocks, which provide an important buffer against price volatility.'
Inevitably, Moses gets brought into one of the articles. Another article calls for 'public stocks .. to be re-established, with planning for local, national and regional roles. Such stocks provide an important buffer against price spikes and food insecurity.' Of course, they also provide a buffer between consumers and producers because the price mechanism cannot function as a transmitter of information. The writer does admit that they are expensive and there is 'lost theoretical market efficiency'.
That lost efficiency is not theoretical in the abstract sense of the word, it has real implications for whether we make optimal use of scarce resources.
Saturday, May 31, 2008
Rethinking Less Favoured Areas
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.
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 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.'
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