A developed country expert takes a look at ag policy in the Global South

I thought I would take a look outside my comfort zone and see how agricultural tax and subsidy policies are developing in DCs and emerging countries.   I am not an expert on either so apologies in advance for any errors or misunderstandings.   I have drawn a lot on IMF, FAO and Royal Geographical Society analyses.

Caution is necessary in making generalizations about developing countries as they range from emerging countries that are significant agricultural exporters to least developed countries where semi-subsistence and subsistence agriculture is predominates and engagement with the global economy is limited.   Each country can tell a different story that is the product of interacting factors that include climatic conditions (and how rapidly they are changing); economic structures; and the political framework.    However, some useful generalizations can be made about what is a complex and changing picture.   In particular, developing countries are being increasingly pressed by the World Bank and other international institutions to take account of climate change in their domestic policies and indeed for many of them water scarcity is an increasing challenge.

Leading Mercosur members

The variety of trajectories and the factors that influence them can be considered by briefly examining the cases of the three leading Mercosur countries: Chile, Argentina and Brazil.  Each of them is a significant agricultural exporter and in that sense can be seen to be beneficiaries of globalization, but the constraints and opportunities they face have been mediated by domestic considerations.   Above all, one can see the influence of path dependency, historical choices of strategy.

Chile is an OECD member, reflecting its relative prosperity.  It has a dynamic domestic retail market with sophisticated consumers that help to underpin the agri-food sector as a whole.   It has a wide variety of climatic regimes, but is particularly strong in wine, fruit and vegetables.  In 2022 agriculture and related sectors accounted for some 27 per cent of total Chilean exports.    Political tensions surrounding the constitution, but also stemming from income divergence, have not been resolved, but on the whole there is a stable political and regulatory environment.    

However, a crime wave contributed to growing unrest in the run up to the presidential elections scheduled for November 2025.   Agricultural technology and production is well supported by a mix of public, private and academic stakeholders. The country has had a relatively open commercial policy with 33 international trade agreements that cover 65 markets.   Water scarcity as a result of climate change is a potential challenge with 70 per cent of available water resources used by agriculture.

Argentina is in many respects a story of long-term decline resulting largely from mismanagement by successive populist governments.   Nevertheless, it remains a major exporter of grain, soya, meat and wine (the latter, particularly from the Andes foothills, is an international success story).  It is the world’s third largest agricultural exporter, with the agricultural sector accounting for 16 per cent of GDP and 11 per cent of tax revenues in 2021.   There has been a history of governments imposing export taxes on the sector to raise revenues, aggravated by uncertainty surrounding the peso.

 In 2021, Argentina ranked second among countries with the highest rate of tax collection from duties (2.1 per cent of GDP).   The World Bank notes that ‘In recent years the country has been losing market share in international markets which raises concerns about the sector’s competitiveness.’ In the World Bank’s view ‘the country’s poor performance in agri-food production and exports relative to its potential can be attributed to policies that have heavily taxed and constrained the sector.’

Even under the libertarian oriented Milei regime these policies have not changed fundamentally. The administration’s economic strategy relies on agricultural exports bringing in badly needed foreign currency to build up the central bank’s depleted foreign exchange reserves and to boost the state’s financial credibility.   In January 2025 Milei temporarily lowered export duties on key agricultural exports, e.g., from 33 per cent to 26 per cent for soybeans, and the main grains from 12 per cent to 9.5 per cent.   However, he made it clear that the duties would be reintroduced in July to the disappointment of large scale agricultural producers.

 Brazil’s great asset is plentiful supplies of land for growing a range of crops and raising beef, but the grubbing up of large tracts of Amazon rain forest has attracted international criticism because of its potential adverse contribution to climate change.   Agriculture has accounted for around 25 per cent of GDP in the last two decades   Brazil is the fourth largest agricultural producer in the world and is the leading producer of crops such as soy, sugar cane and maize. 

In 2025 Brazil found itself locked in a trade battle with the US despite running a trade deficit with that country.   President Trump threatened 50 per cent tariffs against Brazil because of the court proceedings against former right-wing president Bolsinaro who was charged with plotting a coup.  These are among the largest tariffs threatened against any country by the US, but Brazil took a defiant stance, resenting interference in its internal affairs on this and other matters.   This example show how patterns of agricultural trade can be disrupted by considerations that have nothing to do with agriculture. 

These three emerging countries are substantially reliant on agricultural trade and this influences their domestic and international trade policies.   At the other end of the spectrum are the countries of sub-Saharan Africa where water constraints are particularly severe and are worsening because of climate change. 

Charities such as Farm Africa follow an incremental strategy of converting subsistence farmers (often women) into semi-subsistence farmers who sell into local markets so that they can invest in their crops.   The International Monetary Fund (IMF) notes that ‘overall (explicit and implicit) agriculture and food subsidies are lowest (in fact, often negative) in sub-Saharan Africa {and] relatively low in Latin America and the Caribbean.’  The strong implicit taxation of low income developing countries agriculture ‘is primarily a sub-Saharan African phenomenon.’

Kenya

 There are, nevertheless, some relative success stories which are related to international trade.  ‘Agriculture is key to Kenya's economy, contributing 33 per cent of the Gross Domestic Product (GDP) and another 27 per cent of GDP indirectly through linkages with other sectors. The sector employs more than 40 per cent of the total population and more than 70 per cent of Kenya's rural people.’  (FAO). 

Kenya joined the WTO in 1995 as it sought to move away from an import substitution model in favour of an export oriented engagement with the global economy.  Changes in the political environment may have contributed to this shift in terms of: ‘the gradual transition to a relatively embryonic democratic multi party-based political system.  Despite democratic electoral process, Kenya follows a hybrid regime—a mixed type of political regime that combines autocratic features with democratic ones.’  (Singh, 2023, 2567).   Nevertheless, there are episode of instability including rioting, fuelled by continuing income inequality and poverty in urban and rural settings, even if overall levels of poverty have declined.

Kenya has developed a strong horticultural export trade with Europe, particularly the UK, becoming a leading exporter of cabbages and leguminous vegetables such as peas, beans and mage tout.  As they are high value and perishable, they are generally ‘air freighted for freshness’, a practice that has attracted criticism because of carbon emissions.  Kenya sends out about 350 tonnes of vegetables and cut flowers each night ready to be sold next day in UK supermarkets.  Horticulture accounts for over 90 per cent of exports.   The country has been a pioneer in the development of the use of biological pest control products as an alternative to chemical pesticides.      

However, critics of Kenya’s integration in global value chains argue that ‘The framework considers value chain inclusion as a management or competency issue but overlooks the asymmetrical relations in the agricultural value chain (buyer-driven) dominated by lead firms. Furthermore, it fails to recognise that small and marginalised farmers have limited capacity to assess risk factors that exist due to asymmetrical power relations.’ (Singh, 2023,2567).  Farms based in Kenya that have contracts with UK companies are high-tech, commercial businesses that have to produce food to very high standards.     Kenya’s integration in global value chains has had positive economic results for the country, but there are concerns about the wages paid to labourers, over use of irrigation and other environmental impacts.

Input subsidies were important in developing countries in the 1960s and 1970s, but the preference of growing urban populations for cheap food saw farmers disadvantaged.   Producer subsidies were restored in many countries in the 21^st century, often with the support of donors. As developing countries become more prosperous it is possible to introduce new producer support programmes such as the Kenyan Fertilizer Support Programme in 2023 which covered 54 per cent of fertilizer costs.   In LIDCs there is not the fiscal space to provide subsidies and after account is taken of border measures and market price control net assistance to agriculture is negative.

‘In Emerging and Developing Asia, implicit support starts out negative, a tax on agriculture …. And after the late 2000s, it becomes strongly positive.’  (IMF)   Historically Taiwan used the agriculture sector to provide capital for industrialization, as indeed happened in Britain’s Industrial Revolution but without government intervention.   Farmers had to buy fertilizer from government factories at 40 per cent above the market while taxes had to be paid for in the rice they produced.  Those policies have long since been abandoned.

For agricultural exporting countries like those in the southern cone of South America the international trade regime remains of critical importance.   These are generally emerging countries, but it is also important for countries integrated into supplying global value chains such as Kenya.  Global value chains (GVCs) have played a transformative role in reshaping agricultural trade flows by linking producers in developing countries with retailers and processors in developed and increasingly other developing economies.   Peru offers another example of a boom in horticultural exports such as avocados and blueberries with trade agreements with China and Japan opening up new markets.   For structural reasons, LIDCs have less direct engagement with global markets.

In analysing DCs one can see aggregate trends that are reshaping trade flows, but also particular country stories that reflect specific geographic considerations and economic and political histories which can lock countries into path dependency, but they can also embark on new paths.    What us therefore needed is a political economy that takes account of both specific national considerations and the international context.   The erratic trade policies of the US make it even more challenging to develop such a framework.

A small step towards ending the CAP's exceptionalism

The merger of the CAP into another fund under broad horizontal principles is a complex subject, but Alan Matthews takes a deep and comprehensive dive into it here, exploring every possible angle: https://capreform.eu/horizontal-principles-in-the-next-mff-and-implications-for-the-cap/

But it looks as if any impacts on the CAP will be incremental and relatively limited.  Matthews concludes: 'This reframing of the horizontal principles marks a very small step towards eroding the CAP’s historical exceptionalism. CAP spending is treated the same as other shared management spending in the National and Regional Partnership Plans. The impact of the new architecture on the way CAP money is spent remains to be seen.'

How can we get climate action in EU agriculture?

Professor Alan Matthews of TCD reports: 'A new paper just published by the EIU School of Transnational Governance puts forward a Strawman proposal to accelerate climate action in EU agriculture https://lnkd.in/dWv6GgDq. 

The three people behind the proposal are heavyweights in EU climate policy. Artur Runge-Metzger is a former Director in DG Climate Action in the European Commission, Peter Vis was central to the development of EU climate policy in several roles in the Commission, including as Head of Cabinet for Connie Hedegaard, the EU's first Climate Commissioner, while Professor Jos Delbeke who currently holds the EIB Chair on Climate Policy and International Carbon Markets at the EIU was previously Director-General of DG Climate Action. All were centrally involved in the development of the EU's climate targets for 2020 and 2030 and the initiation of its Emissions Trading System.

They have produced a Strawman proposal to accelerate the reduction in agricultural emissions with five elements which they argue can turn climate action into business opportunities for farmers and processors. Their five actions are:
1. Creating public demand for voluntary carbon farming.
2. Creating private demand for carbon farming through setting downstream mandatory (and gradually declining) emission intensity standards, for example, per unit of milk or meat.
3. Creating lead markets for novel products such as bio-based materials.
4. Introducing a farm-level incentive system to price emissions implicitly seen as a cap-and-trade AgETS.
5. A new public-private finance facility to finance necessary investments in mitigation technologies, adapting carbon stores to climate change, and support for novel value chains.

The sheer breadth of experience in climate policy design behind this proposal is guaranteed to give it a central position in policy discussions around the 2040 target, even if the authors accept that the politics of getting a political agreement "will be enormously challenging".

WG: You can say that again, given the row back there has already been on the greening of the CAP in the face of farmer pressure!  Measures on climate change have been particularly limited, althoughit is already impacting on farmers.

How trade impacts farmers

 Professor Alan Matthews of TCD reports: 

'The number of new studies, reports and policy briefs is now so overwhelming it is impossible to keep up, and I have only just come across this briefing for the European Parliament International Trade Committee on 'Trade aspects of the Strategic Dialogue on the future of EU agriculture and the impact of trade on the competitiveness and sustainability of European agriculture' https://lnkd.in/dhtEBim4 that was published in February this year. 

This short paper nicely captures the dual role of trade as both acting positively for farmers as a source of inputs and creating new markets, and acting negatively where it increases competition and introduces market volatility. A significant gap is that the paper discusses the need for a level playing field on regulatory standards with third countries to ensure fair competition, but surprisingly without mentioning mirror clauses or reciprocity or suggesting guidelines when they might be appropriate. Still work to be done here.'

Farm lobby wins Parliament budget vote

Professor Alan Matthews reports on Linkedin: "The European Parliament has now voted in plenary (7 May) on its MFF resolution. The AGRI Committee through its Chair re-introduced amendments not previously accepted by the Budget Committee but which were accepted by plenary 381 votes to 245 for paragraph 29 and by 358 votes to 268 for paragraph 30.

Para 29 now "calls for an increased and dedicated budget for the CAP in the next MFF, safeguarding it from possible cuts" as well as calling for "additional dedicated funding sources to be explored where appropriate, including outside of the CAP, in order to cope with natural disasters and provide incentives to farmers and foresters to contribute to climate change mitigation, biodiversity recovery and nature protection, without measures causing a regression in EU agricultural production".

Para. 30 notes that "the CAP urgently needs an increased budget in the next MFF that is indexed to inflation through annual re-evaluation" and underlines that direct payments "should continue to strengthen income security, production and protection against price volatility, better targeting persons actively engaged in agricultural production and the provision of public goods, while respecting realistic and balanced EU environmental and social standards"  

This looks like a win for the farm lobby to me.

Budget structure proposals upset farm lobby

It may seem a very technical matter, but proposed changes to the EU budget structure have upset farm lobby COPA/COGECA.   They have sent an open letter to the Commission president, reminding her of the large scale farm protests in 2024.

They state: 'In an era of geopolitical instability, economic uncertainty, and mounting societal challenges, a strong and resilient agricultural sector is not just strategic; it is the keystone that supports the EU’s entire security architecture. Copa-Cogeca and its members representing European farmers and agri-cooperatives are steadfast in our commitment to ensuring food security, sustainability, as well as economic and social stability for 450 million citizens of Europe and beyond.

The pan-European agricultural protests of 2024, though driven by different causes, all revealed the vulnerability of our communities, exposed to the cumulative and conflicting effects of policies in an increasingly complex market environment.

The recent European Commission’s Vision for EU Agriculture and Food rightly acknowledges the sector’s strategic importance. Likewise, the Council’s EU Strategic Agenda and the Commission’s political guidelines for the 2024-2029 mandate recognise the indispensable contribution of farmers and rural communities to Europe’s economic and social fabric.

The farming community is still grappling with numerous challenges, such as geopolitical instability, high energy prices, legal uncertainties, and stricter environmental regulations. While farmers have made significant progress in improving productivity and reducing emissions, they still face rising costs and unfair competition, which is eroding their income and making it harder to remain competitive.

As you, President von der Leyen, rightly emphasised: we are entering a new era of rearmament in which Europe must assume greater responsibility for its own security. In this spirit, we firmly believe that there is no security without food security — and no strategic autonomy without food autonomy.

This is why we are profoundly alarmed by recent discussions on reallocating EU funding into a Single Fund effectively eliminating the EAGF and EAFRD – the pillars of the Common Agricultural Policy (CAP). Such a shift represents a fundamental change to the governance of the next Multiannual Financial Framework (MFF) and would severely undermine the CAP, which remains the cornerstone of Europe’s competitiveness and food sovereignty.

Dismantling the two-pillar CAP structure based on the EAGF and EAFRD alongside using a single national programming approach per Member State will lead to a further loss of commonality in European policies. Besides further weakening the Single Market, this will have far-reaching consequences for food production and security and the maintenance of vibrant and populated rural areas in the EU. There is a clear added value in European expenditure when it comes to policies such as the CAP and this must be recognised and kept.

We are not the only ones who think so. Alongside 28 other key EU agri-food organisations, we have already conveyed a simple but crucial message to you and EU leadership: a dedicated increased CAP budget is not merely a matter of financial support, but a strategic investment in Europe’s future resilience and security.     [Good luck with that call given the other demands on EU funds and the still disproportionate share of EU finding that goes on the CAP.]

It was also one of the key conclusions of the Strategic Dialogue that were delivered to you last September: the multiple transitions required for European agriculture can and will only be achieved 

Agri-food may stand in way of new EU trade deals

Professor Alan Matthews provides an authoritative and informative analysis of Trump tariffs and the EU agro-food sector.  Although originally published in February, it largely stands the test of time, other than for the ease of imposing tariffs on US spirit exports: http://capreform.eu/trump-ii-tariffs-and-the-eu-agri-food-sector/

As the EU seeks to expand and diversify its trade deals, it is evident that concerns about agriculture are a potential obstacle to its scope of action.   Discussions with Australia collapsed in 2023 over beef exports, although they could be revived after its general election next month.

Notwithstanding von der Leyen’s ambitions to secure new deals, the recent history of EU trade talks underscores how difficult it will be to consummate meaningful alliances.  Brussels has struggled to clinch agreements in recent years because of sensitivities in its 27 member states over agricultural products. 

Although the bloc has a €63bn trade surplus in agri-food, it does not want to allow more chicken, beef and sugar in after huge protests by farmers over the past two years. France and several other countries, for example, have yet to ratify a deal with Canada signed in 2016 because it would allow more beef imports. 

Paris, Vienna and The Hague have yet to back the Mercosur accord, saying they need greater protection for farmers, although it contains a mechanism to choke off imports if there is market disruption.

EU budget format changes and their implications for the CAP

Proposals for changes to the EU budget format that could affect the CAP are discussed in depth by Professor Alan Matthews: http://capreform.eu/fitting-the-cap-into-the-next-mff-long-term-budget/

Both the Budget and the CAP are very complex and technical issues so considering them alongside each other is almost mind blowing, even for those with some expertise in the area.

However, the take home message from Professor Matthews is: 'there is limited scope to improve the effectiveness of CAP spending by redesigning the MFF, which reinforces the need for a greater focus on the CAP regulations themselves.'

The underlying issues are very familiar and have been around for decades.   Nevertheless, they require fresh consideration.

US tariffs will hit EU agri-food sector

Professor Alan Matthews examines the likely impact on the EU agri-food sector of 25 per cent tariffs imposed by the United States: http://capreform.eu/trump-ii-tariffs-and-the-eu-agri-food-sector/

It's not good news for the sector which has an overall trading surplus with the US.   Some niche or more up market products may be able to withstand the resultant price hike, but products more to the commodity end of the spectrum will be hit.

The EU doesn't have many options.  The favoured one of retaliation is unlikely to help the sectors that will be most affected.

Farmers welcome EU shift of tone but want more money

Farmers' lobby COPA/COGECA has given a broad welcome to a new Commission document on the CAP, but argues that more funding is needed to realise the vision.

The Commission's statement on the roadmap is here: https://ec.europa.eu/commission/presscorner/detail/en/ip_25_530

The farmers state: 'Today, the European Commission unveiled a key communication, long trailed by Ursula von der Leyen, outlining the EU’s vision for agriculture and food policy. This roadmap represents a pragmatic reset based on relevant analysis and grounded observations and proposes an ambitious catalog of future work strands. However, it fails to address the elephant in the room: the future CAP budget and the resources needed to finance this package of measures.

In its assessment of the current situation, the Commission appears to have regained its bearings in agricultural policy and is now speaking a different language. The importance of agriculture—its role and vulnerabilities—within the current geopolitical context is now fully acknowledged. Commissioner Hansen’s approach rightly repositions agriculture as a key strategic asset and a pillar of European sovereignty. Farmers are also recognized as entrepreneurs and innovators who play a crucial role in addressing climate challenges, protecting the environment, supporting the bioeconomy, and contributing to society as a whole. The Commission has also correctly diagnosed the sector’s demographic and economic fragilities, bringing the issues of farm income, competitiveness, innovation, cooperation and generational renewal back to the fore.

Political will, starting with a focus on simplification, also forms part of the picture. We welcome the need for stricter alignment of production standards for imported goods, particularly concerning plant protection products and animal welfare based on stronger and more comprehensive impact assessments, which should be published prior to any major trade decisions. The principle of ‘no bans without viable alternatives’ for plant protection products is explicitly stated, as is the need for a renewed approach toward the livestock sector.

Yet despite these positive elements, today’s announcement misses a fundamental part of the equation. In the current context, it is impossible to ignore the ongoing debate over CAP financing in the next Multiannual Financial Framework (MFF). Last week, Copa Cogeca warned of the dangers of merging funds and establishing single budgetary national plans. However, today’s vision makes no mention of the CAP budget and references to the second pillar and its funding are simply absent from the final version of the communication. The complementarity between the EAGF delivering on support and the EAFRD facilitating multiannual measures and investment is crucial for the sector and must be maintained.

Let’s be clear: ambitions and proposals will amount to little without a robust CAP. One which supports active farmers - regardless the size - and is backed by an increased budget in the post-2027 MFF. This budget must include automatic corrections for inflation and the growing responsibilities placed on agriculture. Without this, Europe’s farming communities will face significant challenges, and the vision for the sector’s future risks becoming a hollow promise.

How do we get older farmers to exit in favour of younger ones?

Generational renewal in agriculture is a hot topic in Brussels (and in the UK in the context of the APR debate) and Alan Matthews summarises his views given in a recent submission to a Commission looking into the topic in Ireland: http://capreform.eu/addressing-generational-renewal-the-situation-in-ireland/

He concludes: 'allocating yet more funding to young farmer measures mainly provides support to those who have already succeeded in entering the farming profession. There is mixed evidence on the extent to which it actually allows or facilitates more young people to enter farming. Here the principal barrier is gaining access to land, and this requires the exit of older farmers. Without giving a clear financial incentive for earlier transfer, the generational imbalance between young and old farmers will hardly improve.'

Future pathways for the CAP

An important report on the next reform of the CAP has been produced for the European Parliament Agri Committee: https://www.europarl.europa.eu/RegData/etudes/STUD/2025/759316/CASP_STU(2025)759316_EN.pdf

The report notes: 'The European agri-food system is facing an increasing number of challenges. Most of these challenges were already present when the current CAP was discussed. Other challenges, such as global food security on the European continent and the autonomy of European agriculture, have been put back on the agenda due to the Covid-19 crisis, the war in Ukraine, world geopolitical tensions and agricultural protests.'

The report helpfully distinguishes five future pathways: Within the two “production” pathways (Pathways A and B), there is a second trade-off between Pathway A (Intensification and exports)based on price competitiveness and Pathway B (Support for all types of farms)which aims at maintaining productive capacity by supporting farm incomes for all types of farms Within the three “climate and environment pathways, Pathway C (Resource use efficiency through the optimisation of current production systems), contrasts with Pathways D and E, which require much more profound changes (land-sparing for Pathway D vs land-sharing/agro-ecology for Pathway E).

The report comments: 'The dominance of transnational companies in food value chains is high and increasing (Howard, 2016). Industrial concentration is very high in the global agricultural commodity market, agri-food industries and farm input suppliers(seeds, pesticides, farm equipment, etc.). Multinational firms have a strong incentive to lobby against measures at the EU border.'

The report also notes: 'The growth in the economic power of multinational companies gives them increasing power over political processes. Interest groups that are financially and politically powerful are able to discredit their rivals on policy decisions (see, for example, Oreskes and Conway, 2010). The EU and MSs should strengthen the rules on the integrity and transparency of lobbying to improve the trade policy-making process.'

The usual suspects continue to subsidise

The OECD Agricultural Policy Monitoring and Evaluation Outlook 2024 has just been published and provides a comprehensive analysis and global reference on government support to agriculture across 54 countries, which shows that total support to agriculture averaged USD 842 billion per year during the 2021-23 period.

Support remains concentrated in a few large economies, with China, the United States, India and the European Union representing 37%, 15%, 14% and 13% of the total respectively. Although public support for agriculture has declined since 2021 it remains near historic highs and is still not sufficiently directed at critical innovation, productivity and sustainability goals, according to a new report from the OECD.

In this context, the share of estimated support dedicated to general services such as innovation, biosecurity or infrastructure averaged only 12.6% of total support in 2021-23. While it has been fairly stable since 2020, this share is well below the 16% seen at the beginning of the 21st century. These services are key elements in countries’ efforts towards sustainable productivity growth – the ability to produce more with less while reducing demands on the environment.https://doi.org10.1787/74da57ed-en

Why Mercosur deal concerns EU farmers

The EU deal with Merocsur has not gone down well with European farmers and this analysis refers to some of their concerns as well as the drivers of the deal: https://ukandeu.ac.uk/eu-and-mercosur-bloc-breakthrough/?mc_cid=60623adc76&mc_eid=a47fa58ca7

New EU farm supremo sets out his stall

The EU’s new agriculture chief is pushing for more of the bloc’s generous subsidies to be doled out to low-income farmers rather than big agribusinesses. Christophe Hansen told the Financial Times that the seven-year €387bn Common Agricultural Policy (CAP) should no longer reward the biggest landowners and instead focus on small farms, as discussions get under way on the bloc’s finances for the next decade.

[This, then, is a move towards treating the CAP as a welfare payment, but it is not an efficient instrument for delivering such payments.   What about international competitiveness and efficiency?]

 “We all know that the CAP budget will not be higher,” he said. “There is a lot of pressure because we have a lot of political priorities in the European Union so we need to better target the support to those most in need.”

The new EU commissioner, who took office on December 1, said his reform of CAP would not amount to a “revolution” and would not move “entirely” away from hectare-based payments. But changing the allocation would constitute the most significant overhaul in the history of the 62-year-old subsidy programme, which represents a third of the bloc’s annual budget.

The largest farms in the bloc have traditionally received most of the funding, with an analysis by the Institute for European Environmental Policy, a Brussels-based think-tank, estimating about 80 per cent of the direct payments go to roughly 20 per cent of farms.   [My view is that this is a lazy application of the Pareto rule and the actual figure is lower].

 Nearly 6mn farmers and landowners received direct payments in 2022, according to the European Commission. Discussions around the next EU multi-annual budget, which is due to run from 2028, have shifted towards a much greater focus on defence spending in recent months in response to Russia’s invasion of Ukraine and Donald Trump’s return to the White House. The US president-elect has threatened to pull out of Nato if allies refuse to spend more on the military.

Any CAP reduction will be met with fierce resistance from farmers who took to the streets of Brussels and other European capitals last year to protest against stringent environmental regulations, red tape and unfair prices. European Commission president Ursula von der Leyen in September vowed to ensure farmers receive “fair and sufficient income” and preserve farming amid financial and environmental pressures. Hansen, a centre-right Luxembourgish politician, said the commission should encourage farmers to look at “alternative income” streams.   [Historically there has been a suspicion that farm commissioners from Luxembourg are susceptible to French pressure].

While “producing and selling a tomato” was good, “it makes you vulnerable because it’s your only income”, Hansen told the Pinl ‘Un. Farmers could grow crops for biofuels or use their land for solar panels and other renewable energy sources. Planting trees that could be monetised as carbon credits should also be considered, he said.   [Farmers in the UK have been diversifying for decades].

Part of the commission’s response to the protests was to water down environmental standards that farmers were required to meet in order to access CAP support, despite widespread outcry from green groups. Von der Leyen on Tuesday is set to put forward further measures aimed at helping farmers sell their products at a better price.

The proposals, if agreed by EU lawmakers and member states, will make written contracts between farmers and food companies mandatory and allow more co-operation between national authorities to manage cross-border disputes.

Hansen said he also intended to ease competition rules to promote products from young farmers and require greater transparency in retail pricing. “Big retailers use certain products to attract the consumers and they use the weak position of the farmers in the supply chain,” he said. Christel Delberghe, director-general of the retail industry body EuroCommerce, said introducing stricter pricing rules would result in “inflation. What else?”

[Farmers in the UK have certainly been turned into price takers by supermarkets, but changing the balance of power is not easy because consumers demand cheap food]. 

The limits of Dutch lessons for farmer protests

This article by a political scientist looks at the impact of farmer protests in the Netherlands and their implications for the UK: https://ukandeu.ac.uk/farmer-protests-lessons-from-the-netherlands/?mc_cid=6bb3292f21&mc_eid=a47fa58ca7

What it doesn't mention is that the Netherlands has a very pure system of proportional representation which makes it easy for insurgent parties with a narrow support base to win legislative seats.

Doing the Brexit walk

In a thorough and authoritative analysis, Alan Matthews examines the repurposing of the English agricultural budget since Brexit, noting that the only other developed country to attempt such extensive changes is New Zealand: http://capreform.eu/agricultural-policy-reform-in-england-and-the-2024-uk-budget/

There has been a much greater reallocation to agri-environmental funds in England than in the CAP.

Benelux countries increase net contributions to CAP

Alan Matthews takes a look at net contributions to the CAP: http://capreform.eu/how-net-balances-might-influence-member-state-views-on-the-size-of-the-next-cap-budget/

He notes: 'Instead of the smooth transition from the largest net contributors to the largest net recipients as we move from left to right [on the chart], the general picture is now more jagged even if the general pattern is maintained.

The two smallest Member States, Luxembourg and Malta, with relatively limited agricultural area relative to the rest of their economies, now appear as the largest net contributors in relative terms.

More significant in economic terms is that, despite the huge significance of Germany’s absolute net contribution to the CAP, in relative terms the contribution of the Netherlands and Belgium is even greater.'

New farm commissioner in EU

The outgoing EU agriculture commissioner reviews his five years in office which appear to be ones of problem free achievement: https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/highlights-2019-24_en?s=09

The new commissioner, Christophe Hansen, is from Luxembourg, often perceived to be amenable to French concerns.  Food has been added to his portfolio, but animal welfare goes to health.   His biography is here: https://commission.europa.eu/document/download/1af2336d-a010-4ac0-b8de-81a23772a5ac_en?filename=CV%20Hansen.pdf

In 100 days he has to produce a vision for agriculture and food, so good luck with that.

Agriculture needs to cut emissions

The EU’s chief climate scientist has warned that the bloc will miss its climate targets if it does not force the agricultural sector to pay for its greenhouse gas emissions. Ottmar Edenhofer, chair of the European Scientific Advisory Board on Climate Change, told the Financial Times that it would be “almost impossible” to achieve the European Commission’s proposed aim of cutting emissions by 90 per cent by 2040 without a levy on agricultural emissions.

 “[Over] the last 15 years, the emissions in the agriculture sector remained quite stable,” Edenhofer said, while other sectors had cut their climate impact. “The price signal is important because without the price signal, it is very unlikely that, basically, we can reduce emissions,” he added.

Farming makes up 12 per cent of the EU’s emissions, of which about two-thirds comes from meat and dairy production. But it is one of the few sectors in the EU to have so far avoided strict climate legislation, including sectoral emissions reduction targets, in part because of farmers’ ability to stage widespread and disruptive protests.

Earlier this year, tractor blockades and demonstrations by farmers in many European capitals catalysed a rethink in the EU about how it was approaching efforts to decarbonise farms. It prompted the commission to retract a proposed law on pesticides and delete recommended targets from a document outlining how the bloc would reach its 2040 goal.

But the issue of making either farmers or other parties in the food chain pay for emissions has risen up the agenda as Brussels starts to outline its priorities for the next five-year mandate starting later this year.

 Denmark has also been lobbying Brussels to introduce an EU-wide system after it announced the world’s first carbon tax on farm emissions in June. EU officials are weighing options including a levy on food processors that would also include incentives for farmers to use their land as a carbon sink.

But a report on the future of farming in the EU that stemmed from consultations between food and farming industry groups as well as environmental NGOs, published this month, said it was “premature” to come to a conclusion about pricing agricultural emissions.