July 29, 2013
The end of what might be described as the bad old common agricultural policy based on expensively rigged markets was recently marked by what should be the final removal of export subsidies on agricultural commodities. For over fifty years these subsidies have been a major mechanism for maintaining high farm prices in the European Union. At their height in the 1970s and 1980s they were swallowing as much as half of the annual CAP budget. Even in the 1990s these subsidies, designed to dump EU surpluses of wheat, butter, beef, other meats and even wine on international markets, were costing the European taxpayer over €10 billion a year.
So-called export ‘refunds’ on egg and pig meat products – the last remaining refunds payable – have now been reduced to zero. The subsidies were somewhat euphemistically called ‘refunds’ because they refunded to food traders the usually massive difference between the high EU price guarantee to farmers and the much lower world price, thus allowing them to compete on world markets.. The need for them has now evaporated, not because of any radical policy change, but for the simple reason that the world price of food has in recent years risen so much that the price gap between markets inside and outside the EU has practically disappeared. The facility to revive them in case of ‘market crises’ has however been preserved in the current reform package which comes into force after 2014.
But don’t worry, farmers are still being heavily supported by the European taxpayer. They will still be drawing €50 billion a year from public funds in direct income subsidies under the post 2014 CAP. These are subsidies which are paid to land holders just for being a farmer – no matter how much or how little they produce. Each hectare farmed attracts an EU ‘single farm payment’ of an average €320.
Needless to say, they still want more. Interviewed in the London Guardian this week the leader of the UK Farmers Union Peter Kendall complained that the prospect of possible harmful climate change impact and the consequent global market volatility justifies the establishment of new farm market supports. Or at least that can be the only conclusion from his statement that farmers need the certainty of a supported market to maintain production. Bearing in mind that Mr Kendall draws €162,000 in EU subsidies before he even sets his hand to the plough, one would have thought that such a sum should be a good enough guarantee to bolster his income against ‘market volatility’. <29/07/2013>