Brussels, 05/10/2011 (Agence Europe) - The Organisation for Economic Cooperation and Development (OECD) added its voice, on Wednesday 5 October, to those calling for realignment of European agricultural aid, a large percentage of which benefits those who do not need it. The report states that a substantial proportion of aid for production is not going to the agricultural sector, and
that it is the input suppliers, non-farming landowners and others upstream in the food supply chain
who benefit.
“Expected growth in demand and higher real commodity prices offer tremendous opportunities for farmers and government alike”, said Ken Ash, OECD Director of Trade and Agriculture, at the report's launch in Brussels. “A window has opened for re-orientation of policy away from broad income support and towards investments in a strong and competitive agri-food sector”, he added.
The report says that successive reforms have considerably improved the performance of EU agricultural policies. Distortion reduction in the European Union and global markets has made it possible for EU farmers to profit from the openings that are likely to be created over the next decade by stronger and more diversified demand for food and non-food uses and also higher real prices for a number of basic products.
At the same time, the EU agricultural sector will have to overcome major challenges (world food security, climate change attenuation and adaptation, market volatility). According to the OECD, future reforms will have to capitalise on past successes and continue to increase market orientation of the sector and reduce distortions generated mainly by residual market price support. Over the last 20 years, the proportion of public aid in farm incomes has decreased substantially, from 39% in 1986-88 to 22% in 2008-10, as a result of reforms and also the increase in raw materials.
However, a large part of agricultural aid goes to those for whom it was not intended, that is, farmers who do not necessarily have low incomes, the OECD notes. The largest farms receive the lion's share of support, even though their incomes are above the average. This is particularly flagrant in the 15 older member states of the EU where, in 2007, the largest 25% of farms had an annual average income of €73,000 per farm (€28,000 per man-work unit, which is equivalent to double the minimum wage in France). This €73,000 income is three times higher than the average of all farms and 16 times higher than the average income of the smallest 25%. In addition, over the years, a growing share of the payments has gone to non-farming landowners, who increasingly are leasing their land, the report states.
This problem has long been recognised and NGO regularly complain that the Queen of Great Britain and Northern Ireland and huge agri-food companies, such as the Nestlé group, receive hundreds of thousands of euro from the common agricultural policy (CAP). The OECD estimates that restricting this aid to those who need it would mean that more could be done with less.
The European Commission is due to present its proposals next week for reforming the CAP, the aim being to resolve some of these problems. It will propose, for example, concentrating direct aid on working farmers and capping the aid received by large farms. The cap would, however, take account of the number of workers in order not to penalise those who create employment.
The OECD, nevertheless, suggests that changing the way aid is delivered by imposing caps on farms or excluding “leisure” farms will not resolve the deep-seated issue: income support does not refer to any income target defined among the policy objectives. Capping payments could also affect farms' restructuring strategies and encourage the break-up of the largest farms.
Several member states, including the United Kingdom, Germany and the Czech Republic, refuse to countenance any capping of aid to large farms.
The OECD report suggests paths for future reforms, including: - the removal of remaining impediments to the functioning of input and output markets; - more open access to the European market and transparent EU-wide markets for the sale and lease of land, production quotas and payment entitlements; - greater investment in agricultural innovation; - the introduction at EU level of an effective and comprehensive framework for risk management; - targeted efforts to improve the environmental performance of agriculture, including direct payments to farmers, when necessary, for provision of environmental goods and services. (LC/transl.rt)