Brussels, 23/04/2012 (Agence Europe) - Working from the premise that the European Commission's proposals of October 2011 on the reform of the common agricultural policy (CAP) reflect a desire to maintain the status quo without offering any answers to the problems of price volatility and farmers' income support, the think tank momagri argues for “another CAP”, in which the lion's share of the funding allocated to single payment entitlements is redirected towards agricultural market management tools, to be deployed counter-cyclically. The aim of this minor revolution is twofold: to address agricultural price volatility and to bring the needed stability to farmers' incomes, while at the same time making savings compared with the Commission proposal on agricultural spending for 2014-2020. The Commission proposes that agricultural funding for the next financial framework period be kept at the 2013 level in real terms.
Momagri believes its “pragmatic” model would mean that the agricultural budget would be sheltered from the difficult negotiations on the 2014-2020 financial framework, which might very well see spending on agriculture reduced. “The effectiveness of European public spending can be improved”, momagri argues.
Momagri's proposals, which are based on comparative analyses of the farm policies of the world's main producer countries, such as the United States and Brazil, would seem to have struck a chord with a number of MEPs, including Paolo de Castro, who chairs the European Parliament (EP) agricultural committee and Alain Lamassoure, chairman of the EP budgets committee. At the same time, America's second largest agricultural union, the National Farmers' Union (NFU) has just proposed that an alternative farmers' income support scheme be put in place through aid for storage mechanisms, along the same counter-cyclical lines as the momagri proposal.
The regulation instruments and mechanisms proposed by momagri: there should be a free variation range with ceiling and base prices around an equilibrium price (in a sense, a reference price). Product prices could fluctuate in this range with no public intervention. No direct aid would be paid within this range, with farmers' income resulting from market prices.
However, whatever the level of prices, momagri advocates payment of food security aid (€75 per hectare, the same for all types of production and for all regions) to correct the economic effect of the costs brought about by the “European agricultural model” (family farms, and quality, health and environmental requirements).
If prices were to rise or fall beyond the range (the “snake in the tunnel”), the EU would automatically trigger regulation measures on actual and financial markets. If prices fell below the baseline, producers would receive counter-cyclical payments. This aid, calculated on the difference between the periodically monitored market price and the base price, would be payable for virtually the entire production. If prices fell below a second threshold, the public regulation threshold, public purchases would be affected. These could be for to up to 8% of annual production and would complement the strategic permanent food security stock, which amounts to about 2% of annual production.
When prices rise above the ceiling, that is, above the “financial solidarity threshold” determined by the EU, a variable solidarity tax would be imposed on all agricultural transactions, financial and actual, related to the produce traded. The revenue generated by the financial solidarity tax will be paid into a reserve fund for crisis management (this fund will be boosted or used depending on the market situation). With this system, public destocking on a manageable scale will be possible to bring prices close to the equilibrium price. The great advantage of the reserve fund will be to discourage market speculation. In cases of emergency, the possibility will exist to enhance food aid and to address contracts involving countries subject to persistent food crises.
Had the momagri proposal been applied between 2006 and 2010 to the cereals and milk sectors, the areas of production that received most aid and which, in the case of cereals, affect the price of animal production, the Community budget would have made a 15% saving. Budget simulations conducted on the basis of prices seen between 2006 and 2010 indicate spending of less than €8 billion per year. Similar savings would be made for the 2011-2012 period, calculated on average price changes. Under the momagri alternative system, when prices are high, spending falls, and rises when prices are low, as in 2009. (LC/transl.rt)