Brussels, 25/02/2016 (Agence Europe) - Tackling the effects of volatility in the prices of agricultural raw materials is one of the challenges of the common agricultural policy (CAP) after 2020, in the view of MEPs and experts speaking at a hearing on the issue in Brussels on Wednesday 24 February.
What instruments can the EU put in place to help farmers deal with the volatility of agricultural prices? The European Parliament's agriculture committee has debated the matter and Angélique Delahaye (EPP, France) is drafting an own initiative report. She is looking to address five main issues: - the correlation between volatility and income fluctuation; - the way the member states have put in place the insurance instrument of the second pillar of the CAP (rural development); - lessons to be learned from the insurance schemes already in place in the United States and Canada; - ways of taking account of volatility in free-trade agreements under negotiation; - ways to better tackle volatility under the next CAP.
“61% of aid in the EU is decoupled but in other partner countries around the world it is 0%. We are going against current trends”, stated Jacques Carles, chief operating officer of the think tank Momagri (Mouvement pour une Organisation Mondiale de l'Agriculture). Now that the European market has been opened up, the only new instruments available to public authorities seem to be insurance (harvest or revenue) and counter-cyclical aid (which are only triggered when prices fall).
Marc Tarabella (S&D, Belgium) pointed out that the EU had also abandoned mechanisms to regulate supply, a move that has only sharpened the fall in prices. Contrary to what an expert had said, José Bové (Greens/EFA, France) argued that the financial markets heighten price volatility. He recalled that the Council had rejected a mechanism proposed by the Parliament that sought to offer financial incentives to farmers to cut their production in times of crisis.
Jeroen Buysse of the University of Ghent, Belgium, spoke of a form of risk insurance linked to revenue. Other mechanisms were put forward by some of the experts: a reserve fund scheme, with money being paid in every year, that farmers can dip into when needed for investment purposes; or aid to reduce the use of inputs (of fertiliser, in particular) as a way of reducing farmers' dependency, improving margins and environmental performance.
“We are no longer looking to resist volatility but to help farmers deal with it”, said Felice Adinolfi, professor of Agricultural Economics at the University of Bologna. He added that, in a market opened up to globalisation, limiting supply would definitely not help those who put it into effect but those who continue to produce. Were the EU to move away from the current system of direct aid, a combination of counter-cyclical aid (which could be accompanied with incentives to protect the environment) and insurance could provide the answer. Unlike in the United States and Canada, which have put these kinds of instruments in place, the problem in the EU is that the annual budget is very rigid and cannot vary from one year to the next.
The Commission continues to defend the current model which makes it possible to support income without influencing the markets. Tassos Haniotis, director at Directorate General Agriculture of the Commission, pointed out that, in the United States, 90% of aid goes on three crops: maize, soya and wheat. He argued that counter-cyclical aid and insurance mechanisms had meant that American farmers could ignore price signals. He noted that “thanks to direct aid, European farmers' incomes have been much less volatile than American farmers' in the last few years.” “Addressing price volatility amounts to linking aid to production. We do not think that is a good idea. It is better to deal with income volatility”, he said. On this point, the Commission is expecting great things of the new insurance instruments set up as part of the CAP's second pillar (rural development). Above all, it will have to be understood why this instrument has not had much success hitherto. (Original version in French by Lionel Changeur)