Europe's CAP celebrates 50 years

by Chris Lyddon
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The European Union is celebrating 50 years of the Common Agricultural Policy (CAP) this year. Since the early 1960s, it has shaped the way European farmers work and dominated the market in which the European grains and oilseed sectors work. It’s been through a long process of reform with more to come. Although it’s often been under fire as inefficient and anti-competitive, it’s succeeded in protecting Europe’s agriculture and its food supply.

The European Commission launched the CAP@50 campaign in January to celebrate the anniversary of what it called “A partnership between Europe and Farmers.”

“2012 is an important year not only to remember the past 50 years of history, but especially for us to look ahead toward a new reform of the Common Agricultural Policy,” Dacian Cioloş, Commissioner for Agriculture and Rural Development, said at the time.

“Back in 1962, Europeans were predominantly worried about having enough food on their plates. Today, food security remains important, but we have also new concerns such as climate change and the sustainable use of natural resources. This campaign will help to reflect on this evolution.”

Danish Farm Minister Mette Gjerskov, at the time the holder of the revolving presidency of the Council of Agriculture Ministers, remembers the political attraction of the CAP. “I was six years old when Denmark had a referendum and joined the European Union in 1972,” she said. “I remember it vividly. The CAP was an important incentive for Danes to vote yes.”

“To me personally, it seems that the CAP always has been part of my life,” she said. “Growing up on a farm, studying to be an agronomist, working in the Ministry for Food and now as a minister during the Danish Presidency.

“To begin with, 50 years ago, when it was launched, the common goal was to avoid food shortages and to ensure stable and reasonable prices. We accomplished that.”

IMPORTANT MILESTONES

The minister of the then six members of the European Economic Community decided to establish common market organizations for each agricultural product and to apply specific competition rules and to create a European Agricultural Guidance and Guarantee Fund (EAGGF). The negotions lasted for 140 hours, the first of a series of marathons which have become almost a tradition in the CAP. Later in the year they agreed and published a series of texts setting out the rules. The date that they came into effect depended on the start of the market season. For the common market organization for cereals, eggs, poultry, meat and pork, the date of entry into effect was July 1, 1962.

In 1992, Commissioner Ray Mac- Sharry oversaw a reform shifting the CAP from market support to producer support. Price support was replaced with direct aid payments.

In 2003 came the “Mid-term review,” guided through by Commissioner Franz Fischler. It cut the link between subsidies and production. Farmers would receive an income aid “in view of the specific constraints on European agriculture,” according to the Commission.

Since then, the farming population of the E.U. has doubled with its massive expansion into Central and Eastern Europe.

On Oct. 12, 2011, the Commission presented a set of legal proposals designed to make the CAP a more effective policy for a more competitive and sustainable agriculture and vibrant rural areas.

Following a debate in the European Parliament and the Council, the approval of the different regulations and implementing acts is expected by the end of 2013, with a view to having the CAP reform in place by Jan. 1, 2014.

“In these days we are preparing a new chapter in the history of the common policy, a greener chapter,” said Gjerskov. “The modernization of the CAP has already meant an increase in the emphasis on environmental aspects, climate, development, jobs, food safety and animal welfare. The policy must continue to develop in this direction.”

The reform plans come after the Commission identified three principal objectives from the CAP:
•Viable food production (the provision of safe and sufficient food supplies, in the context of growing global demand, economic crisis and much greater market volatility to contribute to food security).
•Sustainable management of natural resources and climate action (farmers often have to put environmental considerations ahead of economic considerations — but such costs are not rewarded by the market);
•Maintaining the territorial balance and diversity of rural areas (agriculture remains a major economic and social driving force in rural areas and an important factor in maintaining a living countryside).

Pekka Pesonen, secretary-general of the European farmers’ organization Copa-Cogeca, praised the stable setting the CAP has created for farming in Europe.

“It has maintained European agriculture,” he told World Grain. “It has provided some level of stability across the regions, across the member states that have been involved and also across the crop years, meaning from year to year. It’s not always perfect, but it has maintained relative stability, maintenance of production and stability across the regions in the E.U. and the years.”

However, he expected that stability to be less as time goes on.

“We know we have a benchmark here, when all the assessments point out that most probably volatility of the market will increase,” he said.

The CAP reform and the opening of European markets have made Europe less insulated from the world market.

“We no longer have the same level of border protection, which means we are more vulnerable to international markets fluctuations and/or we seem to have some sort of tendency now in the environment, at least occasionally, that would create some sort of fluctuation of yields or crop levels,” he said. “That makes an awful lot of difference.”

The current situation is in stark contrast to the effect of the CAP before the first big round of reforms in 1992. It was very stable then.

“I would say almost too stable,” he said. “We ended up having excess stocks of various agricultural commodities in the 1970s, of course.”

IMPACT ON FLOUR MILLING, OILSEEDS

Laurent Reverdy, secretary-general of the European Flour Milling Association, explained that the policy’s main impact on his members had been through the way it has dominated the work of Europe’s farmers.

“To a very large extent, the CAP does not have a direct impact on the flour milling sector but it does set the framework within which E.U. wheat growers operate,” he said. “In particular, the direct payment scheme ensures the viability of the sectors in years when arable profitability is low.”

He also pointed out that it has achieved what it originally set out to do.

“When it came into force in 1962, the CAP was intended to guarantee self-sufficiency in food, improved and stable living standards for farmers, and higher productivity but also to stabilize markets and secure availability of supplies,” he said. “It is interesting to notice that most of these objectives are still valid today, although most of the CAP market instruments are disappearing.”

He did express concern about the CAP’s effect on innovation in the grains sector.

“The E.U. is today one of the world’s largest net importers in food and agriculture,” he said. “In the last two decades, we have witnessed a decline in the growth trend of cereal (and in particular wheat) yields in many E.U. countries. Innovation is the key for productivity growth and innovation is generated through research and development investment. European flour millers believe that the CAP has so far missed the point of innovation and should act on productivity growth.”

Of course, an evaluation of the CAP and notably its Cereals Common Market Organization years after its introduction will differ according to interests. In general, most stakeholders agree that no major hiccups in the E.U. market have occurred.

However, whereas Turkey (or Kazakhstan) has seen its flour exports rising from 200,000 tonnes in the 1990s to 2 million tonnes today, the E.U. has seen its flour exports decreasing from around 3 million to 1 million tonnes over the same period. The European flour millers are urging E.U. decision-makers to act with similar political will as their counterparts to change this trend.

Nathalie Lecocq, director general of the oilseeds industry organization FEDIOL, pointed out that the CAP had not solved the long-standing shortfall in oilseeds supply in Europe.

“Over the years, the reforms of the CAP have gotten rid of direct production incentives and introduced more market orientation into European agricultural policy,” she said. “The E.U. oilseeds market today is liberalized and farmers are free to respond to market signals. The CAP has, however, not helped overcoming Europe’s structural oilseeds deficit.

“The European oilseeds’ industries crush approximately 28 million tonnes of oilseeds sourced from E.U. agricultural production to produce oil for food, feed, energy and technical applications and meals for feed. Europe imports about 9 million tonnes of crude oils, 15.5 million tonnes of oilseeds and 25 million tonnes of protein meals to complement E.U. production.”

The CAP is not the only area of policy that has a direct effect on oilseed processors.

“Other E.U. policies, in particular the renewable energy policy, have influenced and continue to be a driving force for the vegetable oils and the oilseeds market,” she said. “As global demand from food, feed, energy and technical markets is expected to grow, FEDIOL has stressed the importance, in the currently reviewed CAP, of supporting productivity and efficiency increase.”

The oilseeds sector has, in her view, suffered from the openness of the E.U. market.

“It is also worth noting that the openness of the E.U. oilseeds market and the need for complementary supplies leave the E.U. oilseeds processing chain vulnerable to trade distorting practices of third countries, notably Differential Export Taxes (DETs) as they are common practice in Argentina and Indonesia,” she said.


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