Commission presentation on communication future cap in sca 6 december 2010

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Presentatie die Tassos Haniotis (head of the Agricultural Trade Policy Analysis, Directorate General for Agriculture, European Commission) op 6 december 2010 in het CSA gaf: toelichting op Mededeling …

Presentatie die Tassos Haniotis (head of the Agricultural Trade Policy Analysis, Directorate General for Agriculture, European Commission) op 6 december 2010 in het CSA gaf: toelichting op Mededeling van de CIE.

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  • Sources: European Commission - DG Agriculture and Rural Development (Units I.1/L.1) and DG Economic and Financial Affairs (AMECO database)/Eurostat Updated: 18.10.2010 Annual expenditure, in 2007 constant prices. This graph shows how the CAP has evolved through the evolution of the CAP expenditure. In the 80s the expenditure was mainly due to price support through market mechanisms (intervention and export subsidies). In the end of the 80s this expenditure in market mechanisms boosts due to the agricultural surpluses. In 1992 there is the first big shift, due to the Mac Sharry reform. The market mechanisms (in red and yellow) are reduced and replaced by direct payments (in blue). These payments were paid per hectare or per animal. Thus price support is replaced by producer support. Finally, spending on rural development measures also increased (in purple). In 2003, one can see the impacts of the 2003 reform, with direct payments shifting to decoupled payments (green). Payments are no longer paid per ha or per animal but paid in function of what the farmer received in a reference period. Spending in rural development also increases. Spending as been stabilized and despite the successive enlargements, the overall spending as a share of the GDP has actually decreased in nominal terms: 0.5% of GDP in the 80s to 0.4% now (graphic line). Stable expenditure level since mid-1990s despite enlargements Significant shift from market expenditure to direct payments and increased expenditure for rural development Decreasing share of CAP in GDP. However, slightly increasing in 2009 due to economic crisis (-5% in GDP of EU-27)
  • Sources: European Commission - DG Agriculture and Rural Development (Agriview Market prices and Circa ) World Bank - Pink Sheets Updated: 14.10.2010 Volatility of agricultural market prices is increasing: Since 2005, EU market prices are fluctuating more for the most part of agricultural commodities. However, this variation would be bigger with world prices and in dollars. Since last year, the term "farm price crisis", and then "food crisis", has been used interchangeably to describe the dramatic increase, and then the dramatic decline of farm commodity prices. Rarely a day passes without some reference to price developments in commodity markets; clearly not just in agricultural commodities. Some days prices will increase, others will see prices decline; yet regardless of the direction, it is the extent of variability in price movements that has been the main concern of farmers across the world. Clearly, it is not the presence of price variability as such that is of concern. This has been a permanent feature of agricultural markets, driven by the simple fact that the discontinuous, weather-dependent farm production interacts with the continuous, daily demand for food. What has been of concern is the magnitude that farm price variations have taken in recent years, and the fact that sometimes wide price swings seem to be linked more to parallel developments in all commodity markets than to the fundamentals of each individual market. As a result of this development, the signal that farmers receive about market direction becomes unclear, and often distorted, and hampers their capacity to respond.
  • Source: European Commission - DG Agriculture and Rural Development (Units L.1 and L.2), based on Eurostat – Economic Accounts for Agriculture Updated: 5.3.2010 - Income situation is particularly difficult, with stagnation since the end of the 1990s. - Due to the significant drop in 2009 linked to the impact of the economic crisis, agricultural income has come back to its 1993 level (erasing all the gains of the reform process started in 1992). - On average, agricultural income as a share of average total income in the economy is 61% for EU-15 and 31% for EU-12
  • Source: European Commission - DG Agriculture and Rural Development (Units L.1 and L.2), based on Eurostat – Economic Accounts for Agriculture Updated: 27.10.2010
  • Source: Eurostat. Caclulated on the basis of real prices for the "agricultural output" and "total intermediate consumption" aggregates (by Unit L.2) Updated: 28.9.2010
  • Sources: Net ceilings = ‘gross amounts minus (modulation and transfers, as well as cotton and POSEI)’ - European Commission - DG Agriculture and Rural Development ( Unit I.1) Area = Potentially eligible area in 2008 - IACS Beneficiaries in FY 2008 – DG Agriculture and Rural Development (2008 CATS Report) Updated: 8.10.2010 These amounts correspond to the gross ceilings foreseen in Reg. 73/2009 with phasing-in completed for EU-12, including the transfers from the wine enveloppe and the silkworms, after modulation and transfers in accordance with Decision 379/2009. This graph shows the issue of different levels of direct payments between Member States. The bars in blue show the average level of payment per hectare in each Member State in 2016 if we keep the current situation or status quo (2016 is considered to take into account the full phasing in of the new member states). This is a calculation obtained by dividing the total amount of direct payments by the agricultural utilized area in each MS. It provide us with the average level of payment per hectare in each MS. The difference between the MS reflect the historical references for the direct payments, firstly introduced in the 1992 reform, to compensate price reductions, and calculated in function of past production levels of each MS. The black bars show the difference between the average direct payments in old MS (262 EUR/ha) and new MS (182 EUR/ha) The orange line shows the level in which the EU flat rate (calculated by dividing the total amount of direct payments in the EU by the total amount of agricultural utilised area) all the amount would be set up to (with 100% of current overall budget). The MS with high levels of aid would lose (left) and the MS with low levels would win (right). The bullets show an alternative calculation: average payments per beneficiary instead of hectare (it is not actually the hectares who get the money…). The case of Greece, that passes from the highest level of aid per hectare to one of the lowest per beneficiary, or Chec Republic in a opposite manner, shows how the payment level discussion can have different angles. One could as well see other alternative conclusions: the average payments divided by the level of the country GDP. Here New Member states, like Latvia would have a higher level of aid… Impacts of levelling direct payments: In short, the levelling of direct payments across the EU can lead to important budgetary redistribution between Member States and regions. The extreme would be to introduce a EU wide flat rate across the EU, leading to big losers and winners. This redistribution as important implications, beyond the budgetary ones: It would lead to a big impact in land values: in the MS loosing, land values would be depressed while in the winning MS they would be inflated (with negative effects, in particular, in “loosing” MS where the debt to equity ratio of farms are already high); There would big impact in farmer’s incomes. However, not necessarily in terms of distribution of support between farmers (as flat rate direct payments do not fundamentally affect the distribution of support between farms) because with a flat rate this is largely determined by the unequal distribution of land.
  • Source: European Commission - DG Economic and Financial Affairs , based on Eurostat and DG Agriculture and Rural Development (Agriview) data Updated: April 2010

Transcript

  • 1. Communication on the future of the CAP “The CAP towards 2020: meeting the food, natural resources and territorial challenges of the future” DG for Agriculture and Rural Development European Commission
  • 2. Outline
    • 1. The context
    • 2. The CAP today
    • 3. Why do we need a reform?
    • 4. New objectives, future instruments and policy options
    • 5. Next steps
  • 3. 1. The context Background of reform
    • Entry into force of Lisbon Treaty
    • Budgetary framework ends in 2013
    • Need to align CAP post-2013 to Europe 2020 strategy
    Public debate The Communication
    • Strong public interest in Commission call to public: 5 600 contributions
    • Very successful Conference in July: 600 participants
    • Council, EP, EESC, CoR discussions and/or opinions
    • Reflects broadly identified policy challenges
    • Responds to the public debate and outlines broad future options
    • Launches inter-institutional debate and prepares legal proposals
  • 4. 2. The CAP today A substantially reformed policy…
    • Structured in two complementary pillars
    • Farm support mainly decoupled and subject to cross-compliance
    • Role of market intervention mechanisms significantly reduced to safety net level
    • Rural development policy strengthened with funds and new policy instruments
    … better performing…
    • Surpluses belong to the past
    • Competitiveness improved
    • Improved transfer efficiency
    • More sustainable farming
    • Integrated approach for rural areas
    • Contribution to EU budget stability
    … and resulting in a territorial and environmentally balanced EU agriculture
  • 5. The CAP today – budget relevance Rural Development Direct payments Pillar I Pillar II Markets Modulation
  • 6. CAP expenditure and CAP reform path (2007 constant prices) Source: European Commission - DG Agriculture and Rural Development EU-10 EU-12 EU-15 EU-25 EU-27
  • 7. 3. Why do we need a reform? To respond to challenges ahead Economic challenges
    • Food security
    • Price variability
    • Economic crisis
  • 8. Recent trends in some commodity market prices Sources: European Commission - DG Agriculture and Rural Development and World Bank
  • 9. EU developments in agricultural income (agricultural income/AWU in real terms) Source: Eurostat EU-15 EU-12
  • 10. Relative situation of agricultural income in the EU Income gap with the rest of the economy (average 2005-2007) Agricultural income level between Member States (2009) Source: European Commission - DG Agriculture and Rural Development, based on Eurostat data
  • 11. Recent evolution of agricultural input and output prices Source: Eurostat
  • 12. 3. Why do we need a reform? To respond to challenges ahead Economic challenges Environmental challenges Territorial challenges
    • Food security
    • Price variability
    • Economic crisis
    • GHG emissions
    • Soil depletion
    • Water/air quality
    • Habitats and biodiversity
    • Vitality of rural areas
    • Diversity of EU agriculture
    Equity and balance of support Contribution to Europe 2020 strategy
  • 13. 4a. What are the objectives with the reform? Viable food production Sustainable management of natural resources and climate action Balanced territorial development Common EU response needed Economic challenges Environmental challenges Territorial challenges
  • 14. 4b. What policy instruments? Better targeted to objectives Based on two pillar structure Direct payments
    • Redistribution
    • Better targeting
    • Redesign:
      • Greening of direct payments
      • Capping of payments
      • Small farmers support
      • Areas with specific natural constraints
  • 15. Average direct payments per potentially eligible area and beneficiary Direct payments net ceilings fully phased-in (in 2016) Source: European Commission - DG Agriculture and Rural Development
  • 16. 4b. What policy instruments? Better targeted to objectives Based on two pillar structure Direct payments Market measures
    • Market orientation
    • Streamline and simplification
    • Improved food chain functioning
    • Redistribution
    • Better targeting
    • Redesign:
      • Greening of direct payments
      • Capping of payments
      • Small farmers support
      • Areas with specific natural constraints
  • 17. Slow, limited, asymmetric price transmission along the food supply chain Source: European Commission – DG Economic and Financial Affairs, based on Eurostat data FOOD PRICE CRISIS PRODUCERS’ LAG RETAILERS’ LAG STABILISATION Agricultural commodity prices Overall inflation (HICP) Food producer prices Food consumer prices
  • 18. 4b. What policy instruments? Better targeted to objectives Based on two pillar structure Direct payments Market measures Rural development
    • Market orientation
    • Streamline and simplification
    • Improved food chain functioning
    • Environment, climate change and innovation as guideline themes
    • Improved coherence with other EU policies
    • More effective delivery mechanisms
    • Address risk management
    • New distribution criteria
    • Redistribution
    • Better targeting
    • Redesign:
      • Greening of direct payments
      • Capping of payments
      • Small farmers support
      • Areas with specific natural constraints
  • 19. 4c. What policy options? Option 1
    • Continue the gradual reform process
    • Adjust the most pressing shortcomings (e.g. more equity in the distribution of direct payments)
    Option 2
    • Capture the opportunity for reform
    • More sustainable and balanced CAP (between policy objectives, MS and farmers)
    • More ‘green’ targeted measures
    Option 3
    • More fundamental reform
    • Focus on environmental and climate change objectives through rural development
    • Move away from income support and most market measures
  • 20. 5. Next steps Inter-institutional debate on the Communication Preparation of Impact Assessment (IA) Preparation of Legal Proposals
    • In-depth Commission analysis of new policy settings, options and their economic, social and environmental impacts
    • Stakeholders consultation: analytical contributions from stakeholders based on Consultation document published on the 23th of November
    Legal proposals presented by mid-2011
  • 21. For further information
    • The CAP after 2013
    • http://ec.europa.eu/agriculture/cap-post-2013/index_en.htm
    • The Communication on the future of the CAP
    • http://ec.europa.eu/agriculture/cap-post-2013/communication/ index_en.htm
    • Public consultation
    • http://ec.europa.eu/agriculture/cap-post-2013/consultation/ index_en.htm
  • 22. Thank you