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www.missouri.edu University of Missouri
Agricultural Policy. What’s Next? Lars Hoelgaard, Deputy Director-General University of Missouri’s Transatlantic Center, B...
Direct Payments <ul><li>Historical model </li></ul><ul><li>Regional model </li></ul><ul><li>Flatter rates? </li></ul><ul><...
Cross compliance - CC <ul><li>SMR’s – health, environment, animal welfare </li></ul><ul><li>Good Agricultural and Environm...
Direct support <ul><li>Partially coupled support and other aid schemes </li></ul><ul><ul><li>Full decoupling from 2010 for...
Article 68 <ul><li>Specific support – 10% of direct payments </li></ul><ul><li>Environment, quality, animal welfare </li><...
Insurance and mutual funds <ul><li>Article 70: Crops, animal and plant insurance </li></ul><ul><li>Article 71: Mutual fund...
Market measures (1/2) <ul><li>Milk quotas </li></ul><ul><ul><li>Increase milk quotas by 1% annually from 2009 to 2013 </li...
Rural Development <ul><li>Address new and ongoing challenges: climate change, bio-energy, water scarcity, biodiversity, da...
What’s next (1) <ul><li>Pillar I – direct payments </li></ul><ul><ul><li>Decoupled </li></ul></ul><ul><ul><li>Level </li><...
What’s next (2) <ul><li>Pillar II </li></ul><ul><ul><li>Axis I, II, III </li></ul></ul><ul><ul><li>” New challenges” – cli...
What’s next (3) <ul><li>Market orientation. Dairy quotas </li></ul><ul><li>Safety net </li></ul><ul><li>Doha </li></ul><ul...
Pavel Vavra Agricultural Economist OECD
Global Trends in Commodity Markets
<ul><li>Agricultural Outlook - a set of conditional projections published in an OECD-FAO annual report  </li></ul><ul><li>...
1973 2008 Cereal prices in real terms, schematic Where are (were) prices going? Transitory factors, Long-term factors } 20...
<ul><li>Market turmoil – add hoc policies </li></ul><ul><li>Negative yield shocks – bad weather </li></ul><ul><li>Strong d...
Growing demand for agricultural commodities P.a. average growth rate between 2008 and 2017
Food - Feed - Fuel fuelling demand for cereals Wheat Coarse  grains
<ul><li>Crude oil  price : 90-104 US $ </li></ul>World oil price assumed at higher levels
Change in world prices for 2017:  Cumulative impacts of different scenarios
Strong ties of agriculture and energy
<ul><li>www.oecd.org/tad </li></ul>Thank You [email_address]
Pat Westhoff Co-Director Food and Agricultural Policy Institute University of Missouri
Patrick Westhoff University of Missouri [email_address] Transatlantic Roundtable, Brussels January 14, 2009
Mar 08: $450 Nov 08: $237
<ul><li>WHY PRICES ROSE </li></ul><ul><li>Reduced grain production in Europe, Australia in 2007 </li></ul><ul><li>Economic...
<ul><li>WHY PRICES ROSE </li></ul><ul><li>Reduced grain production in Europe, Australia in 2007 </li></ul><ul><li>Economic...
CBOT maize futures, March 2009 contracts Jan. 9:  $4.10/bushel ($161/ton) Jan. 13: $3.62/bushel ($143/ton), down 12%  Dec....
 
Source: FAPRI preliminary baseline, Nov. 2008
Source: FAPRI preliminary baseline, Nov. 2008. Note: “Payment trigger” is price that would result in countercyclical payme...
Note: Net CCC outlays include spending on direct payments, marketing loans, countercyclical payments and other basic farm ...
<ul><li>Average Crop Revenue Election (ACRE) program created in 2008 Farm Bill </li></ul><ul><li>Makes payments if state-l...
<ul><li>Time of great market uncertainty </li></ul><ul><li>U.S. ACRE program could prove important </li></ul><ul><ul><li>P...
Michel Petit Professor Institut Agronomique Méditerranéen (Montpellier)
CAP PROSPECTS Michel PETIT [email_address] Transatlantic Roundtable, Brussels  January 14, 2009
INTRODUCTION <ul><li>MY TASK :   </li></ul><ul><li>Update on Health Check implications for future and especially direction...
PREDICTABILITY OF CAP REFORMS SINCE 1992 <ul><li>SUBSTANCE :  </li></ul><ul><li>FROM PRICE SUPPORT TO DECOUPLED DIRECT PAY...
CAP expenditure and CAP reform path EU-10 EU-12 EU-15 EU-25 EU-27
INTERVENTION AS SAFETY NET
MAJOR UNCERTAINTIES FOR THE FUTURE <ul><li>BUDGET FRAMEWORK: </li></ul><ul><li>TOWARD A NEW ALLIANCE  </li></ul><ul><li>OF...
Neil Conklin President Farm Foundation
The Future of U.S. Agricultural Policy  &quot;Agricultural Policy in Transition: What's Next?&quot; Brussels, Belgium Janu...
75 Years Ago <ul><li>More than 20% of the  workforce employed in production agriculture </li></ul><ul><li>Production agric...
Today <ul><li>Less than 2% of workforce employed in production agriculture </li></ul><ul><li>Production agriculture’s shar...
75 Years of Change
Growing Population
Rising Income
Policies Shaped by Abundance
The 30-Year Challenge <ul><li>Farm Foundation project The 30 Year Challenge: Feeding and Fueling a Growing World </li></ul...
Six Challenges <ul><li>Global financial markets and recession, </li></ul><ul><li>Global food security, </li></ul><ul><li>G...
Themes from The 30-Year Challenge <ul><li>Uncertainty, </li></ul><ul><li>Public understanding, </li></ul><ul><li>Unintende...
The Near-Term Imperatives <ul><li>Financial Crisis and Recession </li></ul><ul><ul><ul><li>Interest rates </li></ul></ul><...
Prospects for Policy Transition <ul><li>In response to what one of our participants in the 30-Year Challenge Project calle...
For More Information <ul><li>Visit  www.farmfoundation.org  to find: </li></ul><ul><ul><li>“ What’s Driving Food Prices” <...
Willi Meyers Co-Director Food and Agriculture Policy Research Institute University of Missouri
Discussion Willi Meyers [email_address] Transatlantic Roundtable, Brussels  January 14, 2009
Changing US Political Setting?
Changing EU Political Setting?
Changing Market Environment? Real U.S. Crop Farm Prices   in year 2000 US dollars Source: January 08 FAPRI Baseline
Did we lose trust in MARKET INSTITUTIONS? ..said Thursday(Oct 23)that the current  financial crisis  had uncovered a flaw ...
Questions for future <ul><li>Will food prices be higher and instability greater? </li></ul><ul><li>Did the food price surg...
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Agricultural Policy: What's Next?

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Agricultural Policy: What's Next?

  1. 1. www.missouri.edu University of Missouri
  2. 2. Agricultural Policy. What’s Next? Lars Hoelgaard, Deputy Director-General University of Missouri’s Transatlantic Center, Brussels, 14 January 2009
  3. 3. Direct Payments <ul><li>Historical model </li></ul><ul><li>Regional model </li></ul><ul><li>Flatter rates? </li></ul><ul><li>SAPS – New Member States – 2013/2016 </li></ul>University of Missouri, Brussels, 14 January 2009
  4. 4. Cross compliance - CC <ul><li>SMR’s – health, environment, animal welfare </li></ul><ul><li>Good Agricultural and Environmental Practice – GAEC </li></ul><ul><li>Permanent pasture ratio </li></ul><ul><li>Water management – buffer strips </li></ul>University of Missouri, Brussels, 14 January 2009
  5. 5. Direct support <ul><li>Partially coupled support and other aid schemes </li></ul><ul><ul><li>Full decoupling from 2010 for arable crop, durum, olive oil and hops </li></ul></ul><ul><ul><li>From 2012 for beef and veal, rice, nuts, seeds, protein and aid for starch growers </li></ul></ul><ul><ul><li>Abolition of energy crop premium </li></ul></ul><ul><ul><li>MS allowed to maintain coupled support for suckler cows, sheep and goats </li></ul></ul>University of Missouri, Brussels, 14 January 2009
  6. 6. Article 68 <ul><li>Specific support – 10% of direct payments </li></ul><ul><li>Environment, quality, animal welfare </li></ul><ul><li>Sector specific dairy, beef and veal, sheepmeat and rice </li></ul><ul><li>Max. 3,5% coupled </li></ul>University of Missouri, Brussels, 14 January 2009
  7. 7. Insurance and mutual funds <ul><li>Article 70: Crops, animal and plant insurance </li></ul><ul><li>Article 71: Mutual funds for animal and plant diseases </li></ul><ul><li>Article 44: sCMO </li></ul>University of Missouri, Brussels, 14 January 2009
  8. 8. Market measures (1/2) <ul><li>Milk quotas </li></ul><ul><ul><li>Increase milk quotas by 1% annually from 2009 to 2013 </li></ul></ul><ul><ul><li>Additional super levy for 2009 and 2010 (for overshoots higher than 6%) and adapted fat correction </li></ul></ul><ul><ul><li>Review clause in 2010 and 2012 to assess market developments and report on PDO cheeses </li></ul></ul><ul><ul><li>Abolish private storage for cheese and butter disposal aids </li></ul></ul><ul><li>Cereals </li></ul><ul><ul><li>Bread wheat intervention remains with no quantitative limits. Tendering system starting from quantities above 3 million tons </li></ul></ul><ul><ul><li>Quantitative ceilings set to zero for all coarse grains, durum wheat and rice </li></ul></ul>University of Missouri, Brussels, 14 January 2009
  9. 9. Rural Development <ul><li>Address new and ongoing challenges: climate change, bio-energy, water scarcity, biodiversity, dairy accompanying measures and innovation related to the afore-mentioned priorities </li></ul><ul><li>More funding via an increase in compulsory and the introduction progressive modulation </li></ul><ul><li>Revision of National Strategy Plan and Rural Development Programs indicating how additional funds will be used in meeting the new challenges </li></ul>University of Missouri, Brussels, 14 January 2009 Thresholds (in €) 2009 2010 2011 2012 1 to 5 000 0% 0% 0% 0% 5 000 to 300 000 2% 3% 4% 5% Above 300 000 6% 7% 8% 9%
  10. 10. What’s next (1) <ul><li>Pillar I – direct payments </li></ul><ul><ul><li>Decoupled </li></ul></ul><ul><ul><li>Level </li></ul></ul><ul><ul><li>Distribution between MS </li></ul></ul><ul><li>Budget after 2013 </li></ul>University of Missouri, Brussels, 14 January 2009
  11. 11. What’s next (2) <ul><li>Pillar II </li></ul><ul><ul><li>Axis I, II, III </li></ul></ul><ul><ul><li>” New challenges” – climate change </li></ul></ul><ul><ul><li>Public goods - NL-paper Annecy September 2008 </li></ul></ul>University of Missouri, Brussels, 14 January 2009
  12. 12. What’s next (3) <ul><li>Market orientation. Dairy quotas </li></ul><ul><li>Safety net </li></ul><ul><li>Doha </li></ul><ul><li>EU – direction </li></ul><ul><li>US - direction </li></ul>University of Missouri, Brussels, 14 January 2009
  13. 13. Pavel Vavra Agricultural Economist OECD
  14. 14. Global Trends in Commodity Markets
  15. 15. <ul><li>Agricultural Outlook - a set of conditional projections published in an OECD-FAO annual report </li></ul><ul><li>The datasets are available at www.agri-outlook.org </li></ul>OECD-FAO Agricultural Outlook
  16. 16. 1973 2008 Cereal prices in real terms, schematic Where are (were) prices going? Transitory factors, Long-term factors } 20-30%
  17. 17. <ul><li>Market turmoil – add hoc policies </li></ul><ul><li>Negative yield shocks – bad weather </li></ul><ul><li>Strong demand growth </li></ul>Temporary – transitory factors <ul><li>High crude oil prices </li></ul><ul><li>Feedstock demand for biofuel production </li></ul>Longer term factors <ul><li>Devaluation of US dollar </li></ul><ul><li>Low stock levels </li></ul>Factors behind price rises
  18. 18. Growing demand for agricultural commodities P.a. average growth rate between 2008 and 2017
  19. 19. Food - Feed - Fuel fuelling demand for cereals Wheat Coarse grains
  20. 20. <ul><li>Crude oil price : 90-104 US $ </li></ul>World oil price assumed at higher levels
  21. 21. Change in world prices for 2017: Cumulative impacts of different scenarios
  22. 22. Strong ties of agriculture and energy
  23. 23. <ul><li>www.oecd.org/tad </li></ul>Thank You [email_address]
  24. 24. Pat Westhoff Co-Director Food and Agricultural Policy Institute University of Missouri
  25. 25. Patrick Westhoff University of Missouri [email_address] Transatlantic Roundtable, Brussels January 14, 2009
  26. 26. Mar 08: $450 Nov 08: $237
  27. 27. <ul><li>WHY PRICES ROSE </li></ul><ul><li>Reduced grain production in Europe, Australia in 2007 </li></ul><ul><li>Economic growth in Asia and elsewhere </li></ul><ul><li>Weaker dollar </li></ul><ul><li>Higher petroleum prices </li></ul><ul><li>Rapid biofuel expansion </li></ul><ul><li>Policy response </li></ul><ul><li>Speculation </li></ul>
  28. 28. <ul><li>WHY PRICES ROSE </li></ul><ul><li>Reduced grain production in Europe, Australia in 2007 </li></ul><ul><li>Economic growth in Asia and elsewhere </li></ul><ul><li>Weaker dollar </li></ul><ul><li>Higher petroleum prices </li></ul><ul><li>Rapid biofuel expansion </li></ul><ul><li>Policy response </li></ul><ul><li>Speculation </li></ul><ul><li>WHY PRICES FELL </li></ul><ul><li>Sharp increase in global grain production in 2008 </li></ul><ul><li>Financial crisis and world economic slowdown </li></ul><ul><li>Stronger dollar </li></ul><ul><li>Lower petroleum prices </li></ul><ul><li>Slower biofuel growth </li></ul><ul><li>Policy response </li></ul><ul><li>Speculation </li></ul>
  29. 29. CBOT maize futures, March 2009 contracts Jan. 9: $4.10/bushel ($161/ton) Jan. 13: $3.62/bushel ($143/ton), down 12% Dec. estimate by USDA Jan. estimate by USDA Comments 2008 maize production 305.3 mil. tons 307.4 mil. tons More area, higher yields than previous estimate 2008/09 U.S. maize for ethanol 94.0 mil. tons 91.4 mil. tons Lower fuel prices have closed some plants 2008/09 U.S. maize used for livestock feed 135.9 mil. tons 134.6 mil. tons Less meat demand due to weak economy 2008/09 U.S. maize exports 45.7 mil. tons 44.5 mil. tons Weak global economy slows trade Sep. 1, 2009 U.S. maize stocks 37.4 mil. tons 45.5 mil. tons More production, less use mean more stocks
  30. 31. Source: FAPRI preliminary baseline, Nov. 2008
  31. 32. Source: FAPRI preliminary baseline, Nov. 2008. Note: “Payment trigger” is price that would result in countercyclical payments.
  32. 33. Note: Net CCC outlays include spending on direct payments, marketing loans, countercyclical payments and other basic farm programs
  33. 34. <ul><li>Average Crop Revenue Election (ACRE) program created in 2008 Farm Bill </li></ul><ul><li>Makes payments if state-level revenues/hectare fall below a benchmark </li></ul><ul><li>Benchmark tied to prices from last 2 years, yields from last 5 </li></ul><ul><li>If prices and yields do not fall, no payments occur </li></ul><ul><li>Payments could be large if prices fall, even if prices stay above levels that would result in “traditional” payments </li></ul>
  34. 35. <ul><li>Time of great market uncertainty </li></ul><ul><li>U.S. ACRE program could prove important </li></ul><ul><ul><li>Potential large payments if commodity prices fall </li></ul></ul><ul><ul><li>Is program consistent with U.S. Doha proposal? </li></ul></ul><ul><li>What will new U.S. administration do? </li></ul><ul><ul><li>Seems unlikely that farm program changes will be on 2009 agenda </li></ul></ul><ul><ul><li>But could see changes if/when budget and trade concerns become important </li></ul></ul>
  35. 36. Michel Petit Professor Institut Agronomique Méditerranéen (Montpellier)
  36. 37. CAP PROSPECTS Michel PETIT [email_address] Transatlantic Roundtable, Brussels January 14, 2009
  37. 38. INTRODUCTION <ul><li>MY TASK :  </li></ul><ul><li>Update on Health Check implications for future and especially directions of EU policy beyond 2013  </li></ul><ul><li>TWO QUOTES : </li></ul><ul><ul><li>CAP introduced short-term adjustments to respond to crisis before “Health Check” </li></ul></ul><ul><ul><li>“ Health Check” proposals aimed at fine-tuning the CAP reform process </li></ul></ul>
  38. 39. PREDICTABILITY OF CAP REFORMS SINCE 1992 <ul><li>SUBSTANCE : </li></ul><ul><li>FROM PRICE SUPPORT TO DECOUPLED DIRECT PAYMENTS </li></ul><ul><li>INSTITUTIONAL ARRANGEMENT: KEY ROLE OF THE EUROPEAN COMMISSION </li></ul>
  39. 40. CAP expenditure and CAP reform path EU-10 EU-12 EU-15 EU-25 EU-27
  40. 41. INTERVENTION AS SAFETY NET
  41. 42. MAJOR UNCERTAINTIES FOR THE FUTURE <ul><li>BUDGET FRAMEWORK: </li></ul><ul><li>TOWARD A NEW ALLIANCE </li></ul><ul><li>OF THE NET CONTRIBUTORS? </li></ul><ul><li>NEW ‘SOCIETAL CONCERNS’: </li></ul><ul><li>EUROPEAN MODEL </li></ul><ul><li>OF AGRICULTURE? </li></ul><ul><li>HOW TO COPE WITH PRICE VOLATILITY? </li></ul>
  42. 43. Neil Conklin President Farm Foundation
  43. 44. The Future of U.S. Agricultural Policy &quot;Agricultural Policy in Transition: What's Next?&quot; Brussels, Belgium January 14, 2009 Neil Conklin Farm Foundation
  44. 45. 75 Years Ago <ul><li>More than 20% of the workforce employed in production agriculture </li></ul><ul><li>Production agriculture’s share of GDP about 7 % </li></ul><ul><li>1933 Agricultural Adjustment Act—the first “Farm Bill” </li></ul>
  45. 46. Today <ul><li>Less than 2% of workforce employed in production agriculture </li></ul><ul><li>Production agriculture’s share of GDP is less than 1% </li></ul><ul><li>Food Conservation and Energy Act of 2008 </li></ul>
  46. 47. 75 Years of Change
  47. 48. Growing Population
  48. 49. Rising Income
  49. 50. Policies Shaped by Abundance
  50. 51. The 30-Year Challenge <ul><li>Farm Foundation project The 30 Year Challenge: Feeding and Fueling a Growing World </li></ul><ul><li>Conclusions: </li></ul><ul><ul><li>With the right tools and incentives, the world’s agricultural producers and agribusinesses will rise to the challenge </li></ul></ul><ul><ul><li>Those incentives and tools are heavily influenced by public policy </li></ul></ul><ul><ul><li>Need to begin to build the framework to meet the challenges of the future </li></ul></ul>
  51. 52. Six Challenges <ul><li>Global financial markets and recession, </li></ul><ul><li>Global food security, </li></ul><ul><li>Global energy security, </li></ul><ul><li>Climate change, </li></ul><ul><li>Competition for natural resources, and </li></ul><ul><li>Global economic development </li></ul>
  52. 53. Themes from The 30-Year Challenge <ul><li>Uncertainty, </li></ul><ul><li>Public understanding, </li></ul><ul><li>Unintended consequences, </li></ul><ul><li>Trade-offs, </li></ul><ul><li>Research and development, </li></ul><ul><li>Infrastructure, </li></ul><ul><li>Trade, and </li></ul><ul><li>The absence of a clear strategy for U.S. agriculture. </li></ul>
  53. 54. The Near-Term Imperatives <ul><li>Financial Crisis and Recession </li></ul><ul><ul><ul><li>Interest rates </li></ul></ul></ul><ul><ul><ul><li>Exchange rates </li></ul></ul></ul><ul><ul><ul><li>Incomes and demand </li></ul></ul></ul><ul><li>Boom and Bust </li></ul><ul><ul><li>Ethanol </li></ul></ul><ul><ul><li>Commodity Prices </li></ul></ul><ul><li>Policy Responses??????? </li></ul>
  54. 55. Prospects for Policy Transition <ul><li>In response to what one of our participants in the 30-Year Challenge Project called a “generational opportunity” Farm Foundation undertook this effort to motivate the debate. </li></ul>
  55. 56. For More Information <ul><li>Visit www.farmfoundation.org to find: </li></ul><ul><ul><li>“ What’s Driving Food Prices” </li></ul></ul><ul><ul><li>“ The 30 Year Challenge, Feeding and Fueling a Growing World” </li></ul></ul>
  56. 57. Willi Meyers Co-Director Food and Agriculture Policy Research Institute University of Missouri
  57. 58. Discussion Willi Meyers [email_address] Transatlantic Roundtable, Brussels January 14, 2009
  58. 59. Changing US Political Setting?
  59. 60. Changing EU Political Setting?
  60. 61. Changing Market Environment? Real U.S. Crop Farm Prices in year 2000 US dollars Source: January 08 FAPRI Baseline
  61. 62. Did we lose trust in MARKET INSTITUTIONS? ..said Thursday(Oct 23)that the current financial crisis had uncovered a flaw in how the free market system works that had shocked him.
  62. 63. Questions for future <ul><li>Will food prices be higher and instability greater? </li></ul><ul><li>Did the food price surge reveal flaws in market/policy systems? </li></ul><ul><li>Which flaws and which market factors can be mitigated with policy changes/trade disciplines? </li></ul><ul><ul><li>Short term </li></ul></ul><ul><ul><li>Long term </li></ul></ul><ul><li>Will policy behavior reflect loss of confidence in market? </li></ul>

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