eu agricultural policy and sustainability j. bensted-smith, director ipc seminar 2007, stratford
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EU Agricultural Policy and Sustainability J. BENSTED-SMITH, Director IPC Seminar 2007, Stratford. 1.Economic Sustainability. Trends Outlook (Cereals). a) Trends. Key figures of the agricultural sector. - PowerPoint PPT PresentationTRANSCRIPT
EU Agricultural Policy and Sustainability
J. BENSTED-SMITH, Director
IPC Seminar 2007, Stratford
2
1. Economic Sustainability
a) Trendsb) Outlook (Cereals)
3
a) Trends
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Key figures of the agricultural sector2003 UE-15 EU-N10 UE-25 Romania Bulgaria
Population (mio pers.) 381 74 455 22 8UAA (mio ha) 133 34 167 14,8 5,3Agricultural income (bio €)Agriculture in GDP
1741,9%
133,1%
1871,9%
5,911,7%
1,810,0%
Employment in agriculture (mio)Share in total
6,34,0%
3,612,4%
9.95,2%
2,734,0%
0,826,0%
Agricultural tradeShare in total exportsShare in total imports
8,8%8,8%
6,1%5,9%
8,6%8,6%
3,3%7,5%
3.3%7.5%
Food expenditure:share in household expenditure 12% 26,8% 17,0% 35,0% 32,0%
5
Average farm size reaches 11.5 hectares for EU-27 but varies from 1 ha to 80 ha across Member States
Average farm size in hectares and in potential gross value added - 2003
0
100
200
300
400
500
600
700
800
900
1000
CZ UK DK LU SE FR DE IE FI SK BE NL ES EE AT LV PT LT IT PL SI HU EL BG CY RO MT EU-15
NMS-10
EU-25
EU-27 = 100
hectares of utilised agricultural area potential Gross Value Added (economic size)
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1990 2003
0%
10%
20%
30%
40%
50%
60%
70%
80%
Less than 10 ha From 10 to less than 50 ha From 50 to less than 100 ha 100 ha or more
average farm size (ha)
Holdings
Most of farms have a limited size in area and structural development occurs at a low pace
Distribution of holdings according to their size in area in the EU-12 – 1990-2003
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23%
8%
3%
0%
16%
35%
19%
7%
Holdings; 46%
20%
Labour Force; 11% 12%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
<0.5 AWU 0.5 - < 1 AWU 1 - < 2 AWU 2 - < 3 AWU 3 - < 10 AWU >= 10 AWU
Categories of farms according to the level of the labour force (in annual work units)
66% of farms have less than one full-time job and employ 27% of the labour forceDistributions of holdings and of labour forceby category of level of labour force per holding in the EU-27 - 2003
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Medium term perspectives up to 2013: loss of4.2 mio farms, 3.8 mio ha and 3.4 mio full-time jobs
Number of holdings (million)
Utilised Agricultural Area (million)
Agricultural labour force (mio AWU)
2003 2013 2003 2013 2003 2013
EU-15 6.2 4.8 126.1 122.3 6.3 5.2
NMS-10 3.7 2.6 30.1 30.1 3.6 2.5
BG + RO 5.1 3.4 16.8 16.8 3.5 2.3
EU-25 9.9 7.4 156.1 152.4 9.9 7.7
EU-27 15.1 10.9 173.0 169.2 13.4 10.0
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b) Outlook
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Methodological approach Main assumptions:
– Uruguay Round Agreement on Agriculture maintained constant
– Favourable, though positive world agricultural market outlook
– Market share of biofuels in 2014 - 5%– Return to modest economic growth – $/€ exchange rate to reach 1.15 by 2014– By 2014 direct payments are assumed to be 91%
decoupled (milk 100 %, arable crops 96 %, beef 79 %, sheep 82 %)
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Assumptions for $/€ exchange rate and GDP growth
0.4
0.6
0.8
1
1.2
1.4
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 20140
1.5
3
4.5
6
7.5
GDP growth
$/euro exchange rate
GDP growth$/euro exchange rate
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Crops Medium term perspective appears positive for cereal
markets in line with: – CAP reform, decoupling and phasing out of maize intervention;
– two consecutive low harvest in the EU in 2006 and 2007 causing a significant decline in stocks;
– improving domestic use (emerging biofuel industry and feed);
– favourable world market conditions and
– the expected return to improved exchange rate conditions
– removing regional imbalances of maize markets
– medium-term risks of regional imbalances for barley (Germany) and soft wheat (new Member States).
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Slightly expanding cereal markets and emerging bioethanol markets….
Development of cereal markets in the EU, 1995-2014 (mio t)
0
50
100
150
200
250
300
350
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
production
non-feed use
feed use exportsimports
EU-15 EU-25 EU-27bioethanol
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… lead to a return to modest levels of stocks on EU cereal markets ….
Development of stocks and cereal exports in the EU, 1995-2014 (mio t)
0
10
20
30
40
50
60
70
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
private stocks
public stocks
exports
EU-15 EU-25 EU-27
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…and change in the composition of public stocks …Composition of public stocks in the EU (mio t), 1995-2014
0
2
4
6
8
10
12
14
16
18
20
22
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
wheat barley rye maize
EU-15 EU-25 EU-27
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… with more evenly spread public stocks across regions. Regional distribution of public stocks in the EU (mio t), 1995-2014
0
5
10
15
20
25
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
EU-15 EU-25 EU-27
EU-15 EU-10 EU-2
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Cereal prices should stay firm over the medium term.
80
90
100
110
120
130
140
150
160
170
180
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
EUR
/t
maize EU-15
maize HU
feed barley
soft wheat
rye
Development in cereal prices in the EU (EUR/t), 1991-2014
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2. Environmental Sustainability
a) Cross complianceb) Rural Development
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a) Cross Compliance
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– Introduction of Cross-Compliance as a sanctioning mechanism– 19 statutory European standards (environment, food safety,
plant and animal health, and animal welfare) subject to cross-compliance sanctions
– Obligation to keep land in “Good Environmental and Agricultural Conditions” (Horizontal Regulation, Annex IV) targeted towards:
• Combating erosion• Avoiding the loss of soil organic matter• Preserving soil structure • Ensuring a minimum level of maintenance
– Maintenance of historical level of permanent pasture
Cross-Compliance
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WHAT IS CROSS COMPLIANCE? Two Types of standards 19 Directives and regulations = SMR
Environment protection– Food Safety, animal and plant health and animal welfare
maintenance of land in good agricultural and environmental conditions = GAEC including the total permanent pasture area
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SMR: environment
Wild birds
HabitatsGroundwater
Sewage Sludge
Nitrates
Surface water Surface water and and
GroundwaterGroundwater
SoilSoil Nature Nature protectionprotection
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SMR: sanitary and veterinary legislation
Animal identification and registration
Plant protection products General Food Law Animal welfare
Hormone ban Animal diseases notification
Animal Id. Animal Id. Plant healthPlant health
Public healthPublic health Animal Animal health and health and
welfarewelfare
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GAEC: 4 issues, 11 standards
Unwanted vegetation
Olive groves
Minimum soil cover
Soil organic Soil organic mattermatter
Minimum level level
maintenancemaintenance
Livestock stocking rates
Permanent pasture
Soil structureSoil structureSoil erosionSoil erosion
Retention landscape features
Crops rotations
Arable stubblemanagement
Appropriatemachinery useMinimum land
management
Retain terraces
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b) Rural Development
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Three core objectives:
Improving the competitiveness of the farm and forestry sector through support for restructuring, development and innovation
Improving the environment and the countryside through support for land management
Improving the quality of life in rural areas and encouraging diversification of economic activity
Rural Development Policy Programming Period2007-2013
27
Trends
At present 30-40% of the funds for axis 1
Restructuring and modernization of farm holdings more important for the new MS
Innovation, human capital and entrepreneurship more important for the old MS
In the future Competitiveness still more
important due to elimination of export refunds and reduction of import tariffs
Market segmentation, quality products of special character; training and further education; entrepreneurship and the use of new technologies
AXIS 1
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Trends
At present 40-50% (partly up to 75%) of
the funds for axis 2
In some EU-15 MS: old AE obligations absorb considerable funds
GAEC and CC standards are obligatory and cannot be compensated
In the future Clearer demonstration of the
environmental benefit
Clearer connection with priority areas of EU environmental action (e.g. biodiversity, climate change, water)
AXIS 2
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Trends
At present minimum 10%
(19% on average) of total fund to axis 3 “Quality of life and diversification”
Improving working and living conditions for farming households and the rural community
In the future better promotion of innovative
investments outside the agricultural sector
move from a narrow agriculture to a wider rural perspective
Strengthening the link between agriculture and other sectors of rural economy – narrowing the gap between urban and rural areas
AXIS 3
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SCENAR2020
3. Outlook 2020
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1st & 2nd Level Drivers
Exogenous (= where patterns are not likely to change)
Population growth patterns Macro-economic patterns Consumer preferences Agri-technology Environmental
conditions/patterns
Endogenous (= where changes are easier to achieve)
Agricultural policy Structural policy Environmental policy WTO and other
international commitments
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Conclusions and challenges for agriculture as identified by the study1. Structural change process in agriculture is a long-term driver that continues with or without policy
changes. 2. EU is facing an increasing diversity of structure and structural adjustment.
The livestock sector faces important challenges and restructuring.3. Alternative policy settings may not produce very different effect on the overall production.
However, the regional impact may prove to be more significant.4. The process of liberalisation has a greater impact on agricultural income than on agricultural
production and land use.a) The reduction of border protection and export refunds has a higher impact on production, than a
reduction of direct payments. b) The reduction of direct payments has a higher impact on agricultural income than on agricultural
production.
5. However, at regional level, the impact may be more significanta) A process of liberalisation would lead to intensification in the most competitive regions and an
extensification of production in others b) Adjustment processes in agriculture might be accompanied by an adverse or supportive
economic and social situation6. Increasing segmentation of EU markets will take place. This will be enhanced by further trade
liberalisation and enlargement.
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Changes in farm income / ha: Liberalisation vs. BaselineChange in Income per ha, Liberalisation vs. Baseline
-60% and more-60% to -55%-55% to -40%-40% - -20%-20% - -10%-10 and less
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Changes in Nitrate surplus per ha: Liberalisation vs. Baseline in 2020
Change in Nitrate Surplus (kg per ha), Liberalisation vs. Baseline-4% and more-4% to -2%-2% to 0%0% to +3%not displayed
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Conclusions1. Alternative policy scenarios do not show highly different impact
on the overall production levels (though more on income and structure)
2. “Liberalisation” would:
a) affect production levels mainly through increased market access, rather than from a decline in income support
b) show a significant impact on income and agricultural assets, including land (though this may help facilitating the structural adjustment process)
3. An increasing number of rural areas will become increasingly dependent on other sectors and driven by factors outside agriculture
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Sustainability
1. Economic sustainability– Great diversity of structures in EU-27 linked with direct
payments– Market instruments look sustainable based on outlook but
need review/fine tuning
2. Environmental sustainability– Cross-compliance (SMRs + GAEC) sets baseline– RD Axis 2 addresses environmental sustainability
RD Axis 1 + 2 address principally economic sustainability– longer term link between direct payments and farm
structures and elements of environmental sustainability(e.g. biodiversity)
Overall conclusion