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OlofS.

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


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Outline

1. The context

2. The CAP today

3. Why do we need a reform?

4. New objectives, future instruments and policy options

5. Concluding remarks

6. Next steps


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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


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2. The CAP today

A substantially reformed policy

Structured in two complementary

pillars

Farm support mainly decoupledand 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


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CAP expenditure and CAP reform path(2007 constant prices)

0

10

20

30

40

50

60

70

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

% GDPbillion

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

Export subsidies Other market support Coupled direct payments

Decoupled direct payments Rural development % of EU GDP

Source: European Commission - DG Agriculture and Rural Development

EU-10 EU-12 EU-15 EU-25 EU-27


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0%

10%

20%

30%

40%

50%

60%

% of GDP

CAP expenditure All EU public expenditure

Alternative views on the cost of the CAP

0

20

40

60

80

100

120

140

Billion of euros

CAP expenditure EU budget

CAP cost in 2009

(in relative terms)

CAP cost in 2009

(in absolute terms)

0.5% of

EU GDP

41% of EU

budget



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To respond to challenges ahead

Economic

challenges

Food security

Price variability

Economic crisis


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Recent trends in some commodity market

prices

Sources: European Commission - DG Agriculture and Rural Development and World Bank

EUR/t for maize and fresh milk; EUR/100 kg for SMP

0

50

100

150

200

250

300

350

400

Jan-00

May-00

Sep-00

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

0

25

50

75

100

125

150

175

200

Crude oil, EUR/bbl

Fresh milk, EU SMP, EU Maize, US, Gulf Crude oil, avg spot price


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EU developments in agricultural income(agricultural income/AWU in real terms)

( Index EU-27 in 2005 = 100 )

160

170

180

190

200

210

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

EU-15

0

10

20

30

40

50

60

EU-12

Source: Eurostat

EU-15

EU-12

168.0

192.7

17.9

31.7


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EU developments in agricultural income

(agricultural income/AWU in real terms)

( Index 2000 = 100 )

60

70

80

90

100

110

120

130

140

150

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

EU-15

20

40

60

80

100

120

140

160

180

200

EU-12

Source: Eurostat

EU-15

EU-12


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Relative situation of agricultural income

in the EUIncome gap with the rest

of the economy

(average 2005-2007)

Agricultural income level

between Member States

(2010e)

Source: European Commission - DG Agriculture and Rural Development, based on Eurostat data

(agricultural income as % of averageincome in the total economy)

0%

20%

40%

60%

80%

100%

EU-15 EU-27 EU-12

(agricultural income/AWU in real terms -EU-27 = 100)

0

25

50

75

100

125

150

175

200

EU-15 EU-27 EU-12


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Recent evolution of agricultural input and

output prices

Source: Eurostat

(index 1996 = 100, in real prices)

70

80

90

100

110

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

Input prices - EU-27 Output prices - EU-27


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Economic

challenges

Environmental

challenges

Food security

Price variability

Economic crisis

GHG emissions

Soil depletion

Water/air quality

Habitats and

biodiversity


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Declining trend of GHG emissions in EU

agriculture since 1990

Source: EEA

Tg CO2 equivalents

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

EU-27 = -20%

EU-15 = -12%


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Climate change

- Possible impacts on EU agriculture Floods risk

Hotter and drier summers

Sea levels

Risk crop pests, diseases

Crop, forage yields

Animal health, welfare

Water availability

Risk drought, heat spells

Risk soil erosion

Growing season, crop yields

Optimal crop areas

Summer rainfall

Winter storms, floods

Length growing season,

yields

Suitable farmland Pests, diseases risks

Winter rainfall, floods

Summer rainfall

Risk drought, water stress

Soil erosion risk

Yields, range of crops

Source: DG Agriculture and Rural Development, based on EEA reports, JRC and MS academic studies


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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


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Importance of agriculture in the EU territory

13.7 million farms

(70% with less

than 5 ha)

The agrifood

sector has 17.5

million employees

(7.7% of total

employment)


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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


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4a. What are the objectives with the reform?

Viable foodproduction

Sustainablemanagement of

natural resourcesand climate action

Balanced territorialdevelopment

To contribute to

farm income and

limit its variability

To improve sector

competitiveness

and share in foodchain value-added

To compensate

areas with natural

constraints

To guarantee the

provision of

public goods

To foster green

growth through

innovation

To pursue

climate change

mitigation and

adaptation

To support rural

vitality and

employment

To promote

diversification

To allow social

and structural

diversity in rural

areas

Common EU response needed


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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 withspecific natural

constraints


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Average direct payments per potentially

eligible area and beneficiaryDirect payments net ceilings fully phased-in (in 2016)


0

100

200

300

400

500

600

700

800

Malta

Belgium

Netherlands

Italy

Greece

Cyprus

Denmark

Slovenia

Germany

France

EU-15

Luxembourg

EU-27

Ireland

Austria

Hungary

CzechRepublic

Spain

Finland

Sweden

UnitedKingdom

Bulgaria

Poland

EU-12

Slovakia

Romania

Portugal

Lithuania

Estonia

Latvia

EUR/ben.EUR/ha

0

8000

16000

24000

32000

40000

48000

DP net ceilings fully phased-in (EUR/ha)

EU-27 average (EUR/ha)

DP net ceilings fully phased-in (EUR/beneficiary)


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Direct payments Market measures

Market orientation

Streamline and

simplification

Improved food

chain functioning

Redistribution

Better targeting


payments Capping of

payments

Small farmers

support

Areas withspecific natural

constraints


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Slow, limited, asymmetric price transmission

along the food supply chain

95

100

105

110

115

120

Jan-07

Feb-07

Mar-07

Apr-07

M

ay-07

Jun-07

Jul-07

Aug-07

S

ep-07

Oct-07

Nov-07

D

ec-07

Jan-08

Feb-08

Mar-08

Apr-08

M

ay-08

Jun-08

Jul-08

Aug-08

S

ep-08

Oct-08

Nov-08

D

ec-08

Jan-09

Feb-09

Mar-09

Apr-09

M

ay-09

Jun-09

Jul-09

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


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Direct payments Market measures Rural development

Market orientation

Streamline and

simplification

Improved food

chain functioning

Environment, climatechange and innovation

as guideline themes

Improved coherence

with other EU policies More effective delivery

mechanisms

Address risk

management

New distribution criteria

Redistribution

Better targeting


payments Capping of

payments

Small farmers

support

Areas with

specific natural

constraints


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Denmark

Netherlands

Belgium

France

Greece

Germany

United Kingdom

SpainItaly

Ireland

Sweden

Luxembourg

Finland

Cyprus

Hungary

Austria

Portugal

Czech Republic

Poland

Lithuania

Slovakia

Sl i

%oftotalexpenditu

re

FirstPilla

r

SecondPillar

Source:EuropeanC

ommission-DG

AgricultureandRuralDevelopment

CAPex

penditurebetwe

enpill

(in

2009)


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4c. What policy options?

Option 1

Continue the reform process by introducing

further gradual changes while adjusting the most

pressing shortcomings (e.g. more equity in the

distribution of direct payments)

Option 2

Capture the opportunity for reform ensuring that

CAP becomes more sustainable and balanced

(between policy objectives, MS and farmers)

through more green targeted measures

Option 3

More fundamental reform focusing entirely on

environmental and climate change objectives

through rural development, moving away from

income support and most market measures


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4c. What policy options?

Direct

payments

More equitabledistribution among MS

and among farmers

More equitable distributionamong MS and among

farmers

Greening of direct payments

Capping of payments

Increase small farmers support

Gradually phase outdirect payments

Market

measures

Streamline and

simplify existing

measures

Streamline and simplify

existing measures

Phase-out most

measures

Keep disturbance

clause for severe crises

Rural

d

evelopment Continue emphasis on

climate change,

biodiversity, bio energy

and innovation

More focus on environment,

restructuring and innovation,

climate change, local initiatives

Risk management tools and

income stabilisation tool

New distribution criteria

Primarily focus on

measures linked to the

environment and the

delivery of public goods

Option 1 Option 2 Option 3


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5. Concluding remarks

With reform, the CAP needs to:

better respond to the economic, environmental and territorialchallenges

be more sustainable, balanced, better targeted, simpler, effectiveand more accountable

improve current CAP instruments and design new ones


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6. 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 will be presented in the second semester of 2011


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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
http://ec.europa.eu/agriculture/cap-post-2013/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/communication/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/communication/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/consultation/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/consultation/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/consultation/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/consultation/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/communication/index_en.htmhttp://ec.europa.eu/agriculture/cap-post-2013/communication/index_en.htm


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Thank you

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