The CAP: tomorrow is already here
Thierry Pouch, économiste, in charge of research
at the Permanent Assembly of Chambers of Agriculture (APCA)
The incessant dismantling of agricultural support measures under successive CAP reforms sheds doubt on the future commitments of the EU and member States for European agriculture. What model should we adopt?
There are more and more supporters for a move towards an insurance-based CAP, based on the American model, this is mainly because of the failure of the recent 2014-2020 reform and because the European Commission has been unable to provide effective and sustainable solutions to the farming crisis that has erupted in Europe.
We recommend reading this editorial by Thierry Pouch1 which covers one of the debates on the future of the CAP and its architecture after the next 2020 reform. The insurance mechanisms as developed in the United States may be a source for inspiration, but are complex to implement within the European Union.
Firstly, he suggests finding the resources for new reform within our borders. But above all, fully understanding that our agriculture is subject to an imperfect and unstable market and requires a CAP distinctly different and adapted to the economic, social and geopolitical issues.
momagri Editorial Board
The CAP has only recently been implemented and is already subject to speculation concerning its next reform, due around 2020. Conjecture is rife with regards what the CAP will resemble, knowing that the current reform was difficult to apply. One word keeps recurring, almost by magic – insurance – with all eyes on the US model. However, certain considerations are necessary.
The new CAP, which came into force last January, was distinguished by its long gestation, proportional to its complexity. As the breeding sector crisis demonstrates to anyone willing to see, the dismantling of regulatory measures for agricultural markets has not only contin-ued, but those proposed to replace them have proven highly ineffective.
This is demonstrated by the European Commission’s difficulty in stopping the drop in prices for dairy produce since the beginning of the year as part of the measures adopted in the “milk package”. More generally, the complexity of the current CAP has lead to national adaptations that have initiated a process of re-nationalization of this foundation of European construction.
It is in this context that thoughts on the next CAP, due in 2020, are beginning to emerge. Anticipating the future CAP requires answers to specific questions which are clearly currently not being asked.
What do the farmers want? Market risk management tools? The revision of the principles of market regulation that guarantees prices and incomes? Financial tools adapted to agro-ecology requirements? Making European agriculture a link in world food security? An insurance-based system, similar to that in the United States? These questions alone offer one certainty: Member States and the Commission will struggle to reconcile each other’s expectations and requirements. In any event, with regards insurance, of which much is expected, it is necessary to clarify certain points concerning the US model.
The case of the dairy sector demonstrates to anyone willing to see that the breeders’ margin insurance scheme will undoubtedly have difficulty getting underway as long as its trigger threshold remains low (69 €/1000 litres for two consecutive months). If a dairy farmer wants to cover a higher margin (103 €/1000 litres or more 138 €/1000 litres) they must pay higher than the basic fee, set at $100. And the bigger their herd of cows the higher the insurance margin (for 1000 cows, a 90% protection of production and a margin of 138 €/1000 litres will cost 159 000 €).
The American example, as appealing as is it, remains complex and obviously not very transposable. Moreover, we must remember that 80% of the budget dedicated to agriculture under the Farm Act is devoted to food aid.
However, food aid is an area of the CAP scrapped by the Commission following pressure from Germany. So, inspiration for agricultural policy is therefore not necessarily located outside our borders; we should certainly look within the EU for the tools necessary to building a CAP which meets the expectations of multiple actors, admittedly heterogeneous but the benefits of which remain intact, firstly by moving away from the dogma that the market is efficient by nature. We know that agricultural markets are endogenously unstable. How many more times must this be repeated?
Next, give producers the economic visibility they sorely need. There is no doubt that European agriculture already has its role in the world. Finally, recognize that agriculture is a key sector in a globalized, unstable and dangerous world. The CAP should no longer be reduced to accounting issues. It is now, more than ever, at the heart of an economic, social and geopolitical crossroads.
1 The entire Thierry Pouch’s editorial is available from :