|Paris, 13th July 2016
The bleak OECD Agricultural Outlook 2016-2025 shows that the current CAP is no longer appropriate!
“The period of high agricultural prices is probably coming to an end” this is the main message put forward by the OECD and FAO early July in the annual report, “Agricultural Outlook 2016-2025” which concentrates on the evolution of agricultural markets.
“The [...] factors behind this trend are the strong increase in supply over several years, the decline in demand due to the global economic crisis, the decline in oil prices and the continued accumulation of stocks […]”.
This is a major break from the discourse on which the Commission has based its guidelines for the CAP for the past 10 years which consists in believing the prospect of 9 billion mouths to feed by 2050 will result in higher agricultural prices.
Of course, we can only draw satisfaction from such a change in terms of studies identifying available arable land or the progression in yields that show the extent of the global productive potential. But revising recommendations in terms of agricultural policies still remains to be done!
But the new report says nothing of the end of the commodity “super cycle”, confirming that low prices are not identified as a problem. Worse, agricultural policy recommendations remain unchanged: i.e. increase production... then enter a period of overproduction!
The OECD also continues to anticipate stable prices by 2025, because their predictive model, based on the assumption of market balance, can only predict the evolution of stable prices! And for good reason: there are no major sources of agricultural market instability represented within it: expectations are rational (producers know the price of their crop at planting), everything immediately adjusts (there no fixed costs) and the level of stocks play no role in price formation!
As farmers increasingly have to face uncertain markets, one thing is certain: the CAP is definitely no longer suited to the economic context since the food and financial crises of 2007/2008.
This is why the so-called exceptional announcements expected from Phil Hogan next week must go beyond economic measures and calls for resilience from farmers!
+ 33 1 56 58 51 57