Brussels, February 20th. 

As a continuation of a previous discussion (January 29^th) on the future of Europe’s post-2020 agricultural policy among the European Agriculture Ministers, the Agriculture and Fisheries Council (AGRIFISH) chaired by Bulgarian Minister for Agriculture, Food and Forestry Mr. Porodzanov, was held yesterday, February 19^th 2018 in Brussels. It represented a second thematic exchange of views among EU Ministers specifically focusing on: (i) direct payments, (ii) environmental measures and (iii) rural development.

During the previous exchange, Ministers addressed the importance of the CAP’s added value, the key objectives at EU level to be maintained and further enhanced and the appropriate level of subsidiarity for the implementation of the policy, being cautious on the New delivery model as long as only very few concrete details are available at the moment.

It is relevant at this point to take stock and reflect on these on-going discussions, since the Presidency aims to strike Conclusions on the EC Communication on the “Future of Food & Farming” at the next meeting, which is planned to be on March 19^th.

Let’s start from the initial exchanges and proceed then with the latest one.

On January 29^th, in the occasion of the first debate on the subject, Ministers overall agreed on the CAP’s added value for (i) the competitiveness of the agricultural sector, (ii) the viability of rural areas, (iii) the functioning of the EU Single Market and (iv) the sustainability of the agricultural production among the others.

The “greater subsidiarity” aspect of the Commission’s proposal for the future Common Agricultural Policy (CAP) after 2020 was generally welcomed. Ministers emphasized the importance of “more flexibility in the implementation measures” with MS able to tailor specific measures according to national specificities.

However, a vast majority pointed out that the objectives should be set at EU level and the right level of subsidiarity should be established. Furthermore, they demanded more clarity on the “New Delivery Model” implementation.

Many Ministers asked for maximum transparency and especially guidance on practicalities and division of responsibilities between the EU and MS.

“How can we ensure the proper functioning of this new Mechanism?”

“How can we be ensured that the Common character of the CAP is not undermined?”

“How can we ensure the achievements of CAP objectives?”

“How can you (EC) ensure that the New Delivery Mechanism does not create additional administrative burden for farmers and national/regional authorities?”

These were among the biggest question marks that EU Agriculture Ministers addressed to the European Commission during the January 29^th exchange of views. It is not by chance that the word “ensure” is underlined, but in the conclusion of this post everything will be made clearer to the reader.

In between the two thematic exchanges on the future of the CAP (AGRIFISH meetings), it is necessary to mention the Special Committee on Agriculture’s (SCA) meeting on February 5^th, during which Member States had the possibility to discuss on the Commission’s Communication in much more detail.

Specifically, on Direct Payments, Member States came to a general agreement on: (i) DP’s fundamental role in providing farmers ‘income stability’, (ii) their capacity to ensure a fair standard of living, considering the still existing income gap with other economic sectors, and (iii) the “safety-net” role against the risks of price volatility and extreme climatic conditions.

On Direct Payments’ role, yesterday’s exchange, emphasized again the main outcomes of the SCA:

1. a) “Member States recognized the importance of direct payments being fairly distributed. Mechanisms such as redistributive and degressive payments as well as capping were backed by a considerable number of delegations, many of which pleaded for the choice to be left to Member States”.

1. b) “Some delegations also considered the principle of equality between Member States in the distribution of direct payments as an important element of fairness”.

In addition to this, a fear that many Ministers expressed, was the necessity to separate measures under Pillar I and II with the New Delivery Model proposed by the European Commission to keep clarity between the different tools of the CAP.

While, on Voluntary Coupled Support, a topic which was raised by many Member States, there seemed to be an agreement on the effectiveness of such measure in particular on agriculture most sensitive sectors. Ministers asked for greater flexibility in the implementation of VCS, in order to be better prepared to pressure on competitiveness – i.e. on open markets & FTAs (some MS argued).

On Environmental aspects, the main concepts that emerged from the discussion and that were backed by many Ministers during the exchange were as follow:

– “Environmental objectives should be set out at EU level”

– “Farmers should be adequately rewarded for the provisions of public goods”

– “MS & Regions should be given flexibility when designing specific measures”

– “A better coordination and complementarity between Pillar I and Pillar II measures for environmental and climate action should be ensured and duplication avoided”  

At this point, it seems necessary to summarize the Commission’s explanation on the “new Greening architecture” and its “enhanced conditionality”, since some MS, both at this last meeting and in the occasion of the SCA, made specific points on the structure of the new conditionality and specifically the importance of maintaining coherence by building it on the current one, thus limiting further technicalities.

Structure of the “new greening architecture” as proposed/presented by the EC (see Council’s Document 6066/18 for more details):

– “an enhanced conditionality, mandatory for farmers, and a voluntary mix of interventions funded under pillar II (climate/environmental schemes) and, if chosen by Member States, also under pillar I (eco- schemes).

– “current cross-compliance (SMRs – Statutory Management Requirements and GAEC – Good Agricultural and Environmental Conditions) and greening requirements, will be merged into one single system, incorporating SMRs and a set of GAEC-type standards. These standards would be developed by Member States into appropriate requirements for their farmers to respect (as in the current GAEC), taking account of national specific conditions as well as, for example benefits resulting from requirements for other sectors and possibly lightening the ones their farming sector would have to implement. Respect of the new conditionality would be a condition for farmers to receive pillar I support, and it would serve as the baseline for more ambitious environmental schemes, such as agri-environment-climate measures (AECM)”.

Last but not least, delegations were also asked for their views on “how should the rural development policy be further modernized and simplified to contribute to more sustainable rural economies and jobs and growth in rural areas?”

 What the European Commission specified, when explaining and clarifying the features of the new “delivery model” concerning Rural Development, is that “Member States will have more flexibility in setting objectives and targets on the basis of their local needs, tailoring the CAP interventions on the basis of broad types of interventions set at EU level, and establishing compliance frameworks for beneficiaries”.

Ministers, for their part, underlined the need to maintain and further enhancing the viability and prosperity of rural areas, with a special focus on: generational renewal and job opportunities. An issue raised by some of them, was the necessity to “make RDP programming much simpler”. They also stressed the need to ensure coherence with other EU policies and asked for more flexibility in the design of specific measures.

In conclusion to this overview on the current discussions and exchange of views on “the Future of Food and Farming” proposed by the EU Commission with its Communication, what has to be also stressed is the need:

– to build an effective and pragmatic approach with a CAP, which should remain a fully common EU policy;

– to offer enough concrete flexibilities to make CAP simpler and more efficient at national and regional level.

 In other words, Member States do not only need “reassurance” but a clear guidance on the discussion on how to build a shared common vision for the future of the EU agri-food sector, in order to meet current most pressing challenges, respond to societal expectations, and thrive.

Is there a strategy which combines the need to finance new challenges by recognizing the importance and role of “the elephants in the room” ?

Brussels, January 11^th.

On January 8^th and 9^th, after the Christmas break, and ahead of the College debate on the European Union’s budget, EU Commissioner Günther H. Oettinger launched a high-level conference on “Shaping Our Future – Designing the Next Multiannual Financial Framework (MFF)”, hosted by the European Political Strategy Centre (EPSC), the European Commission in-house think tank.

The debate was an additional step in the preparation of the next Multiannual Financial Framework (MFF), of which Commission’s draft regulation will be presented in May 2018 at the latest. For its part, the European Parliament is planning to include its position in an upcoming own-initiative report.

A first step, was the launch on the 28^th June last year, of the Reflection Paper on the Future of EU Finances, which Farm Europe thoroughly commented in a previous post. Given that all the efforts now should be addressed towards analyzing and selecting the best policy options and ideas to shape a budget that is able to guarantee the right balance between traditional policies and new challenges, let’s focus on the state-of-the-art of the current discussions, since, as Commissioner Oettinger clearly stated “feedbacks are welcome”.

A first clear message from the Commission is that, from a budgetary perspective, the EU needs to find the means to react after Brexit impact, which will cause according to Commissioner Oettinger “a gross annual gap of almost €13 billion”, and furthermore, the new collective challenges that arose (i.e. migration, refugees, external border controls and security and defense among the others) ask for sufficiently ambitious funding.

However, at this stage of the overall discussion, Farm Europe considers it crucial that the Commission not only evaluate the figures of the UK’s net contribution to the EU budget, but specifically the actual cost of UK departure. If, over the years 2010-2016, the UK’s annual net contribution to the EU budget (UK contribution with rebate deducted) was €13,48 billion, it is also true, that the UK benefited during this period of an annual amount average of €6.86 billion of EU aid (all EU policies combined). In fact, the actual effective budgetary cost of the UK’s exit from the EU budget is found to be €6.6 billion/year and not 13 billion. It is on this basis that the Commission must reason and the Heads of State take their decisions for the future.

Commissioner Oettinger declared that 50% of the Brexit gap should be filled by cuts to existing programs (or in other words by savings), and the other half of it should come from “fresh money”.

At the risk of redundancy, this position put forward by the Commission must be applied to the actual net cost of British departure, being it € 6.6 billion/year and not €13 billion repeatedly advanced by the Commission, without which “half new money ” would be only an empty promise and 100% of the cost of Brexit would be borne by existing programs.

Concerning “new priorities” Commissioner Oettinger proposed a 20% financing from restructuring and that 80% should come from fresh money. Accordingly, as also President Juncker noted, it is not possible to finance both EU existing and new policies with the current max 1% of GNI.

“We need a slightly bigger EU budget: 1.1x% of GNI”, Commissioner Oettinger argued.

A second concept that stood out throughout the whole discussion was that “no euro will be spent without the proof of added value”. But, the most important question is how we define it?

Commission’s attitudes towards it seems to be clearly shaped around the fact that “EU budget priorities on the expenditure side, are the ones able to make European economy more competitive globally and which ensures growth of its human capital”. Commissioner Oettinger made it clear: “we have to make cuts somewhere without damaging EU’s current main policies. The CAP and Cohesion policy remain important”. Only 2 Programs will be excluded by these foreseen cuts: Horizon2020 and Erasmus+, since these are core part of the main objectives for the future of the EU – resources allocated to education, research and innovation, as also stated by Vice-President Katainen, “help us to modernize our continent” and “this is an investment for the future”.

Jean Arthuis, Chair of the Committee on Budget of the EP, highlighted that the EU Budget is a reflection of political objectives and ambitions. Mentioning the report the EP intends to issue by the end of March, he stated that proposals are focused on:

– the recognition of the need of flexibility;

– the idea to go beyond the 1% of GNI, because otherwise “we cannot meet current and future challenges” the MEP argued;

– concerning “new own resources” he stressed that it is necessary to think about the implications for tax payers;

What is clear is that the definition of new priorities, and related budgetary commitments, must go hand in hand with a constructive approach on EU traditional policies, namely the Common Agricultural Policy and the Cohesion Policy. It is too simple to say “let’s cut the budget on the two largest spending categories”. It true that these policies need to be reviewed and simplified but an objective analysis, for instance, on European agriculture should lead to the acknowledgement of its capacity to not only ensure European food security, but also safeguarding the environmental stewardship of all EU rural territories, without even mentioning the productivity growth aspect (i.e. through employment generation and innovation).

As also highlighted in a recent World Bank’s report, developed in partnership with the European Commission, which has assessed the impact of the Common Agricultural Policy on growth, jobs, and poverty in European Union countries, it is true that the CAP represents almost 40% of the EU budget (the biggest budget item) but according to the statistical analysis conducted, the CAP was associated with both reduction of poverty and the creation of better jobs for farmers across the whole EU. And this is something which cannot be overlooked, given that the value added of EU agri-food systems remains unquestioned.

Today, in our society, the safeguard of the ecosystem as a common good is an issue, which is becoming every day more relevant.

Being an activity with a notable correlation to environmental issues, food safety, health and respect for animal welfare, animal husbandry deserves particular attention in order to guarantee both its economic and environmental sustainability components.

The path followed by the EU legislation on the animal welfare of livestock breeding has progressively aligned itself to the improvement of mankind’s attitude towards animals as animal husbandry production. Complementary to this, year after year more people have become concerned about the ethical treatment of animals.

Even though this note focuses more on the farm level, it is necessary to stress that the animal welfare dimension concerns the whole food chain, and in particular, it is first and foremost at the slaughterhouse level, where a lot of attention is being paid by the public recently and where we should aim to table concrete proposals having an all-encompassing “food chain approach”.

As a matter of facts, since the final product may be affected at any stage of the food production process, a wide range of factors can impact on animal welfare, including housing, transport conditions and slaughter methods. Hence, in this regard, all sectors of the food chain are covered.

First of all, it is necessary to bear in mind that health and animal well-being are a clear prerequisite for farmers to supply safe products in the food market; and by improving living conditions for animals would also make European food and agricultural products more competitive within Europe and around the world. Thus, farmers are the first interested and willing to developing and providing good living-conditions to animals.

In today’s globalized context, both European farmers and food producers face competition from different countries, which often show lower animal welfare standards than those applied in the EU. Consequently, EU farmers are facing a commercial disadvantage, since they need to invest more to meet EU’s stricter rules.

EU bovine livestock farmers are struggling to survive with negative revenues without CAP subsidies and under the current conditions do not have the capacity to invest more. In addition to this, other EU livestock farmers have had to face high degree of market volatility and bearish financial conditions over the last years.

One concept that should be clearly taken into account is that without economic sustainability, neither environmental sustainability, nor food safety could be accomplished.

However, the social responsibility component in livestock production sustainability implies not only the improvement of animal health and welfare, but it is also linked with the efficiency concept.

On this basis, we should clearly develop a concrete ambition for the high-quality of EU livestock sector.

An option could be either the introduction of quality schemes or a better market segmentation, which must be able to address consumers’ concerns as well as being clearly in relation to animal welfare and industrial livestock production methods, while facilitating the marketing of the products.

Furthermore, nutritional and health related aspects around the consumption and production of animal products, should be addressed by policy-makers hand in hand with the necessity to secure the competitiveness of the EU farming and agricultural industry.

Effective communication systems and effective market segmentation are needed so that consumers are made fully aware of advances in quality, the environment, and animal well-being – and so that operators obtain a meaningful return on investment consistent with the market segment and the production infrastructure in place.

The evolution of the EU regulation, highlights the great importance of a balanced relationship between mankind and animals, which has induced legislative bodies to impose measures meant to discipline human interference.

Since the 70s, EU regulations have taken in great consideration the principles of safeguarding animal well-being, both with the adoption of the protocol on the protection and animal welfare within the EU Treaty, which set the principles and the scope of legislative intervention in regard to this matter. The protocol in particular recognizes the animals as “sentient beings” and it has encouraged programmes of EU action for the protection and animal welfare.

The EU regulation, therefore, was initially developed with a more general angle with respect to animal welfare, specifically for the productive sectors of the single bred animal or breeding system.

Later on, different economic studies, especially on poultry and pig sectors, have highlighted the increase in costs sustained by the operators, the impact on incomes as well as the overall competitiveness.

The regulation on animal welfare has led to the standardization of methods shaped around stringent structural definitions of the animal stalls, the available space, the density of herd, overall management, etc. This is in contrast with the necessary business choices that farmers need to adopt in order to adapt their production to the environmental characteristics of single areas, the different breeding practices in Europe and the control of production costs with regard to territorial resources.

The “diagnoses of animal welfare” would instead be better based upon solid foundations, with a direct and clear link to the living conditions, by adopting precise indicators, collected and elaborated according to a science-based approach.

This system should be envisaged and implemented not as an overburden for the producers, rather by applying a holistic and objective evaluation, that takes into account the various aspects of animal welfare (i.e. management of the animals, structure and equipment, the physical and behavioural state of the animal, etc..). Implemented as such, a comprehensive survey of the state of the animal welfare could be achieved and this would make possible to classify the farms and stimulate those farmers, who should improve their standards to avoid penalties.

Such an approach would be meaningful only if applied to all products available on the EU market, including imported products.

To wrap up, in order to safeguard the animal welfare dimension, while improving at the same time the economic sustainability of the EU farming sector, the European Union should consider how to base the future regulation on methods that allow a comprehensive evaluation of the level of animal well-being by conducting animal welfare inspections that focus on the animals themselves. This would give farmers more flexibility and better tools to determine how their livestock is actually being treated. Furthermore, this system would avoid penalizing farms for irregularities on single parameters which might not be relevant to the effective welfare state on the farm.

This approach can guarantee the respect of the safeguarding principles of animal well-being, allowing to find the best ways at farm level to increase animal welfare while increasing farm profitability and so competitiveness.

Such kind of evaluating systems have already been tested and studied by different European research institutes and have also proved to be adaptable to diverse realities, thus allowing flexibility with respect to the heterogeneity of EU production systems.

To conclude, it’s time for decision-makers to provide more proactive support to the livestock sector in all of its dimensions. This in order to help it coordinating its response to societal concerns and farmers’ needs and to communicate at the same time on results achieved, while highlighting the efforts already undertaken. This is the only way to meet the current and future demand for high quality protein in a sustainable way.

On November 30, the European Commission finally detailed the new clean energy package of measures. Among the new proposals, it was announced the inclusion of targets to substantially increase the use of advanced  biofuels in the transport fuel mix between 2020 and 2030, while reducing the EU ceiling for first generation biofuels (e.g. biodiesel from rapeseed & bioethanol from maize) to 3.8% (at most) of EU renewable energy in transport by 2030, falling from 7% in 2021.

Is there a coherent rationale behind this decision?

First, when it comes to the first generation of biofuels, as shown by Farm Europe’s report available here, the EC’s approach of EU-sourced biofuels is biased, and not taking into account the positive impact renewable fuels can have on both the environment and EU agriculture.

Second, it should be highlighted that advanced biofuels are not the most immediate solution towards a low carbon, circular economy. It will take time and substantial investments to make them ready for the markets.

As recently confirmed by the US Government Accountability Office (GAO) in its report released last month, “low expected production volumes” among other factors mainly related to costs, “make it unlikely that advanced biofuels can meet increasing targets” in the near future. There is basically a problem of non-competitiveness for advanced biofuels, not only related to high production costs, but also to the time needed to bring a new technology to commercial-scale production.

Experts agreed that, although some types of advanced biofuels (i.e. from algae) “are technologically well understood and have significant future potential, there are still several years away from being economical to produce because of the high cost” of converting feedstock.

This result need to be read in light of the recent Environmental Protection Agency (EPA) publication of the new Renewable Fuel Standard (RFS) for 2017. The figures are up from 2016 levels (a total of 73 billion liters compared with 68.5 billion liters in 2016). Mandates for cellulosic fuels are set at 1.2 billion liters compared with 871 million liters by 2016 (an increase of 35%), those for biodiesel, at 7.6 billion liters vs 7.2 billion liters in 2016 and those of advanced biofuels (2^nd and 3^rd generations), at 16.18 billion liters compared with 13.7 billion liters in 2016 (an increase of 19%). It has to be highlighted that these revised mandates achieve US Congress’s target of 57 billion liters for first-generation ethanol biofuels.

In this context, the EU policy framework should promote efforts in favour of advanced biofuels in parallel and not against the conventional ones. It has not to be seen like “one at the expense of  the other”. Otherwise, the EU would indirectly secure the market share of fossil fuels in the EU while increasing the agricultural land losses by cutting an important outlet for EU farmers.

Both first generation and second generation biofuels are needed to reach the renewable energy targets. Shouldn’t EU aim be to replace fossil fuels instead of conventional ones?