Author: Farm Europe

The EP’s agri committee supports the strengthening of crisis and risk management tools as of 2021

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Comagri MEPs yesterday voted on the position they intend the European Parliament to take in negotiations with the Council (and the Commission) on the CAP transitional provisions until the future CAP reform, which they foresee for 1 January 2023 at the earliest, is in place. This position should officially become that of the European Parliament at the next mini-plenary in May.

The package of amendments for crisis management and agricultural risks (concerning articles 37 to 39 of Regulation (EU) No 1305/2013 – risk management tools : insurance, mutual funds and SRI-, precautionary savings – new article – and the crisis reserve – article 25, presented by MEPs Anne Sander (EPP) – permanent rapporteur for the acts implementing the single CMO – Paolo De Castro and Pina Picierno (S&D) was finally adopted during the voting session on 28 April, notwithstanding the negative opinion of rapporteur Katainen (Finland, Renew). These adopted amendments cover the amendment that J Decerle and I Tolleret (Renew) had tabled alongside A Sander’s on precautionary savings.

These amendments were voted by a very large majority of the Comagri, demonstrating the extent of its responsibility in the face of the crises facing agriculture and a CAP reform whose implementation is postponed until at least 2023.

Amendment 350 to Article 8 reduces from 30 to 20% the rate of destruction of “the average annual production of the farmer … or his three-year average production” necessary to obtain the compensatory aid granted by the mutual fund (provided for in Article 36(1)(b)).

Amendment 352 (identical to 351) to Article 8 lowers from 30 to 20% the rate of decrease “of the average annual income of the farmer concerned over the previous three years or three-year average”necessary to obtain the compensatory aid granted by the mutual fund (provided for in Article 36(1)(c)).

These amendments are in line with the amendments adopted in the framework of the Omnibus.

Amendment 359 to Article 8 aims at anticipating the application of a new regulatory measureproposed in the CAP strategic plans which allows farmers “to set up precautionary savings schemes without falling under the State aid regime”.

Amendment 360 to Article 25 on the “agricultural crisis reserve” provides that the initial capital of such a reserve for the period 2021-2027 must be financed outside the CAP budget (in addition to the CAP budget – in heading 3 of the MFF -) and is placed in the reserve at the beginning of the programming period. Furthermore, in order not to lose this money at the end of the first year, the reform of the operation of the reserve is anticipated to allow the carry-over of uncommitted funds from 2021 to the following years.

 

For details of the amendments:

https://www.europarl.europa.eu/doceo/document/AGRI-AM-648384_EN.pdf

 

MEASURES AND IMPACTS RELATED TO THE COVID-19 CRISIS: EU measures’ introduction

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The widespread crisis caused by the Covid19 pandemic continues to have major impacts on economic sectors, including agriculture, and to give rise to decisions at national and Community level.

The European Parliament and the Ministers of the Member States require the European Commission, in addition to the technical and administrative measures adopted, to resort to market intervention measures (intervention, storage) and exceptional measures that the CMO Regulation allows.

Until now, the Commission has mainly left it up to the Member States to act and to find funding if they so wish (state aid and recycling of Rural Development funds for countries which have not fully used them).

On 22 April the Commission opened up the benefit of Article 222 at Community level to the milk, flowers and potatoes sectors (capacity of producers or sectors to agree on the volumes to be marketed in particular). It is thus taking up the challenge of giving farmers responsibility at national level for restoring a balance between supply and demand on the European market.

At the same time, it announces the introduction of European private storage aid measures to encourage the temporary withdrawal of quantities from the market in the milk and meat sectors (beef, sheep and goat) and flexibility for the implementation of national programmes in the wine, fruit and vegetables and olive sectors.

Regarding the “farm to fork” and “biodiversity” strategies, which are due to be presented on 29 April, Frans Timmermans said there would be no major delay, of the order of “a few weeks at the most, but not a few months”. Also asked about the content of the F2F strategy and the ambition to reduce pesticide use, he replied that it would be “a solid proposal,” as biodiversity and pesticides are closely linked issues.

 

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THE COVID-19 CRISIS AND EU AGRICULTURE: WHAT WE NEED AND WHAT WE DON’T NEED

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In all major crisis there is a moment of denial, a moment of blame and a moment of reckoning. We are experiencing a major and unprecedented crisis, a crisis on which states decided to stop economic activity to protect lives. Unfortunately we see many still in denial of the inevitable impact on agriculture.

Farm Europe has written about the likely impact of the Covid-19 crisis in agriculture markets, and what should be done to anticipate the shock.

Here we want to look forward and contribute to what should be the comprehensive response of EU agriculture policy, and what should be avoided at all cost at this stage.

The European Commission indicated her willingness to revise the MFF, the multi-annual budget proposal. You will recall that the CAP was badly treated in the original proposal, with real budget cuts of 12% over the 7-year period.

The current crisis has however showed one thing: we need food security. Some third countries have announced food export restrictions. What would have been the situation in the EU if we were short of food supplies?

Farm Europe agrees with those who point out that food security cannot be delegated, and that the CAP is not a policy only for farmers but rather a policy to the benefit of EU citizens.

Food security is not achievable at local level, only an EU-wide approach will deliver. We are not advocating a narrow and misguided concept whereby each county or region should be self-sufficient, because it is simply not feasible nor desirable. Only at a larger level like the EU, with a functioning internal market, can we achieve actual food security. We are also not advocating that the EU should not trade with the rest of the world, as we can benefit from trade and enjoy its economic benefits without compromising food security.

We also need a reversal of the unfavourable treatment of agriculture in the EU budget proposal. The EU agriculture has been the bedrock of food provision to European citizens even when most of the economy is idle. It is however facing hardship due to reduced demand and demand shifts, as a result of commerce shutdowns, and in the near future reduced purchasing power of many Europeans and world consumers. The last thing EU agriculture needs is further cuts in support. When life lines are extended to whole parts of the economy it would be unaccountable to reduce support to agriculture.

By contrast what we don’t need is a set of policies that increase the burden of producing food in the EU. We don’t need a Farm to Fork Strategy, or a Biodiversity Strategy, that only increase restrictions on the use of inputs, that reduce the agricultural area and productivity, and that reduce already stretched farmer’s incomes.

Farm Europe wishes to be crystal clear: we believe that EU policies should contribute to further environmental protection and to fight climate change. But that has to be done hand-in-hand with furthering the economic situation of farmers and assuring food security.

Increasing the land set-aside for biodiversity goals to 10% and organic production to 30%, as some propose, would reduce the EU production of food by a staggering 15%. Reducing pesticide and fertilizer use without providing farmers with the investments and the technology mix to achieve meaningful environmental goals will result in further food reduction and economic distress for farmers. That is not acceptable.

Thus the second logical “what we need” is a package to promote the right investments in agriculture, those which reduce the environmental foot print and greenhouse gas emissions and at the same time keep or expand agriculture production, ensure food security and sustain farmer’s livelihoods.   

We also need to strengthen the resilience of the sector. As Farm Europe has been consistently advocating, and the European Parliament COMAGRI has taken the lead in proposing, we need a well-financed crisis reserve in the CAP that would have the means and the mandate to quickly intervene in times of crisis, by making use of exceptional measures and shoring-up insurance and mutual funds.

This Covid-19 crisis will leave its scars for some time and we need to learn from past experience that showed that the current CAP crisis management tools are not good enough. The latest dairy or fruits and vegetable crisis are witness to the problems we faced in the past, at great economic and budgetary cost.

What we don’t need is to wait-and-see, to seat back and wait for the crisis to unfold in the dairy, beef, wine, fruit and vegetable, sugar, ethanol or any other sector. The flower and ornamental plants producers are already facing tremendous hardship. Farm Europe calls on the decision-makers, and in particular on the European Commission to change gear and become proactive rather than reactive.

 

Covid19 health crisis & EU agri-food sectors: urgent measures to be taken

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The Covid19 health crisis has taken hold on the economic sectors with significant effects. These effects are likely to be long-lasting, with a recession threatening the European Union and other world economies.

This crisis also highlights the importance of food security. Some in the European Union may have tended to take it for granted, or even to make European agriculture the banker of certain bi or multilateral trade negotiations.

Food security does not mean retreating into a search for local autarky that has never existed, nor is it synonymous with an autodafé of trade with third countries. It is the right balance between boosting European agricultural sectors, a strong single European market ensuring fluidity of trade, and trade with the rest of the world meeting the remaining needs of the European Union and meeting the demands of world markets for which the European Union must assume its share of responsibility in terms of supply and stability of the said markets.

Food security in the European Union is one of the essential bases of its political autonomy.

For it to be true, it goes:

– by an ambitious European policy aimed at the development of the agricultural sectors in all European regions – Farm Europe will devote a specific analysis to it with proposals for action

– in the very short term by urgent measures to respond to the economic crisis in which many agricultural sectors are currently plunging.

 

FOR ACTIONS TO BE TAKEN WITHOUT DELAY:

– For the dairy sector: this sector suffers from an imbalance between supply and demand due to the seasonal upward curve in production (return to grass) on the one hand and the already noted contraction in the demand for powder in view of the slowdown in exports and the demand for butter from industry and the closure of the out-of-home catering sector on the other. For the record, the recent crises have underlined the sensitivity of the market to any imbalance at a very early stage. A 3% drop in demand leads to a crisis with a collapse in prices.

Remember that in this sector, as in most agricultural sectors, stopping a farm means its disappearance and a decline in production. In view of the investments at stake and the typology of European agricultural holdings (essentially with family capital), the transition from animal production to a plant and vice versa is not and cannot be the reality of European agriculture.

—> in order to avoid a fall in prices and the disappearance of producers, the intervention of products must be opened up, as well as private storage aid for certain products, but above all a European measure to encourage the voluntary reduction of production is urgently needed.

It will then be a question of ensuring that the impact of this measure is not minimized by increases in production by producers who would see it as a windfall effect.

– For the beef sector: major difficulties already exist on the noble (premium) cuts due to the closure of out-of-home catering, the closure of butchery departments in supermarkets. Consumers direct their purchases towards prepackaged purchases and products that are quick to cook. In a context of uncertainty, consumers also tend to deport their purchases on cheaper cuts or meats.

In view of the differentiated evolution of the premium/chopped parts markets, it would be advisable to:

1) Immediately open the private storage aid measure for noble cuts (only for noble cuts)

2) Ensure the balance of this market segment at European level by closely monitoring the marketing and import flows for this category of beef. As a reminder, the market premium for these fine cuts does not exist in Brazil or the USA. In fact, these producers are able to export to the Community market with real profitability at an intra-EU selling price of 7 to 8 euros, which is 1/3 lower than the market price.

3) Activate the clauses provided for in the 2013 CAP allowing farmers to organize together the conditions for marketing their products in times of crisis.

With regard to the meat sectors, attention must also be paid to the sheep sector, a significant part of the annual turnover of which is called into question due to the current crisis and the containments decided.

– For the wine sector: sales via large-scale distribution were maintained in March and should also be in April. However, those destined for out-of-home catering have stalled, those via specialized stores have been reduced, as has the flow of exports, which has contracted sharply. As for the other sectors, the losses in volumes sold will not be made up. In addition to the drop in current turnover, there is the problem of the arrival of the new production in areas where the tanks will be full of stocks. To the financial problem could therefore be added a technical problem, which will amplify the first.

—>  distillation measures in certain regions should be considered as soon as they are well used to respond to the Covid-19 crisis and not to erase more structural problems of market adequacy for certain wines, similarly, use of green harvest could be considered.

—>  reinforced promotion campaigns, in particular on the EU market, must be financed substantially within the framework of exceptional European measures,

—>  a one-year extension of the validity of authorisations held by producers should be decided by way of derogation from article 62 paragraph 3 of Reg.1308/2013.

– For the fruit and vegetable sector: this sector is facing the full impact of the crisis, while its production period is picking up again. It is facing major labour problems, a drop in the consumption of fresh fruit and vegetable products, with consumers switching to long-life products, whether cooked or simple to cook, and production losses with limited storage time. It is therefore necessary to ensure a balance between demand and offer in order not to degrade prices – and therefore to envisage withdrawals of production in the absence of a reorientation towards processing limited by industrial capacities and the balance of the markets themselves – and financial support in view of the inevitable loss of income for seasonal production and a decline in post-health crisis market until consumption has returned to previous levels. In addition, measures to promote consumption will have to be planned as soon as the health crisis ends.

– For the flower and nursery sector: this sector has virtually ceased activity, resulting in a loss of turnover and harvests. Direct financial aid is required for these businesses by activating the provisions of article 219 of regulation 1308/2013.

– For the sugar and ethanol sector: this sector will face a very deteriorated situation very quickly. The energy market has fallen significantly, leading to a sharp drop in the prices and volumes of fuel ethanol. The slowdown in global economic activity that will follow the end of the health crisis does not allow us to hope for a real improvement. Three consequences for the European sugar and ethanol sector:

– a higher availability of sugar at world level due to the redirection of part of Brazil’s ethanol capacity to sugar production, and thus a fall in world sugar prices,

– lower ethanol prices on the European market

– a slowdown in the demand for ethanol on the US market, which will result in US quantities being redirected to the world market and thus be likely, without precaution, to flood the European market.

—> therefore, urgent measures must be taken to preserve both profitability for European productions on the European market and a certain fluidity in world sugar trade. The Commission must immediately begin an analysis of market equilibrium and define the regulatory actions for imports and their price to be taken in order to preserve the European market, particularly in the very short term for ethanol.

– For the cereals sector: the European cereals and field crops sector will suffer the double impact of a very likely global recession, low energy prices, the foreseeable drop in US corn prices and a aggressive commercial policy of the United States on the agricultural markets; a policy already marked before the health crisis by the China-USA agreement which relegated European sources of supply to the background.

 

In addition to the specific actions to be taken for each sector, a European crisis plan must be prepared for all sectors in order to protect as many structures as possible from the falls in margins that they are likely to have to face. This fund must be able to provide farmers with direct aid to partially compensate for margin losses and cash loan guarantees. A European plan for financial aid for margin losses must be put in place.

All these measures must be financed out of the CAP budget. It would make no sense to reduce CAP direct aid to farmers in order to finance a crisis fund to rescue European agriculture.

WINE SECTOR: the pandemic of Covid-19 hits hard

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The Covid-19 pandemic is affecting the wine trade, both European and non-European. All wine markets are affected.

In addition to other things, this month of March have seen more than 50 MEPs asking, via a letter, the European Commission to take exceptional measures to support the agri-food sector, including the wine industry, a sector penalised by the increase in US customs duties.

Finally, the CEEV and its British counterpart, the WSTA, called, via a common position, for the wine sector to be taken into account in the next EU-UK trade agreement.

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NEEW BREEDING TECHNIQUES: EASAC RECOMMENDS USING THE NBTS

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In March, EASAC, the Scientific Advisory Council of European Academies, called for a radical reform of the legal framework for GMOs, and considered that new varietal selection techniques can help, inter alia, to combat social inequalities.

Paolo De Castro MEP, S&D coordinator at Comagri,, agreed with EASAC’s request and called for European agriculture to be allowed to use new breeding techniques to make European agriculture more innovative.

At the global level, researchers in Maryland have discovered a new gene editing system called CRISP-cas12b. Also in the United States, a debate has been held in the Senate on the new regulations on NBTs and on which institution, the FDA or the USDA, should control the foods derived from them in the future.

 

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NEGOTIATIONS ON CAP REFORM: work is ongoing

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March was marked as follows:

  • At the level of the European Parliament, measures to combat the coronavirus pandemic have stopped all meetings of the Agriculture Committee. However, negotiations on compromise amendments are continuing.
  • At EU Council level, the meeting on 23 March was cancelled for the same reasons, and the informal summit on the 25th was almost exclusively focused on the management of the pandemic crisis, postponing discussions on the CAP reform & transition period on a date as yet unknown.
  • The European Commission has postponed the presentation of the From Farm to Fork strategy to April 29.

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NEGOTIATIONS FOR THE EU BUDGET: towards a new MFF proposal

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The month of March was marked by:

– At the level of the European Parliament, the exchanges of MEPs in Plenary session after the failure of the European Summit on 21 February, in the absence of agreement and concrete ambition shown by the Member States. 

– At the level of the European Commission, the announcement by the President of a new MFF proposal to come, to deal with the consequences of the Covid-19 pandemic. The timing of budgetary decisions for the period 2021-27 becomes even more uncertain and the timing of the implementation of a CAP reform just as uncertain. If the decision on the EU budget is only expected in the first half of 2021, this would imply a further postponement of the CAP negotiations, with a questioning of the ability to implement it by 1 January 2023, notwithstanding the technical discussions that continue to take place in the European Parliament. With a reformed CAP designed to be completed by the end of 2027, therefore, discussions on the ‘reform of the reform’, which should start in 2024, either the duration of the CAP under discussion or its validity would have to be discussed if it were not to start applying until 1 January 2024.

 

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Measures and impacts related to the Covid-19 crisis: first set of decisions

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The widespread crisis caused by the Covid-19 pandemic has led to a first set of decisions at national and EU level. Support for the general economy represents a total of 947 billion euros.

– At the level of the European Commission, a second package of measures was adopted on 2 April 2020:

The Coronavirus response investment initiative plus (CRII+) complements the first set by introducing exceptional flexibility and simplification in the use of the European structural investment funds (ESIF), including the European agricultural fund for rural development (EAFRD).

Regarding the EAFRD, the CRII+ will support farmers, rural areas and EU countries by increasing flexibility in the use of those funds, including:

  • flexibility in the use of financial instruments: Farmers and other rural development beneficiaries will be able to benefit from loans or guarantees of up to €200,000 at favourable conditions, such as very low interest rates or favourable payment schedules.
  • reallocation of funds: EU countries will be allowed to use money left unused under their rural development programmes (RDP), rather than sending it back into the EU budget. The money will still have to be used in the framework of the respective RDP.
  • postponement for the submission of annual reports: the deadline for EU countries to submit these reports on the implementation of their RDPs is postponed, giving more time to national authorities to put it together.
  • no amendments to partnership agreements required: EU countries will not have to amend their partnership agreements to modify their RDPs, lifting some administrative procedures.

In addition to the measures directly linked to the EAFRD under the CRII+, the Commission is proposing further flexibility and simplification of other CAP instruments:

  • Extension of deadline for CAP payment applications: the deadline will be extended by a month, from 15 May to 15 June 2020.
  • Higher advances of payments: in order to save the cash flow of farmers, the Commission will increase the available advances’ rates of direct payments (from 50% to 70%) and rural development payments (from 75% to 85%). Farmers will be able to start receiving these advances from October 16th.
  • Reduction of physical on-the-spot checks and leeway for timing requirements: EU countries have to carry out checks to ensure that eligibility conditions are met. However, in the current exceptional circumstances, it is crucial to minimise physical contact between farmers and the inspectors carrying out the checks. This measure will help reduce administrative burden and avoid unnecessary delays.

 

– This second package complements the first measures, which included:

  • Extension of the deadline for submitting CAP payment claims for Italy: the new deadline for submitting claims is 15 June 2020 instead of 15 May.
  • Strengthening the possibilities for state aid: Under the recently adopted Temporary Framework for state aid, farmers can now receive up to €100,000 of aid per farm and food processing and marketing companies up to €800,000. These amounts can be complemented by de minimis aid. The ceiling for this aid has recently been increased to €20,000 (and up to €25,000 in certain cases).
  • Continuity of movement of food products throughout the EU: The Commission works closely with Member States to ensure the functioning of the single market for goods through the establishment of dedicated lanes (“green lanes”). Checks at border crossing points designated for these lanes will last no more than 15 minutes. The passage is now authorised for all goods, including agri-food products.

 

– At Council level, in order to support the most vulnerable states, the decision to apply the general derogation clause and to suspend the obligations of the Stability and Growth Pact for expenditure related to Covid-19 was taken, and ministers began to explore the modalities of using the European Stability Mechanism.

– In the Member States, national plans have been adopted for an amount equivalent to 2% of the Union’s GDP, plus cash for businesses and workers amounting to 10-13% of the Union’s GDP. Details of the economic decisions are available here.

 

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THE EU NEEDS TO RAISE TO THE CHALLENGE OF THE COVID-19 CRISIS IN AGRICULTURE MARKETS

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The Covid-19 crisis is already impacting agriculture in a number of ways: cross-border flows of agriculture goods face delays, and in some areas there are not enough workers.

These are serious problems. We understand that measures are being taken to speed up cross-border trade, and particular work shortages can only be addressed at regional and local level.

However, there is an area where the EU, and in particular the European Commission, needs to be extremely vigilant and proactive, as it falls squarely under her responsibility.

We refer to the agriculture markets, which are poised to suffer dearly as a result of the Covid-19 crisis.

There is already a dramatic impact on the flower and ornamental plants sector, which directly and swiftly feels the blow of shop closures. Other sectors, more dependent upon restauration, will also be impacted. Consumption of fresh products may suffer as a result of confinement, as families shop less frequently and daily routines are upset.

However, the worst is unfortunately still to come. The Covid-19 crisis will evolve into a full blown economic crisis, as a result of the closure of so many economic sectors. Some countries will be more impacted than others, but all will suffer and the EU will face a steep recession.

A recession will cause a reduction of demand for agriculture products and a shift of demand to cheaper products. To make things worse, there is no escape valve through exports, as the crisis strikes worldwide. On the contrary, exports will also suffer.

It is thus predictable that agriculture markets will to some extent, some more than others, fall into crisis in a depressed economic environment.

What should the European Commission do? Should it adopt a wait-and-see policy? Should it rely solely on the current CAP crisis management tools? Should it just raise the level of state aids, instead of pursuing a common approach?

The US have followed another route, they prepared for the consequences by raising the agriculture budget by $ 48 billion, including $14 billion to replenish the Commodity Credit Corp., a Depression-era program designed to stabilize farm incomes, and $9.5 billion to support producers of specialty crops, livestock and dairy, as well as those who supply farmers markets, restaurants and schools.

This relief package comes on top of two previous aid packages to compensate for the losses of US farmers in the US-China trade wars.

In the EU, the producers affected by the US retaliations on the Airbus dispute, in particular wine producers, haven’t received any specific support. As Farm Europe already pointed out the divergence of support to farmers across the Atlantic is widening.

So far the European Commission has only relaxed state aid rules to cope with the Covid-19 crisis. Whilst it is understandable to relax state aid rules in times of crisis, on its own it will create distortions between farmers in countries which have the economic might and the political will to help the sector, and those who haven’t.

And even a host of state aids is not the response to EU-wide market crisis. Those can only be tackled by common measures.

Farm Europe strongly believes that we need to learn from past experience. In the latest market crisis, be in the two dairy crisis, or the fruit and vegetables, it was clear that intervening when the crisis had fully developed cost more and caused more economic and social pain.

In addition, the current CAP is ill-equipped to address severe market crisis in many sectors, as for instance the intervention triggers are way too low and the tool box isn’t bold enough. Risk management tools defined in 2013 and refined thanks to the Financial Omnibus are not equipped to face such a crisis. They provide answers to market volatility not to deep crisis.

Therefore a wait-and-see approach is clearly a mistake. The EU needs to anticipate the pain to come and equip herself to deal with it.

It is crucial that the EU moves swiftly to create a real crisis reserve, with the appropriate rules of engagement. COMAGRI has proposed it, the European Commission should take the initiative as a matter of urgency.

We need more than 400 million euros, we need to have rules of engagement that allow the Commission to intervene quickly to redress the markets, by the best means available – e.g. reducing supply and compensating farmers for the output loss, intervening more decisively. And the last thing farmers need is to see their direct payments cut by the amounts used to fight the crisis.

This crisis risks to be bolder and more profound than before. The European Commission should not rely on CAP crisis management tools that have not worked properly in the recent past, and instead build new ones. The transition Regulation could be a legislative vehicle to quickly implement them. Let’s not miss the opportunity.