An initial analysis of the package of emergency measures announced by the Commission on the 7th September.

Posted on - Posted by Farm Europe

In summary, it is clear that the Commission does not wish to rush out measures. We will have to wait for the outcome of the informal Council of Agriculture Ministers Mid-September before commenting on the ambitiousness of the measures announced yesterday. At this stage it is difficult to predict what impact they may ultimately have on the market.

At this stage the package contains a varied if somewhat motley assortment of measures, some of which offer promising prospects however, and in particular:

–       The creation of new financial instruments through the European Investment Bank (EIB): This could prove useful for farmers burdened with significant debts when commodity prices are plummeting. It will take time to put in place and it may be a while before it bears fruit. The idea is nonetheless viable and promising, not least because it addresses a real need facing many farms, especially those that have invested in preparation for the end of quotas.

Other measures being put forward include:

–       Enhancing support for private storage: an increase in the level of public aid for private storage could encourage operators to choose to store more. However, the Commission has not yet announced either the new level of aid or details about storage duration requirements. It is therefore difficult at this stage to judge whether the measure will work. If it is well calibrated, it could, to some extent, offer a more politically acceptable alternative to other stronger forms of intervention. If the incentives are sufficient, it could help to rebalance supply and demand over the short term.

–       Encouraging a wider use of income stabilisation tools, especially insurance. This is possible under the current CAP’s second pillar, although the provisions are embryonic. In a context of volatile markets, of which the current crisis is just the latest episode, such tools offer a promising approach that the EU should actively pursue.

In addition to which the EU has announced:

– €500 million Euros of ‘targeted’ aid for the dairy sector to be shared among the Member States. Negotiations will undoubtedly be difficult and so there is a risk that the impact of this budget will be diluted. If it is to have an impact, it will need to be carefully targeted. Otherwise the €500 million budget will have to be shared among more than a million farmers, which is unlikely to achieve very much.