Has the Common Agricultural Policy realised its income objective?

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Improving the welfare of farmers has always been an important goal of the European agricultural policy. When the Common Agricultural Policy (CAP) was created in 1957, one of its five objectives included in the Treaty of Rome was “to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture”.

In order to assess how successful the Common Agricultural Policy has been in achieving this objective, Farm Europe has examined the evolution of farm incomes in Europe and the evolution in comparison with those of one of our main competitors: the United States (full study available here).

The European Union and the United States adopt a different approach to support the incomes of their farmers. While the Common Agricultural Policy (CAP) of the EU mainly provides direct payments, the US has terminated this payment system and now focuses on supporting the use of agricultural insurances.

The analysis of the statistics provided by the FADN and the USDA ERS enables to evaluate whether the Common Agricultural Policy has achieved its main objective of increasing the earnings of European farmers.

Firstly, the data on Net Farm Income levels showed that after 2006, when farm incomes were still on the same level in both parts of the world, the United States has managed to double its incomes by 2013, while the European Union experienced stagnation and even a slight decrease during the same period. Furthermore, while these general figures suggested that incomes have been relatively stable in the EU, this masks the fact that farm incomes were highly volatile in the majority of the member states.

Secondly, a focus on the different agricultural sectors revealed that the income of EU producers has dropped since 2004 for half of the commodity categories and that almost all the EU agricultural sectors have experienced a stagnation or decrease since 2010. In contrast, between 2010 and 2013, the United States managed to raise the incomes of all their agricultural sectors significantly. The evolution of the sectoral incomes within the EU member states also exposed that most of the agricultural sectors in Europe have been affected by high fluctuations in revenues.

Incomes of European farmers have not improved since 2004, despite the fall in the number of farmers and some on-going restructuration of the EU agri-sectors, and that they were not shielded from volatility.

These evolutions of incomes in the EU should lead us to question the effectiveness of the agricultural policies put in place on three essential elements:

– the creation of a positive environment for the competitiveness of agricultural businesses, encouraging investment in productivity and sustainability;

– the opening of new markets, both for exports and in the domestic context, for each sector, notably via commercial leverage, innovation, and regulation;

– the capacity of the agricultural sector to be effectively armed at the sectoral level and at farm-level in order to continue to grow on volatile markets.

In other words, this data raises the question of the effectiveness of the CAP as it is today and as it has evolved since the start of the early 2000s. In view of the challenges of sustainable growth and competitiveness, the EU must provide the means to the European agri-food sector to regain its unequivocal dynamism. It is high time, now to work actively on that matter and to elaborate concrete proposals. This is on what Farm Europe is focusing with proactive stakeholders.