Less than 1% of the Common Agricultural Policy goes to insurance-related mechanisms.
BRUSSELS 18/01/2016 – Today, Farm Europe has published a report, How to tackle price and income volatility for farmers? An overview of international agricultural policies and instruments, which provides an overview of food policy trends in all of the major production systems across the world. The executive summary raises the question: Do European farmers compete on a level playing field?
While 60% of the US Farm bill is channelled to insurance devices and 1% to direct aids for farmers, 1% of the EU CAP budget goes to insurance-related measures, and 60% to direct payments for farmers. Beyond a first safety net consisting of production insurance, countries such as Brazil and China have also structured their agricultural policies to manage market and income volatility with guaranteed prices defined at regional level. These tools are designed to maintain the profitability of the sector during market crises.
Only 600.000 farms – less than 3 billion EUR in the EU
The CAP for the period 2014-2020 also strengthened the risk management instruments that were introduced in 2009, but they have not been very successful so far, as highlighted by the analysis of the rural development programmes approved last year. These instruments were transferred from the first to the second pillar, and, as a result, they have become optional measures which can be co-financed by the Member States.
They consist of the three following tools:
– Financial support to farmers for the premiums on insurances for crops and livestock against losses caused by adverse climatic events and diseases;
– Financial support for mutual funds to compensate farmers for production losses related to climatic and environmental events;
– An Income Stabilisation Tool (IST), mobilising financial support for farmers who experience severe income losses (exceeding 30% of the average annual income).
The use of EU funds for these tools has so far been limited to twelve countries (Belgium, Spain, France, Croatia, Hungary, Italy, Lithuania, Latvia, Malta, the Netherlands, Portugal, and Romania). Only around 600.000 European farm holdings are now benefiting this type of policy tool, and the large majority of them are based in France and Italy (not taking into account the Spanish national system of agricultural insurance, which is the most advanced on the continent but channelled via a state aid approved at EU level, rather than through rural development schemes).
The total expenditure for these instruments, including both European Union funding and the national co-financing, currently reaches around 2.7 billion euros (Table below), not taking into account the Spanish national system and the crop insurance mechanisms included in the Fruits and Vegetables envelopes.
The Income Stabilisation Tool mobilises the smallest part of the budget, covering only around 10.000 farmers, mainly in Italy and Hungary, with a 130 million EUR budget.
Total expenditure on European risk management instruments
|Total expenditure (EAFRD + national)||Premiums||Mutual Funds||IST|
|BE – Flanders||5.000.000||0||0|
|ES – Castilla y Leon||0||0||14.000.000|
|PT – Continente||49.700.000||0||0|
|PT – Madeira||800.000||0||0|
|PT – Açores||2.350.000||0||0|
Sources: EU Member States Rural Development Programmes (approximate figures).