(Executive summary available here in EN and FR) Introduction While the markets for agricultural commodities have an inherent tendency to be rather volatile, the price volatility of these products has been particularly high in the last decade. More specifically, sharp increases in global food prices in 2007-2008 and 2010-2011 were followed by recurring periods of […]
- Agriculture will be faced in the future with growing climate and market volatility. Risk management tools will therfore be necessary to achieve the resilience of the large range of EU agriculture models ;
- This will not be obtained through a single tool at European level, but through a choice of complementary tools, most of them defined at EU level, the Member States, each sector and industry then being able to enforce at there own level ;
- Some of these tools already exist in the present EU legislation, others will have to be defined and decided in the future CAP reform ;
- In each Member State involved in such a scheme, farmers should be free to opt for one or several of these tools according to their specific situation ;
- The center of the scheme stands in the crop yield insurance (weather) system. This system already partly exists in the present EU legislation and has been tested by certain Member States.
- The analysis and quantitative forecasts show that crop yield insurance (weather) is realistic, easy to inforce in the whole range of arable crops, pastures and vineyards, and can easily be financed inside the present CAP. This could be a first objective as soon as 2018 with the system being tested on a larger scale, before taking formal decisions for the next CAP reform.
- In this scope, the 30% excess and streshold parameters should be lowered to 20%, which meens steping out of the WTO green box principle. WTO is not a constraint for the EU in that respect. We have margins and notably via our de minimis and/or the amber box of the Marrakech commitments. It is up to the EU to decide to use theses possibilities to build its future.
- European cofinancing should be increased from 65 % to 80 % to make it enough attractive.
- 20 % & 80 % = financially workable . Not expensive at all : 4 billons to cover all EU farmers
- if not insured, no hope of other aids for farmers
The coming omnibus regulation should allow EU to deel with this important question.
On top of this basic insurance system, farmers should be offered complementary options :
- A precautionary saving mechanism allowing them to buid up their own individual self-insurance system and benefit at the same time from income tax stabilisation over several years. Such supportive tax policy depend on Member States decision, but should enter a EU framework. The mechanism could benefit from a EU top-up.
- Collective saving mechanism , as mutual funds, should also be develloped notably in certain sectors by as the dairy industry. The Commission has just proposed to adjust the IST. This proposal is a good move and it is our common responsability to improve it to make this tool effective. In that respect, the tool has to be fully reactive. Mutual funds based on index seems to be promoted if we want this tool to be efficient.
On top of that, to answer to both financial European constraints and effectiveness of the saving mechacinsms be they individual or collective, European cofinancing should happen when savings are done and not when the tool has to be activited.
- For sectors that may use existing future markets, more extensive studies should be encouraged in the perspective of the future reform of the CAP in order to quantify the costs/benefits/efficiency of revenue, margin or income insurance, which may provide additional resilience tools to farmers. These approaches will have to keep in mind their potential impact on the suppression of the first pillar direct payments, and their compatibility with EU budgetary capacity and rules.
- All these mechanisms have been developped in two work-shops yersterday. They aim to strengthen both farm and industry resilience to crises, while increasing their ability to invest during favourable periods. The discussions also showed the willingness both to keep a sufficient level of decoupled direct payments and in same the time open such new possibilities for risk managment tools.