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UK Lords report urges CAP reform aimed at boosting crisis resilience

The Common Agriculture Policy should be reformed to put a greater emphasis on provision of public goods, and on helping to building farmers’ resilience to market price volatility, according to a new UK parliamentary report published today (May 16).

The House of Lords EU Committee rejects the often-expressed view that volatility is more of a problem at present than in previous years, stating that it is “unanticipated periods of sustained low agricultural commodity prices”, rather than volatility as such, which causes problems for farmers.

“Price volatility is an inherent feature of agricultural markets, and it will remain a normal risk to be managed by farmers as part of their business strategies,” said the committee’s report, which is entitled “Responding to price volatility: creating a more resilient agricultural sector”.

The report, drawn up following an extensive public inquiry, also urges the UK government to do more to promote private-sector risk management options.

But it does not support the idea, which has been floated in some circles, that subsidised insurance schemes could ultimately replace the current system of Direct Payments to support farmers’ incomes.

The report, which is purely advisory and is non-binding on the UK government, makes no reference to the current ‘Brexit’ debate and implicitly assumes continuing UK participation in the CAP.

Recognition of ‘holistic service’ provided by farmers

“Farmers across the EU do a vital job in ensuring the safe supply of food, managing the land and contributing to the wider rural economy. They do so in the face of risks including price volatility and unpredictable political decisions,” commented Baroness Scott of Needham Market, the Committee’s Chairman.

“Evidence we received suggested it is time for the Common Agricultural Policy to be reformed to more fully recognise the holistic service farmers provide for society by directing funding towards the provision of public goods, including environmental management, food security and stewardship of the land.”

Having reviewed numerous options for subsidised insurance schemes, such as those which form a key part of US income support programmes, the committee concluded that it should not be the sole solution for the CAP, because of “uncertainty over costs and administrative complexity.”

“Direct Payments still have a role to play and we do not propose a move to a US style insurance based approach. However, there is a real risk with the pronounced focus on blanket income support, as opposed to more targeted subsidies, that innovation is stifled and new farmers are discouraged from entering the industry,” said Scott.

The report added: “We believe that insurance instruments may have a supplementary role to play in helping to counter the effects of extreme weather events, for example, and therefore should not be ruled out entirely.”

The UK Government should also “give further consideration” to the use of the mutual fund option within the risk management toolkit available under Pillar 2 of the CAP, it stated.

Low farm prices

The inquiry and resulting report were commissioned by the House of Lords EU Committee in the wake of persistent low producer prices for key agricultural products and mounting debate about the most effective ways of helping farmers cope with revenue volatility. 

The shape of future support to the agriculture sector will come under increasing scrutiny as the Commission starts to make preparations and proposals for a reformed CAP to come into effect after 2020.

* One of the Specialist Advisors to the inquiry was Dr Dylan Bradley, Senior Consultant at Agra CEAS Consulting Ltd, part of Informa Agribusiness Intelligence.

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