A Monthly Publication

By Joe Parker, agricultural ‘expert’

The EU Commission is just about to embark on yet another painstaking review of that hallowed shrine of the European Union – the Farm Support Policy.  This perpetual monolith of what is better known as the Common Agricultural Policy (CAP) has had more incarnations, over the years, than Dr Who.  

The CAP was originally conceived in the 1950’s to increase agricultural productivity and stabilise food markets in a Europe still haunted by the spectre of wartime hunger; by the 1970’s and 1980’s the butter mountains and wine lakes, bought and stored by European officials to keep the price of produce artificially high, led to calls for reform.

It has taken many years, but payments to farmers are now being shifted from production incentives to instead encourage rural development and good environmental practices on farms.  Despite this, France and Germany still rely heavily on farm subsidies as a back-door social support system, without which their multitude of small farmers would desert the land.

In reality, agriculture deserves no more artificial aid than any other commercial business; the supply chain generates a margin within which all the players are rewarded – seems simple enough to the casual observer.  Unfortunately however, our staple food supply is far too precious to leave to market vagaries, especially as the world’s commodity traders now view food, in all its forms, as fair game for a punt.

Some frequent justifications for direct payments to farmers are: Compensation – for the higher costs of animal welfare, environmental protection and food safety, compared to many of our non-EU competitors; Public Goods – side-effect benefits to the countryside, wildlife habitats and landscapes, which without farming would require taxpayers money anyway; Social Policy – many small farming businesses would not be viable without public funding, e.g. hill farmers, and payments prevent land abandonment and maintain rural communities; Food Security – there is at long last a recognition (even by the Government!) that we cannot take our food supply for granted any longer, in the wake of market volatility, population growth and climate change.

Security of food supply will always demand a market premium if we are never to go short; the issue is how much of an insurance policy do we need to balance the interests of Joe Farmer and the hapless taxpayer – who ultimately has to bankroll the process.  New Zealand is often held up as a shining example of free-market, subsidy-free agriculture.  In reality when its government abandoned their food industry to its fate in the world ‘free’ market, mass bankruptcies ensued along with the near destruction of its farming industry.

      But some agricultural experts are warning that as world food supply is predicted to fall behind global demand, a return to production subsidies may be the only way to ensure we can continue to feed ourselves in the long term.  Although the words ‘agricultural subsidies’ bring for most people the excesses of the CAP to mind, direct production subsidies are nothing new. Governments have intervened to keep the price of basic commodities stable for hundreds of years, and after World War II - many years before the UK joined the European Union - farmers were paid to produce food.

It was Sir Winston Churchill who said, just after the war: “30 million people all living on an island where we produce enough food for 15 million, is a spectacle of majesty and insecurity this country can ill afford.  The system of guaranteed payments which was created in 1947 (the CAP) created a fairly stable market for some time. History will prove that these were consumer subsides rather than producer subsidies that at least gave us that stability in the market” (it will not have escaped the reader’s notice that we now have population more than double that of the post-war number).

   ‘Consumer subsidies’ sounds like a contradiction in terms, but many commentators agree that the CAP helped to underwrite the huge growth in agricultural productivity in the 1960s, 1970s and 1980s.  The OECD (Organisation for Economic Co-operation and Development) estimates that its member countries spent $265 billion on farm subsidies in 2008. This was slightly more than a fifth of their farmers’ total earnings.

Last year’s increase in food prices ensured that such payments were at their lowest level since records began in the mid-1980s. But handouts still made up more than three-fifths of farmers’ gross incomes in Norway and South Korea between 2006 and 2008. In contrast, they were less than 1% of farm incomes in New Zealand and under 10% in both Australia and America. But the size of America’s farm sector meant that it still spent $23.3 billion on subsidies last year. The European Union was by far the biggest subsidised, forking out $150.4 billion; amongst the beneficiaries being the Queen’s Sandringham Farm, to the tune of £439,760. 

(To put these seemingly eye-watering amounts of money into perspective, the Telegraph announced recently that the cost of mopping up after the world financial crisis has been estimated at  $11.9 trillion (£7.12 trillion) − enough to finance a £1,779 handout for every man, woman and child on the planet, and equivalent to one-fifth of the world’s annual entire output.)

Interestingly, a barometer of public opinion from a survey on farmer favourability, conducted for the National Farmers Union (NFU), has shown that consumers’ opinions on our industry are improving. They are, according to England Marketing, who asked the questions, increasingly aware of the importance of farmers in improving food security, quality and freshness. Virtually all responses showed UK farmers in a more favourable light than at this time last year. 

  Some 84% of respondents now believe farming will become increasingly important over coming years while 59% agree that farmers treat their animals well and are doing a good job of protecting the countryside and helping in the battle against climate change. Significantly, given the NFU's strong advocacy of a supermarket watchdog, 76% of respondents - 9% more than last year - believed supermarkets were driving UK farmers out of business.

  Other selected findings indicate that 77% of consumers prefer British produce to imported; 96% said growing crops was more important than maintaining footpaths; 89% said farmers should regard using pesticides safely as a top priority; and over 80% would not object strongly if genetically modified crops were grown in this country, with 56% saying their trust in farmers would not be undermined if they grew them. Moreover, 11% said GM crops were the future of farming.

  More generally, 73% of the public described their view of farmers as favourable. This compares with 67% in 2005. All of which sounds like good news - always provided those consumers, and more particularly the retailers from whom they buy their groceries, are prepared to pay fair prices to the suppliers.