Lords EU Committee backs farming industry
Published:  17 May, 2016

The House of Lords EU Committee recently published a report outlining what needs to be done to increase resilience in the farming sector in the face of volatile prices. 

The report called on the European Commission to reform the Common Agricultural Policy (CAP) to support the provision of public goods. This included increased food security, high animal welfare standards and stewardship of the land.

“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,” said Baroness Scott of Needham Market, chairman of the Committee.

“They do so in the face of risks including price volatility and unpredictable political decisions,” she added.

According to the Committee, the delivery of public goods such as the ones mentioned above should be the main point of focus from the CAP budget to support farmers. Although the current income support payments to farmers under the CAP will continue to play their part in helping the industry to overcome periods of low prices, said the Committee, they can also have a negative effect. This comes in the form of preventing innovation and deterring the next generation of farmers.

Unexpected periods of sustained low agricultural commodity prices are one of the main obstacles facing the farming sector, concluded the report. It is claimed that price volatility was a normal market risk to be managed by farmers, and that it was no greater now than in the past.

Furthermore, occasional public support was also urged by the report to help protect farmers from unpredictable market disruption, such as the recent Russian ban on EU imports, or extreme weather cycles. However, the long term should be focused on building farmers’ resilience and capacity to manage risks.

The Committee believed that subsidised insurance schemes should not replace the present system of Direct Payments to support the incomes of farmers. It suggested that the European farming industry learn lessons from the US and Canada on where and how subsidised insurance and disaster compensation could be applied.

“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,” continued Scott.

“We believe that income support for farmers in the UK and in the wider EU should continue as the conditions for agriculture are more challenging than in many other major producing countries. Nevertheless, public money should not be used to simply prop up inefficient farmers.”

She said that Direct Payments still played a role and that the Committee did 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.

“Last year we saw catastrophic flooding in parts of the UK, which caused real hardship for farmers in the affected areas. One-off support packages can help farmers through such episodes beyond their control, but a long-term policy should focus on building the sector’s resilience to withstand a wide range of risks, including low prices. Our inquiry found that better business skills were key to competitive farm businesses.”