EduBourseActualitésCAP health check: finding the right balance

CAP health check: finding the right balance

Pierre Perrin-Monlouis Dernière mise à jour: 20 octobre 2021

Parliament adopted its position on the Common Agricultural Policy health check just before EU agriculture ministers decide on the final shape of this legislation. MEPs call for a smaller cut in farm aid and a limited increase in milk quotas as well as special aid for milk producers and livestock farmers. The House also argues that, for certain sensitive sectors, intervention schemes and the link between subsidies and production should be preserved.

The four reports, drafted by Luis Manuel Capoulas Santos (PES, PT), strike a balance between the various proposals put forward by MEPs during debates on the health check and also reflect the variety of situations facing farmers in the European Union.

Speaking in the plenary debate in Strasbourg on 18 November, Neil Parish (EPP-ED, UK), Chairman of the EP Agriculture Committee said: “Agriculture and the rural environment are one and the same and we have to move to make sure that we deal with climate change and the management of water, that we look at biofuels and biogas and that we really put Europe in a good position. We must not go backwards, because we are in a good position when it comes to the WTO. Let us go forward and actually reform the agricultural policy.”

In agriculture policy, the Parliament’s opinions currently have only consultative status. If the Lisbon Treaty enters into force, MEPs – who are directly elected by the voters – will have joint decision-making power with the Council of agriculture ministers. However, because of the importance of the CAP health check, which will make the last major changes to this policy area before the negotiations on the EU’s next multiannual budget framework (which starts in 2013), the French presidency of the Council has promised to cooperate closely with MEPs, thereby enabling the two institutions to find common ground on most key issues.

MEPs call for smaller shift towards rural development

An important feature of the last CAP reform was a decision to shift part of EU agriculture spending away from direct farm income support towards national rural development programmes, so as to support activities such as rural tourism (a policy known as “modulation”). This decision was linked to the need to comply with WTO rules on farm subsidies.

As part of the health check, the Commission has proposed speeding up the process of switching funds towards rural development. This subject was hotly debated in the EP, which in the end adopted a compromise calling for the transfer of funding to proceed more gradually so as not to hit farmers too hard. MEPs want the current 5% transfer rate applicable to farmers receiving more than €10,000 in EU subsidy to rise to only 7% by 2013, rather than the 13% proposed by the Commission. MEPs agreed to a higher rate for farms that receive over €100,000 from the EU, but not nearly as high as the rate proposed by the Commission (1 percentage point extra between €100,000 and €199,999 rather than 3 points, 2 points between €200,000 and €299,999 rather than 6, and 3 points beyond €300,000 rather than 9).

In addition, MEPs contend that the extra funding released by the increase in modulation should be used to finance more “challenges” than the four identified by the Commission (climate change, renewable energy, water management and biodiversity) and that this Community money should not have to be co-financed by national budgets as is currently the case for rural development programmes.

MEPs are also calling for the link between certain types of aid and production volumes to be kept for livestock farmers, given the current climate of high feed prices, and for small producers (of fodder, protein and flax etc.).

One amendment adopted by the House calls for an increase in compulsory modulation to be balanced by a decrease in voluntary modulation so that farmers are not discriminated against because of national government policy. Supplementary modulation on the biggest farms is opposed by some Member States, including the United Kingdom.

Dairy sector: review in 2010

The Commission’s proposal to increase Member States’ milk quotas by 1% per marketing year until 2013/2014, in order to pave the way for the complete abolition of ceilings in 2015, also exposed differing views within the House. Dairy farmers in several Member States where sale prices are already low face difficulties, while in other Member States farmers want to increase production to take advantage of new opportunities on world markets. The House finally opted for an increase in quotas by 1% every year until 2013/2014 but asked the Commission to review the situation in 2010 and make new proposals before the end of quotas if necessary. MEPs also want to allow Member States to increase their quotas temporarily if the quotas of other Member States are under-used. They call for the creation of a milk fund to help restructure the sector.

Support for hard-hit sectors, insurance and market intervention

Other compromises adopted by MEPs would allow Member States to use up to 15% of the Community funding they receive to support hard-hit sectors such as livestock and dairy farming and to contribute to insurance and mutual schemes (Article 68 support), to broaden insurance coverage, notably for all types of climate damage and for major losses caused by animal or plant disease, and to increase Community co-financing of these insurance schemes and mutual funds.

MEPs also adopted a number of amendments calling for the retention of market intervention or management instruments in the grain, meat and dairy sectors.

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Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.