A Better CAP - a report from the Family Farmers Association
A BETTER CAP
This paper was written before the publication of Dr Fischler's Mid Term Review of the Common Agriultural Poicy. We hope it will serve as a useful background from which to judge the desirability of the measures proposed in that review - or any other measures proposed.
The purpose of this paper is to show how farming could be revived if food sovereignty could be returned to nations. If the WTO's grip on agriculture were removed, the CAP could promote sustainable farming. Sustainable in the sense of being profitable, environmentally and socially benign, and providing the nation with good food. All of these indefinitely, for generations to come.
The paper is in five parts: 1.An outline of the problem
2. Some possible solutions
3. Why we need farmers
4. Some measures proposed
5. Further discussion
1. Why worry about farming? If there was one thing the trauma of foot and mouth did for farming, it was to make plain its importance. Our farming can care for the fabric of our countryside for all to enjoy. Farming is the backbone of the economy in rural areas. It can provide satisfying employment and add to the general prosperity of the nation. It can provide home grown food, the methods of production of which remain under our control. It produces food close to the consumer which does not need to be transported thousands of miles before it is eaten.
1.1 Farming is in serious decline at the moment as farm gate prices have more or less collapsed for a variety of reasons. One of the main ones is excessive importation of cheap food. The system of support for farmers which has evolved over the years into the present Common Agricultural Policy has become completely illogical and now mainly serves to keep world traders in affluence. It should be redesigned, with the objective of the survival of as many farmers, and as much of the fabric of the present countryside as is reasonably practicable. "Sustainability" in its widest possible sense is the goal. Human satisfaction in a well balanced society well supplied with home grown wholesome food is more desirable than "competitiveness", which amounts to producing cheap food by industrial methods.
1.2 We describe how farming as we know it can survive. By "farming" we mean cultivation or other care of the land and soil by independent individuals to produce food and other useful crops. If an effective new regime cannot be devised, traditional farming, will wither and die and the country will be the poorer. Most food will be imported and who will care for the countryside?
1.3 Our government, and their economic advisers, seem to feel there is nothing desirable in preserving a system of smallish independent farms providing wholesome food and caring for the environment. Their assumption is that if farms grow big enough and use plenty of IT they will be able to produce at world prices without subsidies. This is called being competitive. Is it compatible with our vision of rural Britain?
2. What needs to be done? We need to start afresh with simple, common sense and logical measures which can return farming to a desirable and profitable activity which produces most of our food and performs many other useful functions as well.
2.1 If we are going to change the CAP, let us get away from its present form altogether and stop talking about the first and second pillars. Let us organise farming properly, recognising that it is interrelated with many other rural activities. Farming should once again become the mainstay of the rural economy which it was for some years after the last war, when still considered important. Farming needs a long term plan for survival, based on its primary purpose of producing food and other products of the land, rather than a programme of substitute activities.
2.2 The most vital step is to protect domestic food production from competition from imports. Nearly all the food we produce can be produced more cheaply elsewhere, as other countries have less rigorous regulations on welfare, hygiene and environment. Most of them also have cheaper land and lower wages; some subsidise production more heavily than we do. All this means they can put food on our supermarket shelves at lower prices than we can. British farming has had many extra problems to contend with in recent years, but the WTO rules insisting that we accept unlimited imports, regardless of their production methods, look set to be the "coup de grace" which will finish us all.
2.3 By some means the EU must prevent its Agricultural Policy from being negatived by WTO rules, and protect its farmers from unfair competition from cheap imported food. There is a world movement to take agriculture out of WTO regulations altogether. Food sovereignty should apply to all countries – none should be forced to accept imports which undercut their home food production. All nations need to import some food which they cannot easily grow themselves. But food should not be transported to and fro across the world simply for a trading profit. This trade adds to global warming and can put local farmers, in both the North and the South, out of business.
2.4 No country should be forced to import food which does not conform strictly to all that country's laws and regulations on welfare and hygiene. Nor should food be imported which does not conform to ethical standards on the environment and the treatment of workers. This may be dubbed "protectionism". So be it. Protective tariffs can and should be quickly adjustable according to need. The WTO is supposed to have a rule that tariffs may be imposed on imports which threaten home production. This should be used, and not only for US steel! Such action could greatly benefit less developed countries as well.
2.5 If we control imports, export subsidies will have to be abolished so that we cannot be accused of dumping food on other countries when we do not allow them to dump on us. Surpluses may then become a problem and various measures will be needed to keep supply and demand in balance. Supply management is vital as surpluses usually lead to drastic price reductions, as is now being demonstrated world-wide. Quotas may have to be continued and in some cases lowered. Extensification should help to reduce production to manageable levels; some stewardship schemes may enable farmers to gain a better living from producing less.
2.6 Any subsidies which prove to be essential must be tiered or tapered (sees appendix) so as to provide for as many farmers as possible from a given expenditure. The aim must be to keep as many farmers viable as practicable. It is better socially, environmentally and economically, to have 10 farmers of 100 hectares than one of 1000 hectares. Better still if 20 families could have the satisfaction of making an adequate and independent living from 50ha each. Some have been doing this for some time, but it is a hard life and getting harder. The more farmers able to make a living per parish, the more prosperity and social cohesion (to coin a phrase) will be found in that part of the country.
3. Why we need farmers and farming: It is suggested by many people that all production related subsidies should cease and farmers be only rewarded for their care of the Countryside. But it is essential to keep food production profitable by some means. To care for the countryside without farming it will be very difficult indeed. Farming has created the countryside we know and value. Without livestock, pasture soon reverts to bracken and brambles, then a progression to increasingly unkempt thicket, followed by scrub forest. Dartmoor demonstrated that after only one summer unstocked, grazing soon deteriorated. Arable fields take a little longer to regress. In New England can be found vast areas of scrub woods on farmland which has been abandoned as farming moved West. Our food production could well move to the Americas and the Antipodes if we do not take steps to keep it here.
3.1 Without farming, the social structure of rural areas would be quite different. The natural inclination of many active people is to grow plants or care for stock. If this avenue of employment becomes unavailable, there will be more people suffering from stress as they are forced to take jobs for which they are unsuited. Many now find part time farming an antidote to unsatisfying jobs, and this is a legitimate solution for dedicated farmers whose farms are not large enough to support a family. But they cannot be expected to subsidise food production from their employment. Their hobby must at least cover its expenses, and preferably provide some financial reward for their part time activity.
3.2 Some country areas still depend on farming for a significant percentage of employment. If farming becomes impossibly unprofitable in these places, the government will either have to invest large sums in new enterprises to mop up the unemployment, or provide a lot of unemployment benefit, which will be equally expensive.
3.3 It has been suggested that food security and food sovereignty are unnecessary luxuries; that imported food will do just as well and that our farmers have no particular right to farm our land. If we abandon farming in Britain, we lose our security of food supply. We are then at the mercy of world traders who are expert at manipulating prices. If we have little or no home grown food we may find the imported variety is not so cheap after all. Some unexpected disaster – natural or man made – may cause certain food to be unavailable, or disrupt its transport .
3.4 We have little or no control over the method of production of imported food and may find ourselves eating food produced in ways we would never have allowed here. If we insist on high standards here and can find no way of preventing the importation of food of lower standards, we will just be exporting cruelty and even greater intensification to countries which are less squeamish than us in their methods of production. They can produce more cheaply and we are already losing some of our market to them.. This is illustrated by our decrease in pigmeat production in favour of countries still allowed to use sow tethers; if we ban battery eggs, their production will simply increase elsewhere.
3.5 Doctrinaire theories that farming is just another industry and should be subject to international trade regulation to suit multi-national companies are causing untold misery all over the world. They completely distort the natural pattern of food production, which is for each country to use its own resources to feed itself as far as practicable. The inclusion of food in WTO policy has caused nothing but trouble. All but a very few (admittedly powerful) nations would be more than happy to be free to draw up their own rules about how much food they should produce themselves and how much they should import. (This goes for the South too, where many countries being pressed into exporting food are suffering from hunger themselves.)
3.6 Make no mistake, if there is no upturn in farming profitability very soon, the next generation of farmers will not be numerous enough to produce our food or care for our countryside. Once farming habits (hard work) and skills are lost, they will be difficult to relearn.
3.7 Much has been said and written about the evils of the way the CAP increases and intensifies production. Much of this is exaggerated. It is low farm gate prices, not the CAP, which have fuelled intensification. (It should also be noted that the most intensive sectors are those which receive least subsidies.) We are constantly exhorted to be more "competitive". What can this mean but more intensive, to reduce unit costs? Cows are to produce more milk, sheep be thicker on the ground and pigs and chickens to mature faster while eating less.
3.8 What is the result? Environmental degradation and ever diminishing farm gate prices, caused by a combination of cheap imports, of lower standards than ours, and our own over production. Unfortunately farmers do not have such good sense, or are not so well organised, as the oil cartels, or we would reduce production worldwide until prices became more sensible.
3.9 A totally ridiculous situation has developed as farmers have been manipulated into producing more and more. (Advertising pressure to use more inputs and take up new production techniques, stories of world hunger, and also dire necessity – the attempt to make a living in the face of ever lower prices.) As the world's cash available to buy all this food is strictly limited, world traders have been able to force prices steadily downward until farm produce is being sold at a loss, more or less world wide. Governments have had to step in with higher and higher subsidies in order to keep farmers alive. And still the official plans are to reduce farm gate prices even further and increase subsidies in compensation (maybe).
3.10 It will be impossible to support all the farmers in an enlarged EU from the public purse if farm gate prices remain depressed and do not provide a living. If they are forced off the land by lack of profitability, how are they to survive? This is another reason why some means must be found of putting profit back into food production. Supermarkets may have to accept lower profits so that farmers can have more than the present 10% share of consumer cash. The problem of how to increase this share that gets to the farmer needs urgent study. It used to be a lot higher.
4 Proposals This untenable state of farm and food economics needs sorting out urgently.. Control by a more sensible CAP is probably the best way of tackling it. For a start we need a balance between supply and demand and less importing. Also less exporting with its allied subsidies. For example, we now export 10% of Europe's milk, with the aid of substantial "export refunds". If we cut our production by 10% we could plough the money now spent on subsidising exports back to the milk producers. Hopefully they would then make the same income from less production, given no cheap dairy imports. More details of a sensible milk regime in an appendix.
4.1 Area payments are increasingly in vogue as an alternative to headage payments for livestock. (They already apply to arable crops.) They will need to be tapered. They must be seen as a just reward for keeping the countryside in the state which the nation expects. For this reason they will have to be subject to cross compliance. To receive area payments a farmer would have to adhere to most of the following:
Caring for walls, hedges and trees properly.
Having a minimum of 5% of a farm in a natural state as a wildlife habitat.
Not keeping more than 2 livestock units a hectare.
Leaving uncultivated headlands around fields.
Leaving extra wide margins at the bottom of steep fields.
Leaving an unfertilised buffer strip by watercourses.
Respecting all features of interest, natural or manmade.
Not doing anything detrimental to the landscape, such as felling woods
or improving moor or marsh without consultation.
Or being organic.
4.2 It must be realised that present subsidies can only be reduced as food production becomes profitable once more. It is no good expecting farmers to manage without subsidies on just a promise of extra environmental payments if they fulfil many conditions. If the system is to be changed, the environmental requirements must be brought in gradually. Likewise, production subsidies must only be phased out as prices to farmers improve. Farm profits are already so low that any further difficulties will only speed up decisions to quit or intensify.
4.3 Countryside stewardship should be universally available in two tiers, as mentioned. The lower tier will be reasonably easy to achieve and is outlined above as a condition of receiving an area payment. The higher tier should be much as now, but more generous, properly covering costs and incorporating some contribution to the farm profit. For those for whom stewardship is not practical, there should be worthwhile payments for specific conservation activities, such as creating new wildlife habitats, encouraging certain rare flora or fauna, caring for vernacular buildings and maintaining old or planting new orchards. Conservation set aside, the higher rate of payment, may prove very useful in combining care for wildlife with controlling over production and improving profitability.
4.4 There are proposals to "modulate" all subsidies substantially and at a flat rate, diverting the money thus saved to "Pillar Two". However, it must be recognised that most environmental and other "2nd pillar" payments involve expenditure or income foregone by the recipient and are by no means all added income. They do not benefit all farmers equally. Schemes tend to be expensive to administer, another reason why all the benefit is not to farmers.
4.5 There will have to be a certain amount of both "carrot and stick" to ensure all the different goals we expect from farmers. But if it can be made clear that farming will be looked after so long as farming reciprocates by caring properly for the welfare of animals, countryside, wildlife and its workers, many problems should be averted. In other words, we need a social contract; farmers will farm in a civilised way, producing suitable quantities of quality food; society will reward them adequately for so doing.
4.6 In addition to area and conservation payments, there are various other measures which would help to ensure the future of farming. The most important of these is to give help to new entrants. This should be obligatory throughout the EU. Unless conditions change for the better rapidly, there is a real danger that farmers will simply die out, and the necessary practical skills die with them. So many farmers' children are disillusioned by the poverty of their parents and the unrelenting hard work now needed to make a living from farming that they are seeking, and finding, more remunerative jobs off the farm.
4.7 There should be a means tested retirement scheme to enable tenants and others with serious financial problems to retire honourably. This should be linked to the land involved going to a new, or too small, farmer.
4.8 A proper promotion of bio-fuels (by tax exemption) and other non food crops should be universal throughout the CAP. This would provide another source of income and make good use of surplus land and crops. Bio-fuels are desirable to reduce global warming.
4.9 Many present regulations could be removed or simplified. They are an added burden and make competition almost impossible against the unfettered agribusinesses burgeoning in fast developing countries. Those which demand record keeping only benefit those most adept at writing fiction. They also distract attention from the important aspects of farming – ensuring that all stock and crops are healthy. (A most simple example: the slaughter of all animals is automatically recorded by the farmer, the cattle tracing system and the slaughterer. Why cannot the premiums be paid automatically, without further farmer form filling?)
4.10 Consumers should have much more information about the source of their food. It should be comprehensible, not in code. All items should clearly show country of origin. Some means should be invented to show the relationship between the price paid to the farmer and that being asked from the consumer. A brake needs to be put on the supermarkets' attempt to acquire supplies cheaply in order to attract customers by lowering prices. The fact that only 9p of each pound paid by the consumer for food actually reaches the farmer is both ridiculous and scandalous. It is a serious problem which badly needs to be addressed.
4.11 Insofar as this is a common Agricultural Policy, there must be means to ensure that it is universally and evenly applied throughout the EU (if necessary allowing temporary variations for new entrant countries). At present all the advantage seems to lie with the continental states. Restrictive regulations are often applied there either more laxly or not at all. Above all, many other governments are dedicated to ensuring the prosperity of their farmers, while ours seems determined to do the opposite. (Could there be a secret agreement to allow our food production to decline so that it can flourish across the channel? It often seems like it.) All rules and regulations must be applied even-handedly. Either theirs must be tightened up or ours relaxed. Significant measures, such as help for new entrants, should be obligatory, as should agri-monetary compensation for those still outside the Euro. Until these things are taken care of British farmers will remain disadvantaged relative to even their nearest neighbours.
5 Further discussion There needs to be an open debate on whether area payments will be better for livestock farmers and for the environment than the present system of headage payments and some not very generous conservation related ones. There is a strong feeling among farmers that their reward should be related to their farming efforts; that if they farm more successfully they should reap a better income. They do not want to receive what would amount to a pension, just for existing as farmers. They really do not want to be dependent on subsidy cheques at all, but would much prefer to be rewarded by fair prices for the food they produce, i.e. the cost of production plus a reasonable profit.
5.1 The concept of compensation for loss of subsidies which used to be payable should be abandoned. In the new regime food production must become profitable and subsidies will be extra reward for producing "public goods" as a by-product of producing food.
5.2 Large amounts of money would be saved if farmers no longer had to be paid large subsidies to survive. If food production provided a modest living the environmental payments could be much less than the total subsidies now needed to keep farming viable. Some finance may need to be available as a "safety net" in cases of unexpected collapse in prices. But the objective should be to keep supply and demand in balance, by quotas or other restrictions if necessary, so that farm gate prices remained stable and provided at least a modest profit.
5.3 Surely this is more sensible than the present practice of allowing unlimited production in most sectors and then, when overproduction plus imports cause hopelessly low returns, coming to the rescue with taxpayers' money to save farming from total collapse.
5.4 Current perceived wisdom is that relating subsidies to production is the cause of over production, and therefore they should be "decoupled". Under the present system, with present world prices pertaining, area payments are the source of a third or more of the total return from growing arable crops. For beef, one third of the return can come from the Beef Special Premium, plus the Extensification Premium and the Slaughter Premium. In general, as there are no subsidies on heifer beef, arable subsidies are relatively greater than livestock ones.
5.5 If no attempt is made to protect our home market, and thus improve our prices, and subsidies are reduced or even abolished, there will be no profit in food production. It will be mainly abandoned, apart from some high priced speciality food for niche markets. Farmers would therefore prefer the WTO to be brought under control and tariffs allowed to protect our farming. They can be "floating" or flexible and quick reacting. The WTO allows tariffs if imports are threatening indigenous industries. It is time this became accepted practice by others than the US. As mentioned above, this would benefit third world countries greatly, and possible even small Japanese rice farmers who are said to be much threatened by cheap imports. Import quotas might be more acceptable than tariffs.
5.6 The main part of farm incomes would then come from the sale of food on the local or national market, according to the skill of the farmer and the quality of his produce. Farmers who devoted extra care to the environment would receive payment for this in addition. The rules governing environmental payments would need to be drawn up intelligently, probably according to natural variations between regions.
5.7 On the other hand, if it does not prove possible to protect us from cheap imports and prices remain at world trading levels, far below our production costs, substantial subsidies will be needed to keep food production alive. To "decouple" these completely from food and make them all dependent on conservation activities will produce many winners and losers if imports remain unchecked. After many upheavals and much misery in the adjustment process, the end result might well be a few very large farms full of biodiversity producing high quality food for niche markets. There might also be an unknown quantity of large industrial type enterprises churning out food in a state more or less ready to put on the supermarket shelves.
5.8 We believe the regime we have outlined in our proposal for a new CAP to be a more desirable scenario. It seems clear to us that, for farming to survive, it will have to have either substantial subsidies (even more than now) or protection. As it is hardly practicable to increase subsidies, protection is the only possible solution. We are not agreeable that the WTO should be allowed to destroy British farming – or indeed farming anywhere in the world. It surely will cause further havoc if left unchecked.
APPENDIX I Tapering subsidies (Formerly called Modulation)
6. Considerable confusion has been caused by the fact that the government has changed the meaning of the word "modulation". It used to mean tapering or varying payments according to levels of production. It now means cutting all payments by a given percentage and "recycling" (DEFRA's word) the money into finance for various rural activities. (The word "degressivity" is also sometimes used and appears to mean a steady reduction in all payments over time with no corresponding increases anywhere.)
6.1 The great disadvantage of area payments is that they continue the situation where the most money goes to the biggest farms with large fields. If they are generous enough to keep small/medium sized family farms viable, they will pay unduly large sums to large farmers. There is a danger that excessively large landowners will become excessively rich. Also that some people may collect land for the sole purpose of collecting its subsidy. If there were little or no profit in food production, they need only do the minimum of "farming" to satisfy the environmental conditions.
6.2 A German consortium of many different types of NGOs has brought out proposals for a new CAP which includes tapering area payments. It is very similar to our original modulation proposal. Given a rough approximation of pre euro exchange rates, their figures go like this:
For the first £20,000 area payment entitlement 100% payment
For additional amounts between £20,000 and £70,000 75% payment
For additional amounts between £70,000 and £140,000 50% payment
For any entitlement over £140,000 25% payment
6.3 If the principle is accepted, the size of the steps or tranches can be debated. It might be better to taper the reductions in smaller steps. Each extra £20,000 could trigger a 10% reduction in the payment rate for that tranche. In that case the 25% rate would not cut in until £200,000 was reached. If the payments are tapered there will be less incentive for big farms to grow ever bigger. Ideally the starting rate should be set to keep an average sized farm viable.
6.4 A lot will depend on whether these area/environmental payments are to be the main source of income for all farmers, or food production once more becomes profitable. In that case they will not need to be so high – just high enough to be the "carrot" necessary to encourage farmers to farm in desirable ways. In this case, a great deal of public money will be saved.
6.5 To the argument that this will benefit the rest of Europe more as there are more small farms it can be countered that there are many ways of looking at the subject. Small farms everywhere would be entitled to the same help. Large farms would still receive more than small ones – just not so much more. Large farms should have higher incomes anyway, if only from higher production, and therefore are not in so much need. Anything that can be done to keep small farmers on the land, rather than driving them to a life of urban unemployment must be beneficial.
6.6 Such a plan for tapering payments would obviate the need to pay huge sums to the huge farms which seem likely to develop in parts of the new entrant countries. Similarly, it could be the basis for a system of giving higher area payments to small farmers who depend on farming for a living. (More dignified for them than giving up all pretence of earning and "going on benefit". Similar expense to taxpayers.)
APPENDIX II MILK QUOTAS
7. Europe exports some 10% of its milk production. This costs taxpayers considerable sums by way of "export refunds", i.e. subsidies, as world prices for dairy products are way below our costs of production - and the price we are paid. It appears there is a world surplus of milk and its products which does not prevent more coming on stream all the time. It is very difficult to understand the logic of advocating an end to milk quotas. Any increase in production is certain to lead to even lower prices, possibly a total collapse of them – and therefore of dairy farming.
7.1 A more logical solution would be to reduce total quota to the amount for which there is a domestic demand. The money now spent on subsidising exports could either be saved, or used to give producers a better return. They would surely be better off receiving the same total income from producing less milk. Many are now struggling to produce more than the natural capacity of their farm in order to make a living.
7.2 The transfer of quota from those no longer needing it to those who want to start production or need to increase should no longer be a commercial transaction. A new and more sensible system of administering the quota regime will have to be devised. That should not be beyond the wit of man, although the transition may need to be done in stages as it will be complicated.
7.3 It can be noted here that milk production is probably the most heavily regulated farming activity. Hygiene rules are extremely strict and subject to almost daily monitoring as to the quality of the actual milk. The (more or less obligatory) National Dairy Farm Assurance Scheme is very comprehensive. It prescribes standards of cleanliness, methods of milking, welfare, and many details too numerous to mention. (E.g. milking premises must be sealed against the intrusion of flies or birds!) If these rules are important to keep milk and its products in a state suitable for our consumption, no dairy products should be imported which have not been produced to the same standards. This should effectively ensure that no dairy products are imported at prices lower than our cost of production, thus upsetting our desired balance between supply and demand.
Family Farmers Association
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