Wednesday, December 08, 2010

Farmers Feeling Flush

Well, a little more, anyway. Over £1 billion has been added to farmers' bank accounts from the first tranche of Farm Payments paid Dec 1, which is an average of £12,500 for the 80,000 farmers who have had their payments.  There are more payments to come, when the calculations have been finalised.

The $64,000 question is how long the SFP system is likely to continue. A recent document  by the European Commission titled 'The CAP towards 2020: meeting the food, natural resource and territorial challenges of the future', has 13 pages that spell out the parameters for the future. The document raises the relevant issues concerning farming and the countryside, but does so in isolation from the global picture. That picture is focussed on debt, currencies, inflation, and the stability of the euro.

Tomorrow's issues
So issues such as climate change, global food demand, security, and declining farm and rural incomes all get a say, but there's nothing about the fundamental issue of financing and the burden on the German economy, nothing about the banking crisis and how this is affecting the EU budget, about the level of Member State borrowing, unemployment, the continued threat of recession, social consequences, 'fairness' (a popular word in politics these days) and the need of sectors other than agriculture to have support.

Yesterday's concerns
The political drivers of the Common Agricultural Policy were the ration cards in post war Europe, the food supply ships and convoys of WW2, and the relative starvation of many parts of the EU during the 50s and even 60s. As these concerns have receded in the public's mind, to be replaced by issues such as  obesity and health, so the agricultural policy of the EU has shifted to environmental issues, rural social problems. Payments to farmers and landowners are for environmental stewardship rather than food production. But it remains unclear just  how effective these measures have been. Surveys of natural birds and insects show no great increase in numbers, despite the huge funds made available, and the question is whether these funds are being wisely applied to the problem.

Political realities
Read the document and it appears to have been written in a vacuum, an agri-bubble that is divorced from where the money might be coming from and, perhaps, the needs and desires of those 'taxpayers' providing it.
The 13 pages might be seen as a last gasp of a regime which is finding it harder to justify its actions. Which leads us to a possible scenario of more rapid change and reform. Some believe there will be a major change in CAP after 2013, perhaps a complete abolition of market and income support. Others see farmers as getting basic income support from the EU, with an icing of environmental payments. These will hardly be to the liking of the CLA and others who have favoured the way this report looks at food and environmental challenges.

Farming concerns
Farming is a long term business which needs long term planning. Being highly capitalised, farming looks for long term funding, and so needs openness: from politicians, government departments, administrators. There's a weariness among farmers about reports which curry the farming vote, but fail to deliver. The older generation will remember the much heralded ' Food from our own Resources' report of the 1970's which provided the impetus for expansion - but failed to help farmers ride the financial crisis that shortly followed.

Fair trading
Give farmers the choice of either selling to a fair market and getting no taxpayers' money, or having a paltry income at prices which have remain unchanged for 12 years and more which is made up with government hand-outs, and the fair market wins every time. There's greater pleasure gained in an honest penny that one which has been wrested from the tax payer, processed and paid out in some kind of subsidy.
Creating fair markets, providing the thousands of farmers who produce the cereal, meat, milk, vegetables bought by a handful of buyers requires some basic rules.
Juggernaughts have to obey the rules of the road, and the giants of retailing and grocery distribution need to be bound by equivalent rules. 

Practical Farm Ideas says - "Be Prepared"
In the Financial Focus column of the current issue of Practical Farm Ideas, editor Mike Donovan spells out the dangers of taking no notice of the wider economic framework. The economic theories discussed in ivory towers resolve themselves on actual farms. There's an uncanny link between alterations in government and EU policy and the accounts and incomes of the thousands of people who make up the farming industry.
There's a huge impact from the current CAP on farming accounts. 
Looking at the massive machinery on show last week in Herning, Denmark, at the AgroMek show, I couldn't help but remember that much of this is being bought on the back of a generous farm payment system, which costs the EU some €45 billion. That's in the same ballpark as the funds needed to bail out a country like Ireland, or Greece. Money which could save the euro and give strength to the whole European project.

Where change comes from
It's not the farm unions or the government departments covering farming which will be the arbiters of change. For them, and all who ride alongside, the state of the present applecart is okay. The need is to look outside, to listen and read the opinions of others in influence, or who try to influence. Yes, they know nothing about farming, have no idea of its difficulties. But they see figures, compare costs, mentally redistribute payments...   and they have influence. These are the people we need on the conference podium.

Further reading: