Presentation used earlier this year to discuss results from our reserach on options to develop the Common Agricultural Policy after 2020

1. Options to redesign the European
agricultural policy post 2020
Krijn Poppe LEI Wageningen UR
February 2016

2. Objective for the meeting / discussion
 We carried out a study on the CAP-post-2020, for
national discussions (at the time of the NL presidency)
 Our objective: a presentation that helps to frame a
useful discussion on CAP-post-2020
 The judgement of the document should not be based on
the question if all ideas are economically or ecologically
perfect, but if the document would help a strategic
conversation in 2016.
2

3. Can we defend the CAP to the public ?
 Governments face budget problems and other big policy
challenges, like the Jobs & Growth agenda, the Refugee
crisis etc.. Is the budget vulnerable?
 Some of the main discussions:
● Budget goes mainly to larger farms, sometimes very large
sums
● Effectiveness and efficiency of Greening is questioned;
simplification is requested. But climate change asks
probably for more intervention
 The food chain does not solve environmental / ecological
issues and income problems of farmers: these problems
and risks are still shifted to the tax payer
● Do we need a food policy to shift incentives (and
involves the consumer, on sustainability and health)?
3

4. Article 33 European Treaty
 The common agricultural policy shall have as its
objectives:
 (a) to increase agricultural productivity by developing
technical progress and by ensuring the rational
development of agricultural production and the optimum
utilisation of the factors of production, particularly labour;
 (b) to ensure thereby a fair standard of living for the
agricultural population, particularly by the increasing of
the individual earnings of persons engaged in agriculture;
 (c) to stabilise markets;
 (d) to guarantee regular supplies; and
 (e) to ensure reasonable prices in supplies to consumers.
CAP is often defended
with public issues like the
environment, landscape,
biodiversity.
Although the Treaty does
not help us in that respect

5. Intervention logic DG Agri (pillar I, I+II, II)
 (a) to increase agricultural
productivity by developing technical
progress and by ensuring the
rational development of agricultural
production and the optimum
utilisation of the factors of
production, particularly labour;
 (b) to ensure thereby a fair
standard of living for the agricultural
population, particularly by the
increasing of the individual earnings
of persons engaged in agriculture;
 (c) to stabilise markets;
 (d) to guarantee regular supplies;
and
 (e) to ensure reasonable prices in
supplies to consumers.
 Maintain market stability
 Meet consumer expectation
 Enhance farm income
 Improve ag. competitiveness
 Foster innovation
 Provide public environmental
goods
 Pursue climate change
mitigation and adaptation
 Maintain agricultural diversity
 Promote socio economic
development of rural areas
Explaining the CAP to
outsiders is not so easy
due to historical bundling
in two pillars that have no
clear link with the
intervention logic

6. PROFIT, PEOPLE, PLANET: an improvement?
 (a) to increase agricultural
productivity by developing technical
progress and by ensuring the
rational development of agricultural
production and the optimum
utilisation of the factors of
production, particularly labour;
 (b) to ensure thereby a fair
standard of living for the agricultural
population, particularly by the
increasing of the individual earnings
of persons engaged in agriculture;
 (c) to stabilise markets;
 (d) to guarantee regular supplies;
and
 (e) to ensure reasonable prices in
supplies to consumers.
 Food security
 Risk management
 Innovation
 Fair food chains
 Employment
 Income support
farmers
 Liveable rural area
 Public health
 Environment
 Climate change
 Nature management

7. How will the farm sector change to 2030?
 Farming is already very concentrated
● But we use social arguments based on very small
farms to hand out money to large farms and
(indirectly) land owners
 The food processing sector and retail are also
increasingly internationally concentrated
● But have not enough incentives to take
responsibility for environmentally sound sourcing at
fair prices
 ICT has the potential to strengthen these trends in the
coming years, or to disrupt it.
It makes sense to look to some future scenario’s, we must
prepare agriculture and food for 2030 and later
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8. Strong concentration in farming: 5 mln farms matter
Source: FADN
0
20
40
60
80
100
120
0 20 40 60 80 100 120
percentagestandardoutput
percentage farms
France
Germany
UK
Spain
Italy
Poland
Sweden
0
10
20
30
40
50
60
70
80
90
0 5 10 15 20 25
percentagestandardoutput
percentage farms
France
Poland
Romania

9. 3 Scenario’s to explore the future (©AKIS)
HighTech: strong influence new technology owned by
multinationals. Driverless tractors, contract farming and a
rural exodus. US of Europe. Rich society with inequality.
Sustainability issues solved. Bio-boom scenario.
Self-organisation: Europe of regions where new ICT
technologies with disruptive business models lead to self-
organisation, bottom-up democracy, short-supply chains,
multi-functional agriculture. European institutions are
weak, regions and cities rule. Inequalities between regions,
depending on endowments.
Collapse: Big climate change effects, mass-migration and
political turbulence leads to a collapse of institutions and
European integration. Regional and local communities look
for self-sufficiency. Bio-scarcity and labour intensive
agriculture. Technology development becomes dependent
on science in China, India, Brazil.

10. Policy targets: scenario High Tech
mitigate the effects, regulate industry where needed
Policy Target Relevance in scenario
Food security No problem, perhaps food stamps for low incomes
Risk management No issue, contracts and high tech help
Innovation Carried out by food chain partners
Fair chains Competition policy on contracts in chain
Employment Rural exodus: regional policy needed to mitigate
Income support Social policy for those not in food chains
Liveable rural area See employment: policy needed to mitigate
Public health Regulation on food safety, zoonosis, antibiotics
Environment, climate Solved by precision farming, regulation of industry
schemes
Nature, biodiversity Contracts for farmers and food chain partners
10

11. Policy targets: scenario Collapse
concentrate on food production and jobs
Policy Target Relevance in scenario
Food security High priority: Mansholt-type policy to intervene
Risk management Higher risks, hard to manage
Innovation Need for higher productivity
Fair chains Less an issue
Employment New entrants: need for advisory, innovation
Income support Higher prices, less need
Liveable rural area No issue: return to the country side
Public health Less important in times of crisis
Environment, climate Mainly mitigation climate effects, less regulation
Nature, biodiversity Nature is source, less regulation, no contracts
11

12. Policy targets: scenario Self-organisation
CAP as menu for regions, maintain common market
Policy Target Relevance in scenario
Food security Manage common market between regions.
Risk management New market instruments
Innovation Strong and diverse; supported by policy
Fair chain Less issue in short supply chains, new players
Employment Support diversification (nature, care..)
Income support Safety net for those who lose in innovation
Liveable rural area Different needs between regions
Public health Level playing field discussions
Environment, climate Level playing field discussions, contracts
Nature, biodiversity Regional and local contracts for collectives
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13. Insights from the scenario-analysis
 Different futures ask for different types of CAP
 As the future is unknown, a resilient CAP:
● maintains instruments for different futures
● is flexible to adjust
● tries out new instruments that are needed in a
specific future
 Current CAP is not very robust in High Tech scenario:
multinationals shift (environmental) risks and low
rewards to farmers who ask CAP/tax payer for help and
lobby against environmental policies
 Nor in Collapse: Current CAP fosters scale increase, not
jobs

14. Insights from the scenario-analysis
 Regional diversity plays an important role in EU-28, in
Self-Organisation and Collapse and for marginal areas in
High Tech. A menu approach like in Pillar 2 would help.
 Strengthening industry sustainability schemes by making
CAP payments dependent on joining (a producer
organisation with) such a scheme would make food chain
responsible for sustainability and fair incomes. Reduces
administrative burden: only the schemes themselves
have to be audited by the government.
 Targeting (also with contracting instead of cross-
compliance and greening) and capping (e.g. linked to
regional labour costs) could improve efficiency and free
money for innovation in climate smart agriculture etc.

15. 15
PILLAR
1
PILLAR
2
Cross
Compliance
Greening
Contracts
agri-environ-
mental mgt.
Domain
A
Domain
B
Domain
C
Capping and
Targeting
Align with industry
and Public Contracts
Support (social)
innovation
DESIGN PRINCIPLES

16. Future CAP: objectives for the domains
Domain A
• Maintain market stability
• Enhance farm income
• Improve agricultural competitiveness (fair chains)
Domain B
• Provide environmental public goods (incl. nature)
• Pursue climate change adaptation and mitigation
• Ensure public health (farm level and food policy)
Domain C
• Promote socio-economic development of rural areas
• Foster innovation
• Maintain agricultural diversity in EU (employment)

17. From current CAP to the future
• Towards capping income support per
farmer based on real income needs ?
• Disaster relief (safety-net?) and incentives
risk management
Domain A
Food security
Risk management
Income support
• Towards payments for greening based on
sustainability schemes industry or regional
government: contractual relationships
(include antibiotics, animal welfare etc.) in
addition to regulation. Start food policy
Domain B
Greening
Climate change
Public health
• Foster innovation and competitiveness
(EIP, advisory service, producer
organisations, investment aid)
• Relocate industries where needed
• Promote socio dynamics rural area
Domain C
Liveable rural area
Innovation
Employment

18. Target: Food security
European agriculture (and policy) need to change:
Higher yields are needed (for export of products)
Dependency on imported feed should be reduced
Food first, no subsidies for bio-based products
Realistic effective and efficient instruments are:
Innovation and advisory for higher yields
Stimulation protein crops by product-based area payment
(although inefficient)? >> With innovation-instruments
(Product based) area payments for marginal land when
farmed; no ecological focus areas
Favour plant-based diets / production over animal ones
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19. Target: Risk management
European agriculture (and policy) need to change:
Income stability (and price stability)
Less animal transport
Reduce plant- and animal diseases
Realistic effective and efficient instruments are:
Market-based risk instruments: advise them, subsidize
Investment aid for hardware (irrigation equipment etc.)
Financial support in case of disasters (catastrophic risk)
Regulate animal transport or help to build up industries
for breeding young animals or fattening calves elsewhere
(move production east to reduce animal transport)
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20. Target: Innovation
European agriculture (and policy) need to change:
More innovation needed for better yields, lower
production costs, product quality, market orientation, more
sustainability
Support new technology trends (ICT-precision farming)
Develop new chain concepts like short supply chains
Realistic effective and efficient instruments are:
Support for interactive innovation, advisory service
Guarantee fund / venture capital for risky investments
and new business models
ICT: paying agencies involved in data exchange (Internet
of things), provide open data
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21. Target: Fair chains
European agriculture (and policy) need to change:
 Position of farmers in food chains has to be strengthened
Realistic effective and efficient instruments are:
 Support for producer groups and cooperatives.
 Safety-net (temporary extra income support?) in case of
extremely low prices
 Make food chains responsible for fair incomes (support
conditional on being in a fair trade scheme?)
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22. Target: Employment - jobs and growth
European agriculture (and policy) need to change:
More (multifunctional) employment on farms
Support new entrants, including young farmers
More employment in rural food industries (value added)
Realistic effective and efficient instruments are:
Innovation support for value added product chains,
including short supply chains
Financial support for new entrants (subsidized loans etc.)
Link direct payments (if any) to employment, not to land
(in which it is capitalised).
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23. Target: Income support for farmers
European agriculture (and policy) need to change:
Many farmers have a (very) low income (although we do
not know their non-farm income and wealth), due to
uncompetitive farm size and due to farm management
Direct payments are not very efficient (go to large farms
and are capitalised into land)
Realistic effective and efficient instruments are:
Cap direct payments (with e.g. the regional labour cost in
industry as a maximum)
Take fiscal data of farmer in account in capping
(targeting): only support for farmers with a low overall
income
23

24. Target: Liveable rural area
European agriculture (and policy) need to change:
Stimulate farmers to maintain attractive landscape
Employ farmers in public works (maintenance water-
networks, snow clearing etc).
Link (regional) consumers to (modern) farming
Realistic effective and efficient instruments are:
Subsidize / make contracts for landscape maintenance
Stimulate local government to procure ‘farm services’
Advise / subsidy on diversification into agri-tourism,
care-farming etc.
Subsidize operational groups and Leader-activities
24

25. Target: Public health
European agriculture (and policy) need to change:
More transparency / tracing & tracking food safety
Reduce risks of zoonosis
Reduce use antibiotics (animal production), pesticides
Promote plant-based diets
Realistic effective and efficient instruments are:
Stimulate ICT for tracing and tracking, smart farming
Support for re-location of livestock industry
Subsidise (conversion to) organic farming
Subsidise environmental schemes that pay attention to
reduction of antibiotics, pesticides (or regulate use)
25

26. Target: Environment
European agriculture (and policy) need to change:
Reduce pollution of agriculture (nutrients in water,
pesticides, manure)
Maintain production capacity soils (organic matter)
Adopt circular economy, livestock-manure-soils-feed cycle
Realistic effective and efficient instruments are:
Stronger regulation in cross compliance (e.g.max l.u./ha;
green cover)
Oblige sustainability accounting; link payments to
sustainability schemes food industry (changes incentives)
Support for groups of farmers who deliver ecosystem
services
26

27. Target: Climate change
European agriculture (and policy) need to change:
Mitigation: Reduce CO2 and other GHG emissions
Adaptation: Adapt to climate change (risk management)
Realistic effective and efficient instruments are:
Oblige sustainability accounting on GHG; link payments to
sustainability schemes food industry (changes incentives)
Incentivize certain production methods (no tillage,
permanent grassland)
Emission trading for (larger) farms
Support innovation climate smart agriculture
See risk management / innovation for adaptation
strategies
27

28. Target: Nature management + biodiversity
European agriculture (and policy) need to change:
 Towards more nature-inclusive agriculture
 Extra attention for low-intensity / marginal grasslands
 Farmers should pay more attention to soil management
Realistic effective and efficient instruments are:
 Contracts with (collectives of) farmers to produce public
goods
 Incentives for farmers in contracts or cross-compliance
regulation for real crop rotation (not: grow 3 crops).
 Support innovation (advise, interactive innovation
groups, link to sustainability schemes food brands) on
nature-inclusive agriculture
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29. Challenges for policy makers
This is fuel for a strategic conversation – not
more
Is there agreement on a market-based approach?
What choice in the relative importance of different
policy targets and trade-offs?
Are some futures desirable or unavoidable: adjust
CAP in that direction? (but keep it robust for others)
Even more attention to Food Policy ? Or Jobs &
Growth?
Which speed of change to choose ?
And later: details on instruments and consequences.
29

30. Is this useful for
a strategic
conversation ??
krijn.poppe@wur.nl
wageningenUR.nl/lei