The European Union has adopted a piecemeal approach to the crises hitting the bloc’s milk and livestock sector, write Yves Madre and Luc Vernet.
Yves Madre and Luc Vernet are senior advisors at Farm Europe, a multicultural think tank that aims to stimulate thinking on agriculture and food policies.
The EU’s response to the milk crisis – and to the crisis hitting its livestock production more generally (including pork and beef) – has been at sixes and sevens.
Several hundred million euros in emergency aid was announced during the summer by the governments of the EU’s member states, in particular Belgium, Spain, Italy, France, and Estonia. Were it not for the Council convening an emergency meeting of Agriculture Ministers on the 7 September, we would have been forgiven for forgetting that Europe’s 28 member states have a common agricultural policy at all.
Yet, while the situation in each country, in each sector and in each farm varies, the whole industry is struggling to cope with a perfect storm of negative developments: the Russian ban on EU food products, the Chinese economic slowdown, and the persisting sluggishness in the European market. The questions being asked are ‘what is Europe doing?’ or ‘what can Europe do?’, that is, over and above simply observing that, as in the words of the European Commissioner for Agriculture Phil Hogan in July, “there is too much milk on the market”?
If there’s one thing this summer has shown it is that, in addition to short-term measures, the time has come for a fundamental redesign of the European Common Agricultural Policy itself. We need a fresh forward-looking vision and common strategy for agriculture that encompasses the whole of Europe. It is a tall order, but it is the only way to support agricultural businesses, wherever they are in Europe, to become more resilient in times of crisis and it is the only way to avoid the looming renationalisation of crisis management in the industry.
The world’s food needs are growing fast. European agricultural markets are mature. Europe is technologically advanced and it has a climate that is particularly conducive to agriculture. Europe, therefore, is very well placed to be a major supplier. However, if this is to be, it needs to devise a Europe-wide strategy that is equipped to surmount the challenges that would accompany such growth, a growth that must be sustainable in three dimensions: the environmental, the economic and the social. Such a strategy must, in particular, be better able to cope with market volatility as today’s crisis, will not be the last, far from it. Whether in terms of the economy, the geopolitical situation or the weather, instability is increasingly common, and increasingly violent.
It is abundantly clear that Europe is not, as we speak, able to act. Its lack of effective policy instruments for stabilising farm revenues is simply adding to existing volatility. Why? Because producers operate in a market and most of them are obliged to react to market signals: when demand rises they produce more in order to take advantage of rising prices, when demand falls they also produce more in order to earn through volume what they lose in unit value, but they do so hoping that their neighbour produces less, or goes out of business.
Without a fresh European approach, and renewed European investment in the Common Agricultural Policy, this vicious circle can only create unhealthy competition between producers. It has become urgent, therefore, for Europe to ‘tool up’ for the major economic challenge of coming years: market volatility management.
The most recent CAP reform was focused on an important subject; that of the sustainability of farming practices. To this end, greening was introduced and Europe is set to invest nearly 100 billion euros over 7 years, in order to improve the environmental footprint associated with food production in Europe. The priority today is to get serious about the industry’s economic sustainability, by securing revenues and organising the industry to improve its performance. The economy and the environment are two essential dimensions of the sustainability of European agriculture and also two key ingredients for attracting young people – and investors – into the industry.
In the short term, due to its lack of foresight, Europe can only make do with the tools at its disposal: stop the haemorrhage, limit the damage, and reassure producers, whose dynamism and abilities are key to the rural economy of tomorrow, but who are today demonstrating in the streets.
The palette of useful policy instruments is limited. It is possible to increase the trigger price for public storage (intervention) from 21.7 cents to 25 cents, bringing it in line with the economic reality in the industry, without causing artificial overproduction, such as has happened in the past.
Some voices are encouraging the Commission to put in place a ‘financial package’ for the dairy industry. This would be useful. However, any such package should avoid spreading resources too thinly and should not become a political stunt devoid of any real economic impact.
Measures must focus on the areas and the challenges being faced by the sectors that are in difficulty: the challenge of financial costs related to loans recently contracted by farmers investing in the future; the challenge of small farms located in disadvantaged areas and affected by the crisis even if their markets are much more local; the challenge of extension of the closure of the Russian market; the challenge of conquering new markets and of securing investment resources for marketing campaigns, given that any returns take at least 12 to 18 months to arrive in farmers’ bank accounts.
Europe needs to navigate the next few months with due care, it needs to kick-start discussions on the CAP of tomorrow. By doing this, it will be showing its ambition for Europe’s agriculture and food industry, not only though its budget – which is significant – but also through its ability to come up with a vision and a strategy for its farmers, wherever they are in Europe. It isn’t just about the economics of the moment. It is vital to give a political signal that offers hope for the future for those on whom 500 million Europeans depend for their daily food needs.