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Communication on the future of the CAP

“The CAP towards 2020: meeting the food, natural resources and territorial challenges of the future”

DG for Agriculture and Rural Development European Commission
Ⓒ Olof S.

Outline
1. The context 2. The CAP today 3. Why do we need a reform? 4. New objectives, future instruments and policy options 5. Concluding remarks 6. Next steps

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1. The context
Background of reform • Entry into force of Lisbon Treaty • Budgetary framework ends in 2013 • Need to align CAP post-2013 to Europe 2020 strategy Public debate • Strong public interest in Commission call to public: 5 600 contributions • Very successful Conference in July: 600 participants • Council, EP, EESC, CoR discussions and/or opinions The Communication • Reflects broadly identified policy challenges • Responds to the public debate and outlines broad future options • Launches inter-institutional debate and prepares legal proposals

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The CAP today A substantially reformed policy… • Structured in two complementary pillars • Farm support mainly decoupled and subject to cross-compliance • Role of market intervention mechanisms significantly reduced to safety net level • Rural development policy strengthened with funds and new policy instruments … better performing… • Surpluses belong to the past • Competitiveness improved • Improved transfer efficiency • More sustainable farming • Integrated approach for rural areas • Contribution to EU budget stability … and resulting in a territorial and environmentally balanced EU agriculture 4 .2.

6% 0.2% 0.7% 0.DG Agriculture and Rural Development 5 .CAP expenditure and CAP reform path (2007 constant prices) 70 60 50 40 30 20 10 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 billion € EU-10 EU-12 EU-15 EU-25 % GDP EU-27 0.1% 0.3% 0.0% Export subsidies Decoupled direct payments Other market support Rural development Coupled direct payments % of EU GDP Source: European Commission .5% 0.4% 0.

5% of EU GDP CAP expenditure EU budget CAP expenditure All EU public expenditure Source: European Commission .Alternative views on the cost of the CAP CAP cost in 2009 (in absolute terms) 140 120 100 80 60 40 20 0 Billion of euros 20% 10% 0% % of GDP 60% 50% CAP cost in 2009 (in relative terms) 41% of EU budget 40% 30% 0.DG Agriculture and Rural Development 6 .

3. Why do we need a reform? To respond to challenges ahead Economic challenges • Food security • Price variability • Economic crisis 7 .

US. avg spot price Sources: European Commission .Recent trends in some commodity market prices EUR/t for maize and fresh milk. EUR/bbl 200 175 150 125 100 75 50 25 0 8 . EU SMP.DG Agriculture and Rural Development and World Bank Crude oil. Gulf Crude oil. EU Maize. EUR/100 kg for SMP 400 350 300 250 200 150 100 50 0 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 Fresh milk.

7 40 30 20 10 0 31.9 168.EU developments in agricultural income (agricultural income/AWU in real terms) EU-15 210 ( Index EU-27 in 2005 = 100 ) EU-12 60 50 200 EU-15 190 192.0 160 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e Source: Eurostat 9 .7 180 EU-12 170 17.

EU developments in agricultural income (agricultural income/AWU in real terms) EU-15 150 140 130 120 110 100 90 80 70 60 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e Source: Eurostat ( Index 2000 = 100 ) EU-12 200 EU-12 180 160 140 120 EU-15 100 80 60 40 20 10 .

DG Agriculture and Rural Development. based on Eurostat data 11 .Relative situation of agricultural income in the EU Agricultural income level between Member States (2010e) (agricultural income/AWU in real terms EU-27 = 100) Income gap with the rest of the economy (average 2005-2007) (agricultural income as % of average income in the total economy) 200 175 150 125 100 75 50 25 0 100% 80% 60% 40% 20% 0% EU-15 EU-27 EU-12 EU-15 EU-27 EU-12 Source: European Commission .

in real prices) 110 100 90 80 70 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e Input prices .Recent evolution of agricultural input and output prices (index 1996 = 100.EU-27 Source: Eurostat 12 .EU-27 Output prices .

3. Why do we need a reform? To respond to challenges ahead Economic challenges • Food security • Price variability • Economic crisis Environmental challenges • GHG emissions • Soil depletion • Water/air quality • Habitats and biodiversity 13 .

Declining trend of GHG emissions in EU agriculture since 1990 Tg CO2 equivalents 700 600 EU-27 = -20% 500 400 300 200 100 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: EEA EU-15 = -12% 14 .

forage yields ▼ Animal health.Possible impacts on EU agriculture ▲ Floods risk ▲ Hotter and drier summers ▲ Sea levels ▲ Risk crop pests. floods ▼ Summer rainfall ▲ Risk drought. crop yields ▼ Optimal crop areas Source: DG Agriculture and Rural Development. JRC and MS academic studies 15 .Climate change . diseases risks ▲ Winter rainfall. yields ▲ Suitable farmland ▲ Pests. water stress ▲ Soil erosion risk ▲ Yields. heat spells ▲ Risk soil erosion ▼ Growing season. range of crops ▼ Water availability ▲ Risk drought. welfare ▼ Summer rainfall ▲ Winter storms. based on EEA reports. floods ▲ Length growing season. diseases ▲ Crop.

3. Why do we need a reform? To respond to challenges ahead Economic challenges • Food security • Price variability • Economic crisis Environmental challenges • GHG emissions • Soil depletion • Water/air quality • Habitats and biodiversity Territorial challenges • Vitality of rural areas • Diversity of EU agriculture 16 .

5 million employees (7.7% of total employment) 17 .7 million farms (70% with less than 5 ha) • The agrifood sector has 17.Importance of agriculture in the EU territory • 13.

Why do we need a reform? To respond to challenges ahead Economic challenges • Food security • Price variability • Economic crisis Environmental challenges • GHG emissions • Soil depletion • Water/air quality • Habitats and biodiversity Territorial challenges • Vitality of rural areas • Diversity of EU agriculture Equity and balance of support Contribution to Europe 2020 strategy 18 .3.

What are the objectives with the reform? Viable food production Sustainable management of natural resources and climate action • To guarantee the provision of public goods • To foster green growth through innovation • To pursue climate change mitigation and adaptation Common EU response needed Balanced territorial development • To contribute to farm income and limit its variability • To improve sector competitiveness and share in food chain value-added • To compensate areas with natural constraints • To support rural vitality and employment • To promote diversification • To allow social and structural diversity in rural areas 19 .4a.

What policy instruments? Better targeted to objectives Direct payments • Redistribution • Better targeting • Redesign: • Greening of direct payments • Capping of payments • Small farmers support • Areas with specific natural constraints Based on two pillar structure 20 .4b.

48000 40000 DP net ceilings fully phased-in (EUR/ha) EU-27 average (EUR/ha) DP net ceilings fully phased-in (EUR/beneficiary) Source: European Commission .Average direct payments per potentially eligible area and beneficiary Direct payments net ceilings fully phased-in (in 2016) EUR/ha 800 700 600 500 400 300 200 100 0 Malta Germany Slovenia Slovakia Italy Hungary Greece Austria Ireland EU-15 EU-27 EU-12 Luxembourg Cyprus Netherlands Denmark United Kingdom Bulgaria France Poland Sweden Romania Portugal Czech Republic Lithuania Belgium Estonia Finland Latvia Spain 8000 0 32000 24000 16000 EUR/ben.DG Agriculture and Rural Development 21 .

What policy instruments? Better targeted to objectives Direct payments • Redistribution • Better targeting • Redesign: • Greening of direct payments • Capping of payments • Small farmers support • Areas with specific natural constraints Based on two pillar structure Market measures • Market orientation • Streamline and simplification • Improved food chain functioning 22 .4b.

Slow. asymmetric price transmission along the food supply chain FOOD PRICE CRISIS PRODUCERS’ LAG RETAILERS’ LAG STABILISATION 120 115 110 105 100 95 Overall inflation (HICP) Food producer prices Agricultural commodity prices Food consumer prices Jun-07 Jul-07 Jun-08 Jul-08 Nov-07 Dec-07 Nov-08 Dec-08 Apr-07 May-07 Apr-08 May-08 Jan-07 Feb-07 Source: European Commission – DG Economic and Financial Affairs. based on Eurostat data May-09 Aug-07 Sep-07 Jan-08 Feb-08 Aug-08 Sep-08 Jan-09 Feb-09 Mar-09 Apr-09 Mar-07 Mar-08 Jun-09 Jul-09 23 Oct-07 Oct-08 . limited.

climate change and innovation as guideline themes • Improved coherence with other EU policies • More effective delivery mechanisms • Address risk management • New distribution criteria Market measures • Market orientation • Streamline and simplification • Improved food chain functioning 24 . What policy instruments? Better targeted to objectives Direct payments • Redistribution • Better targeting • Redesign: • Greening of direct payments • Capping of payments • Small farmers support • Areas with specific natural constraints Based on two pillar structure Rural development • Environment.4b.

% of total expenditure Source: European Commission .DG Agriculture and Rural Development 100% 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% Denmark Netherlands Belgium France Greece Germany United Kingdom Spain Italy Ireland Sweden Luxembourg Finland Cyprus Hungary Austria Portugal Czech Republic Poland Lithuania Slovakia Slovenia Estonia Latvia Bulgaria Romania Malta Second Pillar First Pillar CAP expenditure between pillars (in 2009) 25 .

What policy options? Option 1 Continue the reform process by introducing further gradual changes while adjusting the most pressing shortcomings (e. moving away from income support and most market measures Option 2 Option 3 26 .4c. more equity in the distribution of direct payments) Capture the opportunity for reform ensuring that CAP becomes more sustainable and balanced (between policy objectives.g. MS and farmers) through more ‘green’ targeted measures More fundamental reform focusing entirely on environmental and climate change objectives through rural development.

4c. biodiversity. climate change. What policy options? Direct payments • More equitable distribution among MS and among farmers • More equitable distribution among MS and among farmers • Greening of direct payments • Capping of payments • Increase small farmers support • Streamline and simplify existing measures • Gradually phase out direct payments Market measures • Streamline and simplify existing measures • Phase-out most measures • Keep disturbance clause for severe crises • Primarily focus on measures linked to the environment and the delivery of public goods Rural development • Continue emphasis on climate change. bio energy and innovation • More focus on environment. local initiatives • Risk management tools and income stabilisation tool • New distribution criteria Option 1 Option 2 Option 3 27 . restructuring and innovation.

environmental and territorial challenges be more sustainable. balanced. Concluding remarks With reform. simpler.5. better targeted. the CAP needs to: better respond to the economic. effective and more accountable improve current CAP instruments and design new ones 28 .

Next steps Inter-institutional debate on the Communication Preparation of Impact Assessment (IA) • In-depth Commission analysis of new policy settings. social and environmental impacts • Stakeholders consultation: analytical contributions from stakeholders based on Consultation document published on the 23th of November Preparation of Legal Proposals Legal proposals will be presented in the second semester of 2011 29 . options and their economic.6.

europa.eu/agriculture/cap-post-2013/consultation/ index_en.eu/agriculture/cap-post-2013/index_en.htm • • 30 .eu/agriculture/cap-post-2013/communication/ index_en.europa.For further information • The CAP after 2013 http://ec.htm The Communication on the future of the CAP http://ec.htm Public consultation http://ec.europa.

Thank you 31 .