CAP plans won’t reduce market volatility, expert warns

Plans to reduce market volatility through reform of the Common Agricultural Policy need to be reassessed if European farmers are to properly deal with input price spikes.

Alexander Gohin, research director at INRA, France’s National Institute for Agricultural Research, said European Commission proposals to help farmers deal with fluctuations in the market did not go far enough.

Addressing MEPs on the EU’s agriculture committee on ways to manage price volatility on Tuesday (27 March), Mr Gohin said producers were unable to make long-term business decisions while price volatility was so high.

But he said plans to alter rules around market management measures in the form of direct support payments and a decision to retain intervention only for wheat stocks would not resolve market fluctuations.

Supply chain

“Simply regulating prices or volumes won’t solve the problem. The whole supply chain needs to be involved in carrying risk.

“You can mitigate volatility by storage and trade, but there’s a cost involved with those mechanisms,” he said. “If you store grain, you have to pay storage costs, while if you trade you have to pay for transport.

“What we really need to do is to look at ways to reduce the cost of market mechanisms.”

Mr Gohin said there was too little information and understanding of the way agricultural markets worked which was a main factor behind price instability.

“Insurers increase their risk premiums because they don’t understand the market.

“There is too little data on thinks like beef, which have different qualities, while there are issues like disease and climate change which cause uncertainty.

“It’s these uncertainties which cause volatility. Information is power and in many areas we are lacking power.”

Direct payments

M Gohin also criticised the Commission’s plans to introduce changes to the direct support element of the CAP for adding to confusion around agricultural markets.
 
Withholding a percentage of direct payments on the basis of whether farmers met certain environmental rules portrayed the wrong message to insurers, investors and tax payers about whether farmers really needed support.

“If a subsidy is necessary to help farmers function, then fund it,” he added. “Threatening to take away some parts of it casts doubt on its legitimacy.”

Mr Gohin’s comments came as European farm Commissioner Dacian Ciolos said a new approach was needed to help farmers deal with the ‘challenging vagaries’ of the market.

Speaking at the Forum for the Future of Agriculture in Brussels on Tuesday, he said the Commission’s plan to make it easier to activate existing tools such as public intervention and private storage aid would replace current inflexible and unhelpful mitigation measures.

“We have to allow farmers more scope to regulate their own activity,” he added.

“European agriculture needs to be able to perform its main function of producing food, but at the same time, it must not forget its wider services to society of managing natural resources.”

For more on this topic

Have your say on the plans to reform the CAP