agricultural policy: what's next?
TRANSCRIPT
www.missouri.edu
University of Missouri
Agricultural Policy. What’s Next?
Lars Hoelgaard, Deputy Director-General
University of Missouri’s Transatlantic Center, Brussels, 14 January 2009
University of Missouri, Brussels, 14 January 2009 3
Direct Payments• Historical model• Regional model• Flatter rates?• SAPS – New Member States – 2013/2016
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Cross compliance - CC• SMR’s – health, environment, animal welfare• Good Agricultural and Environmental Practice –
GAEC• Permanent pasture ratio• Water management – buffer strips
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Direct support• Partially coupled support and other aid
schemes– Full decoupling from 2010 for arable crop,
durum, olive oil and hops
– From 2012 for beef and veal, rice, nuts, seeds, protein and aid for starch growers
– Abolition of energy crop premium– MS allowed to maintain coupled support for
suckler cows, sheep and goats
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Article 68• Specific support – 10% of direct payments• Environment, quality, animal welfare• Sector specific dairy, beef and veal, sheepmeat and
rice• Max. 3,5% coupled
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Insurance and mutual funds• Article 70: Crops, animal and plant insurance• Article 71: Mutual funds for animal and plant
diseases• Article 44: sCMO
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Market measures (1/2)• Milk quotas
– Increase milk quotas by 1% annually from 2009 to 2013– Additional super levy for 2009 and 2010 (for overshoots higher
than 6%) and adapted fat correction
– Review clause in 2010 and 2012 to assess market developments and report on PDO cheeses
– Abolish private storage for cheese and butter disposal aids • Cereals
– Bread wheat intervention remains with no quantitative limits. Tendering system starting from quantities above 3 million tons
– Quantitative ceilings set to zero for all coarse grains, durum wheat and rice
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Rural Development• Address new and ongoing challenges: climate change, bio-energy,
water scarcity, biodiversity, dairy accompanying measures and innovation related to the afore-mentioned priorities
• More funding via an increase in compulsory and the introduction progressive modulation
• Revision of National Strategy Plan and Rural Development Programs indicating how additional funds will be used in meeting the new challenges
Thresholds (in € ) 2009 2010 2011 2012
1 to 5 000 0% 0% 0% 0%
5 000 to 300 000 2% 3% 4% 5%
Above 300 000 6% 7% 8% 9%
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What’s next (1)• Pillar I – direct payments
– Decoupled– Level– Distribution between MS
• Budget after 2013
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What’s next (2)• Pillar II
– Axis I, II, III– ”New challenges” – climate change– Public goods - NL-paper Annecy September
2008
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What’s next (3)• Market orientation. Dairy quotas• Safety net• Doha• EU – direction• US - direction
Pavel Vavra
Agricultural Economist
OECD
Organisation for Economic Cooperation & Development
Pavel VavraTrade and Agriculture Directorate
Agricultural Policy in Transition: What Next? 14 January 2009 Polak Room, International Press Centre, Brussels
Global Trends in Commodity MarketsGlobal Trends in Commodity Markets
Trade & Agriculture Directorate 15
• Agricultural Outlook - a set of conditional projections published in an OECD-FAO annual report
• The datasets are available at www.agri-outlook.org
OECD-FAO Agricultural Outlook
Trade & Agriculture Directorate 1616OECD Trade & Agriculture Directorate
1973 2008
Transitory factors, Long-term factors
} 20-30%
Cereal prices in real terms, schematic
Where are (were) prices going?
Trade & Agriculture Directorate 17
• Market turmoil – add hoc policies
• Negative yield shocks – bad weather
• Strong demand growth
Temporary – transitory factors
• High crude oil prices
• Feedstock demand for biofuel production
Longer term factors
• Devaluation of US dollar
• Low stock levels
Factors behind price rises
Trade & Agriculture Directorate 18
Growing demand for agricultural commodities
P.a. average growth rate between 2008 and 2017
Trade & Agriculture Directorate 19
Food - Feed - Fuel fuelling demand for cereals
Wheat Coarse grains
Trade & Agriculture Directorate 20
Crude oil price : 90-104 US $
World oil price assumed at higher levels
Trade & Agriculture Directorate 21
Change in world prices for 2017: Cumulative impacts of different scenarios
Trade & Agriculture Directorate 22
Strong ties of agriculture and energy
Trade & Agriculture Directorate 23
www.oecd.org/tadwww.oecd.org/tad
Thank YouThank You
Pat Westhoff
Co-Director
Food and Agricultural Policy Institute
University of Missouri
Patrick WesthoffUniversity of Missouri
Transatlantic Roundtable, BrusselsJanuary 14, 2009
Mar 08: $450
Nov 08: $237
WHY PRICES ROSE
Reduced grain production in Europe, Australia in 2007
Economic growth in Asia and elsewhere
Weaker dollar Higher petroleum prices Rapid biofuel expansion Policy response Speculation
WHY PRICES ROSE
Reduced grain production in Europe, Australia in 2007
Economic growth in Asia and elsewhere
Weaker dollar Higher petroleum prices Rapid biofuel expansion Policy response Speculation
WHY PRICES FELL
Sharp increase in global grain production in 2008
Financial crisis and world economic slowdown
Stronger dollar Lower petroleum prices Slower biofuel growth Policy response Speculation
Dec. estimate by USDA
Jan. estimate by USDA Comments
2008 maize production 305.3 mil. tons 307.4 mil. tons More area, higher yields than previous estimate
2008/09 U.S. maize for ethanol
94.0 mil. tons 91.4 mil. tons Lower fuel prices have closed some plants
2008/09 U.S. maize used for livestock feed
135.9 mil. tons 134.6 mil. tons Less meat demand due to weak economy
2008/09 U.S. maize exports
45.7 mil. tons 44.5 mil. tons Weak global economy slows trade
Sep. 1, 2009 U.S. maize stocks
37.4 mil. tons 45.5 mil. tons More production, less use mean more stocks
CBOT maize futures, March 2009 contractsJan. 9: $4.10/bushel ($161/ton)Jan. 13: $3.62/bushel ($143/ton), down 12%
Source: FAPRI preliminary baseline, Nov. 2008
Source: FAPRI preliminary baseline, Nov. 2008.Note: “Payment trigger” is price that would result in countercyclical payments.
Note: Net CCC outlays include spending on direct payments, marketing loans, countercyclical payments and other basic farm programs
Average Crop Revenue Election (ACRE) program created in 2008 Farm Bill
Makes payments if state-level revenues/hectare fall below a benchmark
Benchmark tied to prices from last 2 years, yields from last 5
If prices and yields do not fall, no payments occur
Payments could be large if prices fall, even if prices stay above levels that would result in “traditional” payments
Time of great market uncertainty
U.S. ACRE program could prove important Potential large payments if commodity prices fall Is program consistent with U.S. Doha proposal?
What will new U.S. administration do? Seems unlikely that farm program changes will be on
2009 agenda But could see changes if/when budget and trade
concerns become important
Michel Petit
Professor
Institut Agronomique Méditerranéen (Montpellier)
CAP PROSPECTSCAP PROSPECTS
Michel PETIT
Transatlantic Roundtable, Brussels
January 14, 2009
INTRODUCTIONINTRODUCTION
MY TASK: Update on Health Check implications
for future and especially directions of EU policy beyond 2013
TWO QUOTES:– CAP introduced short-term adjustments to
respond to crisis before “Health Check”
– “Health Check” proposals aimed at fine-tuning the CAP reform process
PREDICTABILITY OF CAP PREDICTABILITY OF CAP REFORMS SINCE 1992REFORMS SINCE 1992
SUBSTANCE: FROM PRICE SUPPORT TO DECOUPLED DIRECT PAYMENTS
INSTITUTIONAL ARRANGEMENT: KEY ROLE OF THE EUROPEAN COMMISSION
CAP expenditure and CAP CAP expenditure and CAP reform pathreform path
0
10
20
30
40
50
60
70
1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007
% GDPbillion Û
0,0%
0,1%
0,2%
0,3%
0,4%
0,5%
0,6%
0,7%
Export subsidies Market support Direct aidsDecoupled payments Rural development of EU GDP%
EU-10 EU-12 EU-15 EU-25 EU-27
INTERVENTION AS SAFETY INTERVENTION AS SAFETY NET NET
0
50
100
150
200
250
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
( in Û per metric tonne )
EU intervention price EU common wheat market price )SRW Gulf (US
MAJOR UNCERTAINTIES MAJOR UNCERTAINTIES FOR THE FUTUREFOR THE FUTURE
BUDGET FRAMEWORK:
TOWARD A NEW ALLIANCE
OF THE NET CONTRIBUTORS? NEW ‘SOCIETAL CONCERNS’:
EUROPEAN MODEL
OF AGRICULTURE? HOW TO COPE WITH PRICE
VOLATILITY?
Neil Conklin
President
Farm Foundation
The Future of U.S. Agricultural Policy
"Agricultural Policy in Transition: What's Next?"
Brussels, Belgium January 14, 2009
Neil Conklin
Farm Foundation
75 Years Ago
• More than 20% of the workforce employed in production agriculture
• Production agriculture’s share of GDP about 7 %
• 1933 Agricultural Adjustment Act—the first “Farm Bill”
Today
• Less than 2% of workforce employed in production agriculture
• Production agriculture’s share of GDP is less than 1%
• Food Conservation and Energy Act of 2008
75 Years of Change
Growing Population
Rising Income
Policies Shaped by Abundance
The 30-Year Challenge• Farm Foundation project The 30 Year Challenge:
Feeding and Fueling a Growing World• Conclusions:
– With the right tools and incentives, the world’s agricultural producers and agribusinesses will rise to the challenge
– Those incentives and tools are heavily influenced by public policy
– Need to begin to build the framework to meet the challenges of the future
Six Challenges
• Global financial markets and recession,• Global food security,• Global energy security,• Climate change,• Competition for natural resources, and• Global economic development
Themes from The 30-Year Challenge
• Uncertainty,• Public understanding,• Unintended consequences,• Trade-offs,• Research and development,• Infrastructure,• Trade, and• The absence of a clear strategy for U.S.
agriculture.
The Near-Term Imperatives
• Financial Crisis and Recession• Interest rates• Exchange rates• Incomes and demand
• Boom and Bust– Ethanol– Commodity Prices
• Policy Responses???????
Prospects for Policy Transition
• In response to what one of our participants in the 30-Year Challenge Project called a “generational opportunity” Farm Foundation undertook this effort to motivate the debate.
For More Information
• Visit www.farmfoundation.org to find:– “What’s Driving Food Prices”– “The 30 Year Challenge, Feeding and Fueling a
Growing World”
Willi Meyers
Co-Director
Food and Agriculture Policy Research Institute
University of Missouri
DiscussionDiscussion
Willi Meyers
Transatlantic Roundtable, Brussels
January 14, 2009
Changing US Political Setting?Changing US Political Setting?
Changing EU Political Setting?Changing EU Political Setting?
Changing Market Environment?Changing Market Environment?Real U.S. Crop Farm PricesReal U.S. Crop Farm Prices in year 2000 US dollarsin year 2000 US dollars
Source: January 08 FAPRI Baseline
Did we lose trust in MARKET INSTITUTIONS?Did we lose trust in MARKET INSTITUTIONS?..said Thursday(Oct 23)that the current ..said Thursday(Oct 23)that the current
financial crisisfinancial crisis had uncovered a flaw in how the had uncovered a flaw in how the free market system works that had shocked free market system works that had shocked
him.him.
Questions for futureQuestions for future Will food prices be higher and instability greater? Did the food price surge reveal flaws in
market/policy systems? Which flaws and which market factors can be
mitigated with policy changes/trade disciplines?– Short term– Long term
Will policy behavior reflect loss of confidence in market?