Giving evidence to the House of Lords EU Energy and Environment Sub Committee, Tassos Haniotis, Director of Economic Analysis, Perspectives and Evaluations, at DG AGRI, in the European Commission said that land management is becoming extremely important for farmers across Europe and is the central focus for farm income support.

Mr Haniotis said that farms now have to manage the risks associated with climate change and the challenges thrown up by the climate, soil erosion and water usage.

He told the inquiry on “Responding to price volatility: creating a more resilient agriculture sector” that volatility is not something that is unknown in agricultural markets as the industry has seen two major spikes in the last eight years.

However, he said that while other commodity prices had moved in a similar pattern to agricultural prices in the past, the pattern had now changed.

The level of prices, particularly agricultural prices has stayed high and they are still higher than they were 10 to 15 years ago, while prices such as fuel and iron ore had slipped.

He said that agricultural prices were now subject to other influences such as a growing world population and growing wealth and changing dietary patterns.

“We have had a long period of underinvestment in agriculture and the markets have then overreacted,” said Mr Haniotis.

He told the inquiry that agricultural prices have also been influenced by an oversupply of fuel and changes in the Chinese economy.

Mr Haniotis said that while Russian sanctions had caused an initial problem, other markets have been found for products that had been exported there.

He said that the basic farm payment through the CAP was an income stabilisation scheme.

While each member state has its own risk management plans for situations such as crop and livestock health, there are payments available from the EU to compensate farmers when they find sever cuts in their income.

However, Mr Haniotis added that these payment programmes had rarely been taken up.

He said that risk management in the EU is through the direct payments to provide a fixed part of the farmer’s income year after year, so that volatility is minimised.

He said that the US has risk management schemes that are crop specific in the insurance scheme, but the programme in the EU covers the whole farm income.

Since the reforms of the Common Agricultural Policy, farmers have become more exposed to volatility because they are now exposed to world market forces.

“They are more open to market signals and they have to respond to that,” Mr Haniotis said.

However, he said that changes had seen the EU become a net exporter of agricultural products and farmers and food producers had become exporters of not commodity products but value added.

He said that farmers have to have a cushion for those things the markets do not pay them for – and that is looking after the land.

“We have moved away from product support to producer support and now we are moving to land management support,” Mr Haniotis said.

Former agriculture minister Lord Rooker said that he was concerned that direct payments from the EU supporting the farmer could be a barrier to innovation.

However, Mr Haniotis said that there are different attitudes to the direct payments in different EU countries and while the farming sector is seeing a fall in numbers there are young and innovative farmers waiting to come into the industry.

However, many are concerned that they do not have access to land or access to capital and this is an area the EU needs to address.

He said that the EU is supportive of research and development and has funds to back research.

European policy is also encouraging knowledge transfer both between member states and of different skills to farmers and he acknowledged that while farmers want new technology they often do not have the practical knowledge to use it and also many rural areas do not have the investment in the technology such as broadband to make it work.

However, he said that the EU cannot give advice directly to farmers as this is the role of individual member states.

For financing projects and agricultural programmes Mr Haniotis said it was essential that the EU finds ways make funds more available to the industry.

He said that agriculture is an economic sector and if it is not economically viable, then it will not be viable in other ways such as socially and environmentally.

He said the important thing about the sustainability of the food and agriculture sectors and food security is not the capacity of Europe to produce but how the food is produced.

And it is a question of either remaining with existing practices in a period of climate change or adapting and using best practice and policies to address the challenge.

Further Reading

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