In its report investigating what needs to be done to boost the resilience of the farming sector in the face of challenges such as volatile prices the House of Lords EU Committee says that the delivery of public goods should be the main objective of support from the CAP budget granted to farmers.

The committee reports: “European farmers provide a secure supply of safe food, manage the land and contribute to the wider rural economy.

“They have to cope with multiple risks such as often unpredictable and catastrophic weather conditions, the impact of political decisions and volatile international markets while delivering public goods such as a managed environment.

“Price volatility is an inherent feature of agricultural commodities markets.

“We found that adverse effects at farm level are caused more by unanticipated periods of sustained low prices than by an increase in levels of volatility.

“Farmers can manage both by taking measures to increase levels of resilience.”

The committee argues that although the current income support payments to farmers under the CAP will continue to play a role in helping farmers to withstand periods of low prices, they can also discourage innovation and prevent the entry of new farmers into the sector.

The report concludes that adverse effects at farm level are caused more by unanticipated periods of sustained low agricultural commodity prices than by an increase in levels of price volatility as such.

The committee says that price volatility is a normal market risk to be managed by farmers and is no greater now than in the past.

It says occasional public support is needed to protect farmers from unpredictable market disruption, such as the recent Russian ban on EU imports, or extreme weather events.

“We recommend that the UK Government clearly articulate the specific circumstances under which it will seek to access EU funding to provide emergency aid for farmers in the wake of an extreme natural disaster or a catastrophic event,” the committee says in its report.

In the long term, however, policy should focus on building farmers’ resilience and capacity to manage risks.

“We recommend that the Commission and the UK Government undertake a structured review of public investment deposit schemes in other countries, with a view to identifying approaches that would work in the EU,” the committee says.

“This would give farmers a secure and guaranteed option to save in times of plenty and withdraw in times of need.

It adds: “The UK Government’s efforts to explore how a futures market for dairy could be established in the UK is a positive step and there may be scope to expand this exploration of futures markets to other commodities in the future.”

It also calls for closer cooperation and a closer working relationship with the European Investment Bank to bolster farming support.

The report calls for more protection for tenant farmers in the UK.

“The UK Government and the devolved administrations should also investigate the
impact of short-term tenancies on the ability of farmers to make necessary
investments,” the report says.

The committee urges better training benchmarking programmes to help farmers manage volatility and low prices and improve farming prospects.

The committee concludes that subsidised insurance schemes should not replace the current system of Direct Payments to support farmers’ incomes.

And it adds that despite the fundamentally different contexts in which agriculture is practiced in other countries, the EU can learn lessons from the US and Canada on where and how subsidised insurance and disaster compensation may be applied.