Thursday, 11th November 2010
Speech to NFUS on CAP Reform
[Speech to NFUS, Thainstone Mart, Inverurie, Aberdeenshire, 11th November 2010]
CAP Reform
The CAP has many critics. When I was first elected 11 years ago, the CAP accounted for 70% of the entire EU budget. 11 years ago there were only 15 EU Member States. Now, in just over a decade, the CAP accounts for only 42% of the overall EU budget and there are 27 Member States, some of them huge agricultural nations like Poland. So less money; more Member States; more mouths to feed and an overall drift of subsidies to the East; that’s a pretty dramatic shift in policy!
The current budget adds up to €50 billion. Divided among our 500 million consumers who benefit from the CAP, this equates to €100 per EU citizen per year (or 27cents – 23p - per day). For that they get food security, animal welfare, the preservation of the natural landscape, high quality produce, high standards of hygiene and the export of welfare, hygiene and environmental management to non EU countries....all for 23p per day.....less than half the cost of a postage stamp! I think that’s a pretty good deal! I think Scotland’s farmers do a good job for 23p a day and they should be congratulated.
Following extensive public debate and the EP's own initiative report on the post 2013 CAP (the George Lyon report), the overwhelming majority of views expressed, including the majority vote in the European Parliament, believes that the CAP should remain a strong common policy structured around its two pillars (the first pillar being annual direct payments and market measures and the second pillar being multi-annual rural development).
The parliament decided that the first pillar should be more equitably distributed and the second pillar should focus more on competitiveness, innovation, climate change and the environment.
The European Commission publication ‘The CAP towards 2020’ more or less shares these views, although it offers three options for the future of the budget: (1) The Status Quo. (2) More balanced, targeted and sustainable support and (3) the abolition of market and income support. It seems likely that option (2) involving a major overhaul of the current system to target payments to active farmers within a simplified regulatory system, will come out on top. Certainly the other two options are non-starters.
As you know, with reform of Europe’s Common Agricultural Policy scheduled for completion by 2013 and implementation by 1st January 2014, Brian Pack has been carrying out an inquiry on behalf of the Scottish Government into how support to Scottish agriculture could be best delivered in the future. I invited Brian to Brussels to outline his interim report last June, at a seminar attended by Commissioner Dacian Ciolos. He has now published his final report.
I think Brian’s approach is going in the right direction. He outlines the critical role of direct support, which underpins food production while at the same time securing wider public benefits. He also highlights the unique nature of Scotland’s agricultural sector and points to the need for flexibility within the CAP to reflect that. I have said to Brian that I believe that we need to see funding maintained for those who are clearly engaged in delivering positive social, environmental and economic benefits, particularly in our hill and upland areas, although I am still slightly concerned about his proposal to target headage payments of £6 per animal to those producing lambs in LFAs.
With almost 85% of Scotland recognised by Europe as being disadvantaged, I accept fully that support to LFAs must involve livestock, but I think re-coupled headage payments will not win approval in Brussels. Similarly, his suggestion that the Beef Calf Scheme should only apply to those farming in LFAs may also hit the buffers in Brussels. But payments under the Less Favoured Areas Support Schemes last year delivered over £64 million to 13,000 businesses, so it is a vital part of our agricultural economy.
I also think that Brian’s thoughts on mechanisms for delivery are interesting. He suggests using labour units and that could be a critically important move, because it’s an option the Commission touched upon in their recent paper. In their communication the Commission stated:
“The future of direct payments to be granted to active farmers could be based on the following principles, taking up the concept proposed by the European Parliament:
Basic income support through the granting of a basic decoupled direct payment, providing a uniform level of obligatory support to all farmers in a Member State based on transferable entitlements that need to be activated by matching them with eligible agricultural land, plus fulfilment of cross-compliance requirements. An upper ceiling for direct payments received by large individual farms (“capping”) should be introduced to improve distribution of payments between farmers. Disproportionate effects on large farms with high employment numbers could be mitigated by taking into account salaried labour intensity.
Brian suggests that each worker employed on a farm in an LFA should attract an extra £5,000 of support. Headage payments for workers if you like! I think this has more chance of success in Brussels than the reintroduction of headage payments for livestock.
Having said that, the current cross compliance rules are ludicrously difficult to live with:
Under the Single Farm Payment and Less Favoured Areas Support Schemes, there is no distinction between errors which are the result of small administrative mistakes and deliberate errors attempting to defraud the system. It has become almost impossible for a livestock farmer to get through an inspection without a penalty.
Similarly, some farmers could face the prospect of losing their entire SFP and Less Favoured Areas Support Schemes payments because they have mistakenly claimed areas of vegetative cover (such as bracken and gorse) which, under a new interpretation of the regulations, are now deemed ineligible. Obviously, for clearly ineligible features such as roads and houses, the rules are clear. But for natural features such as vegetation, it is a matter of subjective judgement whether an area is eligible or not. Whilst the issue of interpretation of the rules and enforcement of eligible land is a matter for the Member State, the Scottish Government claims that its entire enforcement regime is being driven by EU auditors. This must be reviewed in the CAP reform, if not sooner.
There is no doubt that CAP reform will have to embrace some key principles:
• 1 Food Security
Richer nations need to ensure that they produce as much of their own food as possible. By reducing their dependency on the global marketplace, they will avoid contributing to escalating global commodity prices. The EU imports the equivalent of 35 million hectares’ worth of food (the size of Germany) every year; making Europe the world's largest food importer. So the reformed CAP needs to be strong enough to expand productive capacity at home while fair enough to encourage and support agriculture in developing countries.
• 2 Price Volatility
No country is immune to the effects of the world market. High summer temperatures in Eastern Europe have severely reduced harvest yields and consequently, this year Russia has imposed an export ban on all cereals. This ban has had a huge effect on global animal and human food prices. Wheat prices have jumped by 47% driving up the cost of food and feed. Animal feed prices have rocketed by over 60% since 2005 and ammonium nitrate prices by a staggering 73%. This is causing a massive crisis in the livestock sector and urgent help is needed. Indeed we debated this very issue this morning in Brussels in a full plenary session of the parliament.
Rising wheat prices might have been good news for grain farmers here in the North East of Scotland if it hadn’t been for the dreadful weather, leading once again to a washed out harvest. I once remember combining black, wet and mouldy wheat on Xmas Day (in 1985), so I know what it's like!
So rising, volatile, food prices will have an impact on consumers and producers at a time of austerity and cuts. Currently European consumers spend 13% of their disposable income on food (11% in the UK) and this is likely to rise as food prices soar. This in turn will drive consumers to look for cheap alternatives, so EU farmers will need to remain competitive.
• 3 Climate Change
The modern food industry has become a highly energy-intensive sector. Agriculture uses 70% of the world's water and is responsible for 14% of global greenhouse gas emissions. The food processing industry now has to compete with the biofuel industry as the demand for energy grows, again putting upward pressure on the cost of food commodities.
The long term trend will be for energy costs to go on rising, particularly in Scotland where the ‘renewables religion’ has lost all sense of proportion and will double or even triple our electricity bills.
This will impact on agriculture in that:
• Food and feed prices will continue to soar
• Farmers will cut back on costly inputs, thereby reducing overall food production
• Biofuel production will increase, further reducing the food supply and
• New technologies such as GMs will become more important.
• 4 Rural Degradation
Family farming is the basic model of European agriculture and is of vital importance to the EU economy, yet there are very few young people who want to take over the family farm. In 2009, the income of the average farmer was just 50% of the average for all workers in Europe. This is disgraceful. Currently, only 7% of EU agriculture holdings (4% in the UK) are operated by farmers under the age of 35.
But let’s look at what all of this means for the future of farming.
Increasing Demand -v- Decreasing Supply
The World Bank predicts that by 2030, food demand will double as the world population increases by an additional two billion people. An extra 6 million people are born every month. That’s like adding the population of Scotland every four weeks to the global tally. By 2030 the world population will have expanded by such an extent that we will require a 50% increase in food production to meet anticipated demand. By 2080 global food production would need to double.
But the reality is that global food production is declining rather than expanding. The world is losing an agriculturally productive area the size of the Ukraine (250 million hectares) each year due to climate change and spreading desertification. So how can we close the circle?
The UN Intergovernmental Panel on Climate Change has predicted that, over the next 100 years, a one-metre rise in sea levels would flood almost a third of the world's crop-growing land. Add to this the use of productive farmland to grow biofuels and the conversion of corn into bio-ethanol in the US, where they say the amount of maize required to fill the tank of a single family saloon would feed a human being for a year and you begin to see the impact that climate change is having on farming globally.
Europe’s farmers are well placed to provide solutions to many of these global problems. We have the land, we have the resources, we have the capacity and we have the scientific know-how to help us feed ourselves and feed the world. The one thing we don’t have is the political will. Instead of helping our primary producers to thrive, we place endless regulatory burdens in their way. For example, instead of developing GM technology, we have driven it out of Europe.
Biotechnology
Biotechnology will help to overcome the global shortage of grain and to counter the hunger riots in developing countries. Genetically modified foods offer a potential way out of this looming crisis, but the tabloid press and their ‘Frankenstein Food’ headlines and the Greens, have scared us into a zero-tolerance regime on GM foods, without due cause, across the EU. The recent decision by the European Commission to approve a GM potato crop was a case in point. The Greens went into a frenzy of rage. Meanwhile tens of millions of hectares of GM crops are being grown successfully across the world, mostly using EU technology, developed by EU scientists who have been driven into exile.
Genetically modified insect and disease resistant crops reduce the number of pesticide and herbicide applications. But instead of embracing biotechnology we deny our farmers access to its benefits, while handing a key commercial advantage to our direct competitors outside the EU.
EU policy in respect of GMs needs to be radically overhauled. We need to revisit our attitude to GM foods and accept that scientific advances in biotechnology offer a way to alleviate hunger in the poorest nations while at the same time reducing costs for our own EU food producers.
Red Tape and Markets
I believe we need to tackle the imbalance in power between the big supermarkets and food producers. The food chain is dominated by very few, very powerful retailers, yet on the supply side, farmers are widely dispersed and in a weak position.
We also need to reduce the regulatory burden on farmers, and we need to ensure that our primary producers operate on a level playing field with their competitors from outside the EU.
It is madness that we apply more stringent red tape and regulation to our own EU producers than we apply to our competitors outside the EU. Our farmers are bound hand and foot by red tape and yet we import vast quantities of foodstuffs produced under welfare and hygiene conditions that would constitute a criminal offence in the UK. The high cost of complying with all of this red tape is not reflected in the prices our beef farmers are getting for their cattle. British beef is now being sold well below the cost of production. Lowland suckler cow producers reckon they are losing around £260 per cow.
Cattle numbers in the UK have fallen dramatically from over 12 million in 1996 to just over 10 million today. We are only 66% self-sufficient in beef and the trend is downwards. It is a similar situation in the EU with a declining level of self-sufficiency and an increasing reliance on imports.
But our propensity for attacking our home producers to the direct advantage of non-EU competitors doesn't stop with the beef sector.
Our national flock in the UK has fallen in the past decade from 20 million to under 16 million sheep - still the biggest flock in Europe but not, I fear, for much longer. Lowland sheep producers say they are losing around £31 per ewe. So while we know that sheep play a vital role in environmental conservation on our hills and uplands and their socio-economic contribution is significant, yet we are witnessing their steady decline. The ludicrous EID proposals certainly didn’t help.
EID tagging
Most Scottish farmers are double-tagging their sheep, as is required, yet in certain cases, a single tag may be all that is needed. The slaughter derogation that is in place, allows a single electronic tag to be used for lambs that are intended for slaughter within a year of their birth. Many farmers have been confused over the new rules and have simply taken the safest route and double tagged all their animals, which is often an unnecessary cost.
On 20th October, A delegation from the European Commission and DG SANCO visited Newcastle to meet with UK industry representatives. NFUS took the opportunity to talk about their concerns around farm-inspections and cross-compliance. They called for the tagging requirements to change so they only need apply when an animal is leaving its holding of birth.
Many of the requirements are superfluous. They should just focus on identifying animals that are moving and ensure that these movements are properly recorded. The Regulation even requires the recording of deaths. Clearly dead animals are not a risk in terms of traceability and disease. Recording of deaths is a tool to support the running total of sheep on a farm and is not fundamental to traceability and should not be a trigger for penalties.
Animal Transport
New rules to protect animals during transportation entered into force in January 2007 in all 27 EU Member States. We fought and won approval for special derogations to be applied to longer journeys where it could be demonstrated that vehicle standards had been upgraded, to allow animals’ access to water, temperature control and adequate ventilation.
We argued that if a strict 8-hour maximum limit to journey times was applied without any derogation, it would effectively end sheep farming in places like Shetland, where the ferry crossing from Lerwick to Aberdeen takes 14 hours alone. It would also have had a disastrous impact on remote farming areas across Scotland.
Having won these arguments, I was dismayed when last year the Commission announced that they were about to publish yet another set of new regulations covering the transport of livestock to slaughter. After repeated protests, they have now, thankfully, temporarily shelved any idea of new regulations, at least until 2013. But an 8-hour maximum journey-time with no derogation is still a real threat.
In Scotland we can proudly proclaim that we have some of the highest welfare standards for the transportation of animals anywhere in Europe, or indeed anywhere in the world. But sadly, the rules have not been implemented with the same vigour elsewhere. There have been repeated exposés of animals subjected to cruel and gruelling long-distance journeys to slaughter, usually in countries in Eastern or Southern Europe.
I have repeatedly called for the European Commission to provide information on the level of compliance amongst Member States, arguing that tougher measures should be taken to ensure all countries comply with the rules in the same rigorous way that Britain does, rather than re-writing the regulations every two or three years. Those countries that break the rules should be named and shamed.
Dairy farming
According to a recent report commissioned by DEFRA, Scottish dairy farmers are among the most efficient in Europe. If this is the case, why is the mass exodus continuing? According to last year's DairyCo producer survey, 50% of dairy farmers worked more than 80 hours a week for less than £5 an hour. But there is still a crisis in the dairy industry with supermarkets price cutting savagely and dairy farmers struggling to survive with income that often doesn’t even meet the price of production. More and more dairy farmers are leaving the industry because the physical, technical and financial commitment is not recognised or consistent with the financial returns. 12,000 UK dairy farms have gone out of business since the year 2000. Against this background, we know that the removal of dairy quotas will take place in 2015, adding further uncertainty to an already uncertain business.
Scotland’s dairy producers and processors will need to strive for ever greater efficiency and innovation. There will need to be increased co-ordination between research, knowledge transfer and farmers and processors, to produce milk competitively and address the challenges of a competitive market and the demands of the public and the consumer.
So that is the current picture. It is a complex one and there are tortuous debates ahead in Holyrood, Westminster and Brussels. But if we are to secure a sustainable future for Scotland’s agricultural sector then we must give a high priority to protecting the interests of those who live and work in our rural areas. Only by so doing, can we hope to lead the world in producing high quality food in a healthy environment and a beautiful countryside while at the same time ensuring the future security of food supply to our citizens.
