The House of Lords EU Committee has today published a report investigating what needs to be done to boost the resilience of the farming sector in the face of challenges such as volatile prices.
It calls on the European Commission to reform the Common Agricultural Policy (CAP) to primarily support the provision of public goods, such as increased food security, high animal welfare standards and stewardship of the land.
The Committee says that the delivery of such public goods should be the main objective of support from the CAP budget granted to farmers.
It 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 argues that price volatility is a normal market risk to be managed by farmers, and that it is no greater now than in the past.
The Committee argues that 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.
In the long term, however, policy should focus on building farmers’ resilience and capacity to manage risks.
The Committee found that subsidised insurance schemes should not replace the current system of Direct Payments to support farmers’ incomes.
It concludes 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.
'Time for the Common Agricultural Policy to be reformed'
Commenting Baroness Scott of Needham Market, Chairman of the Committee, said: "Farmers across the EU do a vital job in ensuring the safe supply of food, managing the land and contributing to the wider rural economy.
"They do so in the face of risks including price volatility and unpredictable political decisions.
"Evidence we received suggested it is time for the Common Agricultural Policy to be reformed to more fully recognise the holistic service farmers provide for society by directing funding towards the provision of public goods, including environmental management, food security and stewardship of the land.
"We believe that income support for farmers in the UK and in the wider EU should continue as the conditions for agriculture are more challenging than in many other major producing countries. Nevertheless, public money should not be used to simply prop up inefficient farmers.
"Direct Payments still have a role to play and we do not propose a move to a US style insurance based approach.
However, there is a real risk with the pronounced focus on blanket income support, as opposed to more targeted subsidies, that innovation is stifled and new farmers are discouraged from entering the industry.
"Last year we saw catastrophic flooding in parts of the UK which caused real hardship for farmers in the affected areas.
"One-off support packages can help farmers through such episodes beyond their control, but a long-term policy should focus on building the sector’s resilience to withstand a wide range of risks including low prices.
"Our inquiry found that better business skills are key to competitive farm businesses."
Government must 'respond positively' to House of Lords report
The Tenant Farmers Association has welcomed the report, stating it has identified a number of 'unique issues faced by the tenanted sector of agriculture'.
TFA Chief Executive George Dunn said: "These issues being the costs of negotiating rent reviews, short lengths of tenancy term and issues with landlords being unwilling to grant consents for farm diversification.
"All of these issues enhance the vulnerability of tenant farmers to price volatility in comparison to their owner occupier colleagues.
"Agriculture is a capital intensive business which needs investment and short lengths of term are hampering the sustainable development of many farm businesses based on tenancies.
"Through the TFA’s FBT10+ campaign the TFA has been arguing for changes in the taxation environment within which landlords make decisions to encourage longer term tenancies building in a greater degree of resilience to tenanted businesses within agriculture and their ability to invest.
"We would therefore urge the Government to respond positively to the House of Lords recommendation.
"Although the TFA has had useful discussions with the Treasury we have yet to see any willingness on the part of the Chancellor of the Exchequer to bring forward suggestions or proposals for how long term security within the tenant farming sector could be encouraged through the use of fiscal levers.
"This report from their Lordships underlines the importance of addressing this issue without further delay.
"We know the Government understands the need for business investment and growth but if tenant farmers are not provided with a good level of security they will not be able to contribute to the wider economic growth goals of the Government," said Mr Dunn.
