Questions and answers with the president of ICOS, Martin Keane

With Irish farmers and co-ops facing into the unprecedented challenges of Brexit, climate change and global market volatility, they need sufficient CAP financing and effective market support and risk management tools, according to ICOS, which represents the dairy processing and national livestock mart co-ops.

With Irish farmers and co-ops facing into the unprecedented challenges of Brexit, climate change and global market volatility, they need sufficient CAP financing and effective market support and risk management tools, according to ICOS, which represents the dairy processing and national livestock mart co-ops.

“This will provide much needed market stability and will enable farmers meet the outlined goals, including ambitious environmental targets,” said ICOS President Martin Keane.

Reacting to the European Commission’s communication on the “Future of Food and Farming”, he said ICOS opposes mandatory capping and degressive direct support payments, and called for the role of co-ops as the most effective producer organisation, to be enhanced.

“The CAP can help promote the development of a European futures market. This would be a key tool that co-ops could use to manage volatility, through financial hedging.”

Here, we continue our guide to the CAP plans unveiled at the end of November.

How can we ensure that the future CAP will be fairer and that smaller and medium-sized farms will get the support they need?

In 2015, the first year of implementation of the last CAP reform, 20% of farmers received around 80% of direct payments. This raises understandable concerns of economic efficiency and social equity in the public debate.

In fact, this reflects the concentration of land and the nature of the support, which is largely area-based. Furthermore, more than half of its beneficiaries are very small farms and most of the payments (72% in 2015) go to medium-size professional (family) farms (from 5 to 250 ha) who manage most of the EU agricultural land (71%) hence are the main responsible for the delivery of public goods and environmental benefits.

Still, the Commission is committed to explore ways to further target direct payments more effectively and ensure a fair and better targeted support of farmers’ income across the EU, as evoked in the Reflection paper on the future of EU finances.

The following non-exhaustive list of possibilities should be further explored:

* A compulsory capping of direct payments taking into account labour to avoid negative effects on jobs;

* Degressive payments could be introduced as well, as a way of reducing the support for larger farms;

* Enhanced focus on a redistributive payment in order to be able to provide support in a targeted manner e.g. to small-medium sized farms;

* Ensure support to genuine farmers, focussing on those who are actively farming in order to earn a living.

Will farmers be treated equally across the EU?

At the same time as the CAP is ensuring that support is targeted to genuine farmers, focusing on active farmers in order to earn their living, it also needs to play its role in following the principles of “Equality between its members, big or small, East or West, North or South”, which were recalled by President Juncker in his State of the Union address of 2017. In this sense, it should reduce differences between member states in CAP support. Even if the wide diversity of relative costs of labour and land as well as the different agronomic potentials across the EU should be acknowledged, all EU farmers face similar challenges as to market volatility, the environment and the climate.

What is the role of the CAP to promote rural prosperity?

The CAP is not only acting on the farming sector, but helps boosting local rural economies and enhancing rural prosperity; e.g. setting up an artisan’s business. New jobs’ opportunities and increase of growth potential can appear in rural areas through support of new rural value chains such as clean energy, the emerging bio-economy, the circular economy and ecotourism, investments in infrastructure, natural and human capital, including vocational training, programmes for new skills, quality education and connectivity. ‘Smart villages’, as a new concept, will help communities tackle issues of inadequate infrastructures and job opportunities.

How can the Commission encourage the setting-up of young farmers and generation renewal in the sector?

Generational renewal should become a priority in a new policy framework, but member states are in the best position to stimulate generational renewal using their powers on land regulation, taxation, inheritance law or territorial planning. The CAP should give flexibility to member states to develop tailor made schemes that reflect the specific needs of their young farmers. The CAP strategic plans could include support for skills development, knowledge, innovation, business development and investment support. The CAP should also help mitigate this risk in the first years after launching a farming business by providing an EU-wide system of support to the first installation.

Access to financial instruments to support farm investments and working capital should be facilitated and better adapted to the investment needs and higher risk profiles of new entrants. Support to the new generation of farmers could be combined with the appropriate incentives to facilitate the exit of the older generation and the transfer of knowledge among generations as well as to increase land mobility and facilitate succession planning.

Why does the CAP need to support innovation? What is the rationale?

Agriculture and our rural areas face a number of challenges for which new solutions need to be found. We need better advice and more innovation. Public involvement in research and innovation is necessary to bridge the gap between rural areas in demand of digital innovations and better connectivity and providers of new technologies.

For example, sensors could detect and prevent poor health in animals early on and reduce the need for treatment. Real-time access to information about sunlight intensity, soil moisture, markets, herd management and more provides for better and faster decisions by farmers.It makes sense to cooperate on research an innovation at EU level. By learning from each other in different parts of the EU we will develop better knowledge and will adopt innovation faster.

When facing volatility and market crisis, what kind of support can the farmers expect from the future CAP?

Be it sanitary or phytosanitary crises, climate change events or market volatility, farmers face high risks and pressure on incomes. The Commission has always and will always stand by farmers, as evidenced by the two latest solidarity packages each worth €500m, but the higher frequency of risks calls more a more systematic approach. Farming needs an adequate framework for risk management, which combines EU-level support with member states’ national tools and private sector instruments.

For example, the possibility to set up a sector-specific income stabilisation tool, with lower loss thresholds to trigger compensation, is expected to make it more attractive for both farmers and administrations. At the same time, a careful assessment needs to be carried out as to whether new tools or types of support should be introduced. In this context, cooperation among farmers and along the food chain should be fostered, including mutualisation and integrated services, for risk sharing purposes.

What will the EU’s platform on risk management entail?

The limited awareness of farmers and other stakeholders of the available tools and their relative lack of experience in implementing them has been one of the main barriers to the uptake of risk management instruments in the last few years.

The EU-level platform on risk management will be a platform for farmers and public authorities to research institutes and private sector players (ex. insurance companies) to share knowledge and exchange best practices.

The Commission will be involved as a facilitator and will develop the platform on a dedicated website. Under the platform, expert groups, working panels, seminars and events will be organised around risk management topics, e.g. loss calculation using index-based systems. Plus, it will offer the possibility to gather together private or public initiatives on local risk management and work in other policy fields, e.g. climate change adaptation, agro-meteorology, etc.

Why should the CAP stimulate investments and how can financial instruments support farmers?

A flexible CAP investment tool is essential to support competitiveness, innovation, climate change adaptation and mitigation and ultimately the sustainability of agriculture and rural areas.

Modernising a farm, setting up new technologies, renovating irrigation systems are all actions that require a lot of frontload money and are substantial financial efforts that farmers cannot be expected to do all on their own. The public funds available for grants are not sufficient to address the growing investment needs of the sector. Rough estimations show that the market gap for financing agriculture is between €1.6 and €4.1 billion for short-term loans, and between €5.5 and €14.8 billion for long-term loans.Financial instruments, such as loans, guarantees and equity funds, can ease access to finance for those farmers (e.g. small holders, new entrants, etc.) or agri-food producers, who find it difficult to obtain the necessary funds to either enter the business or develop it. By bringing together EU and private funding, they shall have a multiplier effect, i.e. increased investment volumes (leverage).

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