Addressing the Conference on behalf of the EU Commissioner for Agriculture, Mr. Haniotis placed the reform of the EU Common Agricultural Policy (CAP) in the context of the present difficult farm commodity situation. He said that hardly a day goes by without reference to commodity price movements. There has always been price variability in agriculture but the magnitude of this variability is causing concern since it is giving distorted market signals. He noted the double squeeze on farm income which was most evident in the dairy sector. What kind of response was needed from the EU? In the short term, Mr. Haniotis recalled that market measures are available under the CAP. However, 90 percent of EU farm support is now decoupled from production and given as direct payments to producers. Direct payments are not enough in times of market crisis and product safety nets must come into play.

For the post 2013 CAP, there is a public debate in the EU on whether direct payments should be linked to the delivery of public goods (e.g. environmental services) or be paid as basic income support. After 2013, direct payments will have to be un-linked from the historical situation. However, the large price swings over the period 2007-2009 show the need for also having modern safety net programs and market measures.

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