Decoupling would secure significant income gains for EU farmers, writes the European Commission this week. The comment on the link between production and subsidy - so called 'decoupling' - is in response to the release of two new studies on the impact of the proposed reform of the Common Agricultural Policy (CAP).
According to the analysis, farm income would rise by 8.5 per cent compared to 2001 and EU-15 beef production would fall by 2.7 per cent over the medium-term, triggering a rise in prices for beef farmers of some 7 per cent by 2009.
"The studies clearly show that the reform will secure our farmers a higher income while gearing farm production away from surpluses towards less intensive and more sustainable farming," said Franz Fischler, Commissioner for Agriculture, Rural Development and Fisheries.
"Cutting the link between production and farm aids will not lead farmers to abandon their land or stop producing. Market orientation will improve as farmers would have the choice to produce what the consumers want not what the subsidies dictate to them."
The studies predict that the area used to grow energy crops would increase by 0.8-0.9 million ha of land previously allocated mainly to cereals. EU-15 cereal production would fall by around 2 per cent as cereal area would be constrained by the land allocated to energy crops, the rise in voluntary set-aside and the changes in the support level in this sector.
Rye, the sector where significant surpluses currently exist, and durum wheat would be the cereals most affected, with a 10 per cent decline in planted area.
On the topic of milk, the reports suggest that the proposed additional increase in milk production quota is projected to entail an equivalent increase in EU-15 milk production (2.0 per cent above Agenda 2000 levels by 2009).
The resulting rise in fat production and the proposed cut in the butter support price are expected to generate a corresponding fall in the butter market price (23 per cent compared to Agenda 2000 levels by 2009).
The Commission concludes that the declining attractiveness of the butter market would in contrast favour the production of cheese and fresh dairy products which would benefit from lower milk prices to satisfy a steadily growing demand.
In the CAP reform scenario milk prices in the EU-25 would drop by 10 per cent in 2009 compared to Agenda 2000 policies, while the decrease would hit 23 per cent in the EU-15.
No doubt the Commission hopes that the study results will serve to soften the more ardent opponents to CAP reform - primarily France.