Agri-food policy reform in UK and EU may raise prices, farmers warn

01-Dec-2020 - Last updated on 01-Dec-2020 at 16:44 GMT

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It is hoped British agriculture will be transformed by the ‘biggest farming shake-up in 50 years’. But there are fears that both Britain’s move to cut farmer subsidies as it leaves the EU Common Agricultural Policy, and the EU’s reform of the CAP, could impact prices for manufacturers and end consumers.

The UK government has announced a seven-year transition plan to phase out how the the £1.6bn subsidy English farmers receive from the European Union coffers every year is calculated. Rather than following the EU's subsidy system, which bases its calculations on the amount of land under cultivation, the British government says the funds will instead be used to pay farmers to be greener. To, among other things, restore wild habitats, create new woodlands, boost soils and cut pesticide use.

The move comes as the UK prepares for life outside the EU, no longer bound by the EU’s ‘bureaucratic’ Common Agricultural Policy (CAP).

The government hopes the move will lure entrepreneurs with new ideas for more productive and sustainable farming. Farmers will, for example, get grants to improve productivity and animal welfare, including new robotic equipment. From 2022, producers will also benefit from an increased investment in agricultural Research & Development that will enable more farmers and agri-food businesses to drive innovation.

The ultimate goal is to allow farmers, in seven years time, to produce healthy and profitable food in a sustainable way and without subsidies.

In a speech to farmers and environmental groups at the Oxford Farming Conference , Environment Secretary George Eustice said: “We want farmers to access public money to help their businesses become more productive and sustainable, whilst taking steps to improve the environment and animal welfare, and deliver climate change outcomes on the land they manage.

“Rather than the prescriptive, top down rules of the EU era, we want to support the choices that farmers and land managers take. If we work together to get this right, then a decade from now the rest of the world will want to follow our lead.”

Environmental groups welcomed the announcement but said more details were needed. Helen Browning Chief Executive at the Soil Association said: “We welcome this update on immediate next steps for farm policy, though at this stage the downside and exit routes for farmers are more detailed than any future schemes which may provide financial support. It’s heartening to see the wind of change in DEFRA and the commitment to engagement and co-design of future incentives and support.”

But, while Eustice has insisted food prices would “remain broadly stable”, farmers have warned that the move could raise production costs.

The National Farmers' Union (NFU) estimates farmer incomes could fall between 60% and 80% by 2024 as a result of the reduction in subsidies. NFU President Minette Batters said that while her “absolute focus is making sure that we have profitable thriving farming businesses that are producing climate-friendly food that ultimately can deliver what the public wants,” the funding gap will leave many farmers in a precarious position. “Expecting farmers to run viable, high-cost farm businesses, continue to produce food and increase their environmental delivery, while phasing out existing support and without a complete replacement scheme for almost three years is high-risk and a very big ask,” she pointed out.

The balance between costs and sustainability is also being played out in the EU as it attempts to agree on a final text for the post-2020 CAP, alongside its Farm-to-Fork and Biodiversity strategies.

Europe’s farming lobby Copa and Cogeca is complaining a risk assessment has yet to be carried out over concerns about prices being passed on to consumers and trading partners.

It has cited the US Department of Agriculture’s first impact assessment on the Farm to Fork and Biodiversity Strategies, which warns the EU could face food insecurity and a rise in consumer food prices.

The USDA concluded: “Under all scenarios, we found that the proposed input reductions affect EU farmers by reducing their agricultural production by 7 to 12 percent and diminishing their competitiveness in both domestic and export markets. Moreover, we found that adoption of these strategies would have impacts that stretch beyond the EU, driving up worldwide food prices by 9 (EU only adoption) to 89 percent (global adoption), negatively affecting consumer budgets, and ultimately reducing worldwide societal welfare by $96 billion to $1.1 trillion, depending on how widely other countries adopt the strategies. We estimate that the higher food prices under these scenarios would increase the number of food-insecure people in the world’s most vulnerable regions by 22 million (EU only adoption) to 185 million (global adoption).”

Pekka Pesonen, Copa and Cogeca Secretary General, said it was high time that the Commission published its own comprehensive impact assessment. “Such an impact assessment and its conclusions will probably balance the current debate around the CAP, forcing us to look at the complexity of the sustainability equation and will help in working towards concrete solutions for the environment, for consumers and for farmers and their cooperatives.”