"Government and the European Commmunity are the biggest influences on what farmers produce in Britain."
Do you agree with this statement?
Give detailed reasons for your answer
In Deep
1 month ago
Showing posts with label CAP. Show all posts
Showing posts with label CAP. Show all posts
Thursday
CAP
Farm Reform
a. CAP system of farm support has been contentious issue for years
b. The Common Agricultural Policy is regarded by some as one of the EU’s most successful policies, and by others as a scandalous waste of money.
c. EU spends about £34bn annually on the CAP; about 88% of it in direct aid. The rest is market price support - public purchases to protect farmers from a drop in world prices. 7.7bn euros is spent on rural development.
d. 20% of CAP funds go to France; the UK gets 9% of total EU farm support
e. New EU member states began receiving CAP subsidies in 2004, but at only 25% of the rate they are paid to the older member states.
f. Many attempts at reform over the years
g. CAP is crucial and controversial in terms of EU’s trading relationships with many developing countries
h. For the UK farming accounts for less than 1% of GDP (by value added)
i. Share of GDP is higher for new EU members e.g. Bulgaria and Poland
Past failures of CAP (this is government failure in action!)
1. Production inefficiency and surplus: Intervention prices encouraged excess production which led to a misallocation of scarce resources.
2. Big business ‘factory farming’ has led to problems with food safety and animal welfare and has contributed to deforestation / reliance on imports of cheap soya
3. Huge financial cost for the EU Budget - still > 40% of total spending – subsidies that could have been better spent elsewhere
4. Damage to the environment as farmers searched for higher production yields
5. Consumer welfare hit by higher food prices (trade diversion) regressive effect on lower income families where food is a higher % of total spending
6. Damage to export industries of many LDCs – e.g. dumping / EU export subsidies
7. Many farm support programmes benefited larger scale wealthier farmers most
Key reforms
1. Set-aside: Designed initially to reduce surpluses and protect the environment
2. Decoupling: A single farm payment independent from production
3. Reductions in guaranteed prices (e.g. 36% cut in guaranteed price for sugar) and an end to intervention buffer-stock schemes for products such as butter
4. Farm income payments conditional on EU farmers meeting agreed standards of environmental care, food safety & animal welfare (known as cross compliance).
5. Reduction in payments to bigger farms (known as “modulation” and “digression”) to help transfer funds to EU rural development programmes
6. Incentives to encourage farmers to switch towards organic farming
7. Incentives for farmers to move away from food production and diversify
8. Move to allow food prices to be set by global forces of supply and demand.
Source: www.tutor2u.net
a. CAP system of farm support has been contentious issue for years
b. The Common Agricultural Policy is regarded by some as one of the EU’s most successful policies, and by others as a scandalous waste of money.
c. EU spends about £34bn annually on the CAP; about 88% of it in direct aid. The rest is market price support - public purchases to protect farmers from a drop in world prices. 7.7bn euros is spent on rural development.
d. 20% of CAP funds go to France; the UK gets 9% of total EU farm support
e. New EU member states began receiving CAP subsidies in 2004, but at only 25% of the rate they are paid to the older member states.
f. Many attempts at reform over the years
g. CAP is crucial and controversial in terms of EU’s trading relationships with many developing countries
h. For the UK farming accounts for less than 1% of GDP (by value added)
i. Share of GDP is higher for new EU members e.g. Bulgaria and Poland
Past failures of CAP (this is government failure in action!)
1. Production inefficiency and surplus: Intervention prices encouraged excess production which led to a misallocation of scarce resources.
2. Big business ‘factory farming’ has led to problems with food safety and animal welfare and has contributed to deforestation / reliance on imports of cheap soya
3. Huge financial cost for the EU Budget - still > 40% of total spending – subsidies that could have been better spent elsewhere
4. Damage to the environment as farmers searched for higher production yields
5. Consumer welfare hit by higher food prices (trade diversion) regressive effect on lower income families where food is a higher % of total spending
6. Damage to export industries of many LDCs – e.g. dumping / EU export subsidies
7. Many farm support programmes benefited larger scale wealthier farmers most
Key reforms
1. Set-aside: Designed initially to reduce surpluses and protect the environment
2. Decoupling: A single farm payment independent from production
3. Reductions in guaranteed prices (e.g. 36% cut in guaranteed price for sugar) and an end to intervention buffer-stock schemes for products such as butter
4. Farm income payments conditional on EU farmers meeting agreed standards of environmental care, food safety & animal welfare (known as cross compliance).
5. Reduction in payments to bigger farms (known as “modulation” and “digression”) to help transfer funds to EU rural development programmes
6. Incentives to encourage farmers to switch towards organic farming
7. Incentives for farmers to move away from food production and diversify
8. Move to allow food prices to be set by global forces of supply and demand.
Source: www.tutor2u.net
Sunday
Common Agricultural policy
To maintain price the government intervenes and buys up the excess supply of 20 units at £3 each, and stores the unsold produce. Intervention costs £3 x 20 units plus the cost of storage. This theory is behind the operation of the EU Common Agricultural Policy (CAP).
Note the impact of minimum price depends on:
- The difference between the market and minimum price
- The price elasticity of supply and demand for the product
Use elasticities to quantify effects. A similar diagram is used to illustrate the effect of EU wide minimum wage legislation. NB: Minimum price has no impact if the equilibrium price is higher than the minimum
Other points to note:
- CAP has ensured adequate supplies but it has incentivised farmers to produce more
- CAP is the single biggest item in the EU budget and is costly to administer
- CAP is a significant obstacle to WTO negotiations to reduce world wide tariffs
The Common Agricultural Policy (CAP) encourages output maximisation. Farmers adopt intensive farming techniques which see traditional small holdings merged into large super fames with the loss of hedgerows and natural habitats for wild animals.
Agricultural economist, Jules Pretty (University of Essex) estimates that the annual external cost of intensive farming in the UK is £2.3 billion on an ex post basis for cleaning up pollution & repairing habitats.
The above is an extract from here. Click here to read the full post.
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