The crisis in the agricultural sector

20-09-2016

Recent trends in agricultural commodity prices have been a subject of concern to policy-makers at both EU and national levels. The current common agricultural policy (CAP), for the period 2014 to 2020, represents one of the most market-oriented forms of European agricultural policy since its establishment. This has involved a shift away from price support to direct income support and rural development. However, running parallel with these changes, an analysis of price changes in the main agricultural sectors covering dairy, beef, pig meat, cereals, sugar, and fruit and vegetables shows a significant downward trend. In response, on top of the first €500 million support package presented in September 2015 and other measures, the Commission recently announced a new package of measures worth €500 million from EU funds to alleviate the crisis in the European agricultural sector, especially in the dairy sector. The latter includes incentives to reduce milk production, conditional adjustment aid and other technical adjustments, which also include advance direct payments and extensions to the period for public intervention and private storage for skimmed milk powder. A taskforce on agricultural markets has also been established and is expected to report later this year. According to the latest Commission short-term outlook for 2016-2017, dairy, meat, and cereal prices are set to remain low, due to ample supply, slow global growth, depreciation in competing currencies and ever-falling energy prices. It remains to be seen whether the package of measures will be effective. Any such assessment will help future policy considerations, including the most appropriate choice of policy instruments. Looking to the future, to overcome the cyclical and structural crisis, it will be essential to select and identify the most effective measures, or combination of measures, to promote the growth of the agricultural sector.

Recent trends in agricultural commodity prices have been a subject of concern to policy-makers at both EU and national levels. The current common agricultural policy (CAP), for the period 2014 to 2020, represents one of the most market-oriented forms of European agricultural policy since its establishment. This has involved a shift away from price support to direct income support and rural development. However, running parallel with these changes, an analysis of price changes in the main agricultural sectors covering dairy, beef, pig meat, cereals, sugar, and fruit and vegetables shows a significant downward trend. In response, on top of the first €500 million support package presented in September 2015 and other measures, the Commission recently announced a new package of measures worth €500 million from EU funds to alleviate the crisis in the European agricultural sector, especially in the dairy sector. The latter includes incentives to reduce milk production, conditional adjustment aid and other technical adjustments, which also include advance direct payments and extensions to the period for public intervention and private storage for skimmed milk powder. A taskforce on agricultural markets has also been established and is expected to report later this year. According to the latest Commission short-term outlook for 2016-2017, dairy, meat, and cereal prices are set to remain low, due to ample supply, slow global growth, depreciation in competing currencies and ever-falling energy prices. It remains to be seen whether the package of measures will be effective. Any such assessment will help future policy considerations, including the most appropriate choice of policy instruments. Looking to the future, to overcome the cyclical and structural crisis, it will be essential to select and identify the most effective measures, or combination of measures, to promote the growth of the agricultural sector.