Future directions of EU agricultural policies The CAP towards 2020

1. Future directions of EU agricultural policiesThe CAP towards 2020 Tassos Haniotis, Director Economic Analysis, Perspectives and Evaluations DG for Agriculture and Rural Development European Commission ABARES Outlook 2011, 2 March 2011

2. Outline 1. The objectives of CAP reform 2. The context of CAP reform 3. The CAP at a glance 4. Policy challenges and options 5. Next steps Haniotis - ABARES Outlook 2011

3. CAP reform objectives at a glance Future challenges Economic challenges Environmental challenges Territorial challenges • Food security • Price volatility • Economic crisis • GHG emissions • Soil depletion • Water/air quality • Habitats/biodiversity • Vitality of rural areas • EU rural diversity • Regional growth CAP2020 reform objectives Sustainable management of natural resources Balanced territorial development Viable food production Equity and balance of support Contribution to Europe 2020 strategy Haniotis - ABARES Outlook 2011

4. The wider context of CAP reform The future of the CAP is debated within the context of: • A cost-driven commodity price boom • the “baseline” to assess the impact of potential policy changes is full of major uncertainties, mostly of uncertainties outside agriculture • A new set of EU institutional realities • co-decision after the Lisbon Treaty increases the role not just of the EP in the decision process, but also of the wider public in the consultation process • A parallel process of multiple EU policy decisions • CAP reform is linked to the debate about the future EU budget and the wider EU 2020 strategy of “smart, sustainable and inclusive growth” Haniotis - ABARES Outlook 2011

5. Real commodity prices Haniotis - ABARES Outlook 2011

6. Energy and agricultural prices Agriculture + 50 % Energy + 223 % Source: World Bank. Haniotis - ABARES Outlook 2011

7. Price developments in the EU food chain FOOD PRICE CRISIS PRODUCER LAG RETAIL LAG DEJA VU? Agricultural commodity prices Food consumer prices Food producer prices Overall inflation (HICP) Source: European Commission – DG Economic and Financial Affairs, based on Eurostat data Haniotis - ABARES Outlook 2011

8. EU agricultural prices Source: Eurostat Haniotis - ABARES Outlook 2011

9. The policy outcome of CAP reform…CAP expenditure and CAP reform path (2007 constant prices) EU-10 EU-12 EU-15 EU-25 EU-27 Source: European Commission - DG Agriculture and Rural Development Haniotis - ABARES Outlook 2011

10. …and its market impact Sources: European Commission – Eurostat and DG Agriculture and Rural Development Haniotis - ABARES Outlook 2011

11. The evolving role of EU support prices - wheat Sources: European Commission- DG Agriculture and Rural Developmentand World Bank Note: years are market years July-June. 2010* = average July 2010-January 2011. Haniotis - ABARES Outlook 2011

12. The evolving role of EU support prices - SMP Sources: European Commission- DG Agriculture and Rural Developmentand World Bank Haniotis - ABARES Outlook 2011

13. Markets Modulation The CAP today – budget relevance Pillar I Direct payments Pillar II Rural Development Haniotis - ABARES Outlook 2011

14. Direct payments Markets Income Price volatility Food chain issues Basic rate GAEC Market instruments Other criteria Structural adjustment Rural development Public goods Innovation Environment Territories The CAP today – policy relevance Economic crisis Climate change Budget Haniotis - ABARES Outlook 2011

15. Drivers of the broad CAP reform policy options • Continue the gradual reform process • Adjust the most pressing shortcomings (e.g. more equity in the distribution of direct payments) Option 1 • Capture the opportunity for reform • More sustainable and balanced CAP (between policy objectives, MS and farmers) • More ‘green’ targeted measures Option 2 • More fundamental reform • Focus on environmental and climate change objectives through rural development • Move away from income support and most market measures Option 3 Haniotis - ABARES Outlook 2011

16. Main priority the “greening” of the CAP Enhanced cross compliance Haniotis - ABARES Outlook 2011

17. The debate about policy instruments Better targeted to objectives Based on two pillar structure Direct payments Market measures Rural development • Redistribution • among MS • within MS • Redesign • basic uniform rate • “greening” of direct payments • coupled support provisions • Better targeting • areas with specific natural constraints • capping payments • small farmers • Continue market orientation • Streamline and simplify safety nets • Improve food chain functioning • Main guideline themes • environment • climate change • innovation • Improvements in • coherence with other policies • delivery mechanisms • Address risk management • New distribution criteria Haniotis - ABARES Outlook 2011

18. Average direct payments per potentially eligible area and beneficiaryDirect payments net ceilings fully phased-in (in 2016) Source: European Commission - DG Agriculture and Rural Development Haniotis - ABARES Outlook 2011

19. Next steps Inter-institutional debate on the Commission Communication Preparation of Impact Assessment (IA) • In-depth Commission analysis of new policy settings, options and their economic, social, environmental and administrative impacts • Stakeholders consultation: analytical contributions from stakeholders based on a Consultation document Preparation of Legal Proposals Legal proposals presented in 2011 Haniotis - ABARES Outlook 2011

20. Thank youhttp://ec.europa.eu/agriculture/cap-post-2013 Haniotis - ABARES Outlook 2011