Farmers are also losers from these CAP decisions

The media mainly took note of the decisions in Brussels on the new subsidy bases for the Common Agricultural Policy (CAP) framed in terms of winners and losers. Farmers' organizations as winners. Nature and environmental organizations as losers. That image is wrong.

The more than €350 billion in income support for agriculture over the next 7 years will not solve the real problems in agriculture. Not only nature and the environment, but also farmers are the losers of the barely renewed old CAP policy because their rat race continues.

Markets
Farmers' income has to be earned mainly in the market. But because most markets are oversaturated, the prices of many agricultural products are too low. This overproduction then results in a weak position of farmers in the chain. Especially if they grow raw materials that are processed into consumer products by the food industry.

During my missions for PUMS I sometimes ask: "Do you produce what you can sell or do you sell what you produce?" As in the Netherlands, most farmers are focused on the latter. Little focused on potential market opportunities. Dutch agriculture has never put much effort into 'geographic indications', ie region-specific products that are recognizable in the market. And it is precisely those kinds of products that now have an advantage in trade agreements.

Low priority for top quality distinction
With its focus on commodities or bulk products, the Netherlands has given little priority to marketing distinctive, top-quality products. Compare it with the region-specific wines. Or with the antibiotic-free pork from Denmark. The Dutch Dairy Organization (NZO) was hesitant to clearly position low-fat cheese for fear that it would create the impression that fat cheese is not good. Of course, the umbrella organization also did this based on its conviction that 48+ cheese is not unhealthy at all.

But if consumers think differently and there is a 'market' for it, then you're crazy if you don't respond to it. 's Honeytomatoes Jos Looye and Tasty Tom tomatoes from Tony Jansen are good examples of introducing new segments based on consumer values.

Today's markets in Europe are only relatively capable of providing a reasonable income for a sufficient number of farmers. Given their role in the food supply, it is understandable that governments want to provide support. But if that is not done adequately, the question is whether that makes sense.

The CAP leads to lower prices
The renewed income support in the new CAP is motivated by the fact that many farmers are below the minimum income. From a European perspective, however, it appears that 80% of the money goes to 20% of the farmers. The allowances do not depend on income, but depend on the amount of land you have. As a result, the differences between large and small farmers are increasing.

In a report by the General Audit Chamber last year it appears that most of the money in the Netherlands goes to large farmers. Cor Pierik of CBS. notes that 6% of Dutch farmers now own 25% of the acreage and that this small group will acquire more and more arable land. The agricultural subsidies therefore flow to farmers who need them the least.

Ratrace marginalizes farmers' income
This group will receive additional resources for upscaling, intensification and land purchases. Because it is easier for them to buy land, they drive up the price of land. Their ability to expand production puts further pressure on saturated markets and price formation, impacting the 80% of farmers who receive little income support.

In this way, the rat race that marginalizes the farmer's income continues. Because the Netherlands mainly produces bulk products, extra production in the EU will put further pressure on prices. So the new CAP does not look after the interests of farmers as well as many farmers' politicians suggest.

Support disrupts market forces
So-called coupled support is still given for many products. Farmers who cultivate product A receive an extra income supplement. In this way, €170 million per year is paid to sugar producers in the EU for sugar. Extra production obviously puts sugar prices under pressure. Out research by WUR shows that as a result, the average price was almost 5% lower than without this support.

Every year, €3 billion is provided as coupled support for animal production. This also has a strong impact on meat and dairy prices in Europe. According to an recent research European livestock farmers could earn almost €1,5 billion more from the market by abolishing those coupled payments.

The CAP is therefore partly a cause of the low prices for farmers. In this way the low incomes in agriculture are maintained and the CAP funds do not provide a structural approach to those incomes. It must be noted that CAP funds are not a suitable instrument for tackling the income problems of the average farmers. The subsidies further deteriorate the farmer's income by disrupting the functioning of the market and further fanning the negative spiral.

This article is part of the content collaboration between Boerenbusiness en foodlog† In two parts, Joost de Jong, former policy official of the Dutch Ministry of Agriculture, gives his vision on the new framework for the Common Agricultural Policy of the EU. Tomorrow will follow part 2: 'The Netherlands can do great things with the agricultural money from Brussels'.

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