Europe’s New Herd Mentality
European farmers used to fight globalization. Now, they are embracing it—and getting richer as a result.
Remember Jose Bove, European agriculture's old poster boy? The sheep farmer and antiglobalization activist who spent his time doing things like dismantling McDonald's stores was a folk hero among Europe's 13 million farmers for his fight against foreign food imports. Powerful farm lobbies—backed by the government of France—fought EU reforms designed to open up Europe's coddled and regimented agricultural sector to greater market forces. Now, as Europe's farmers see rising profits, many of the same agro activists are singing a very different tune. The German Farmers' Union, a well-connected lobbying organization whose functionaries long beat the same drum as the French for protection and subsidies, now says its members are eagerly embracing "global market freedom." Its president, Bavarian pig farmer Gerd Sonnleitner, praises the new era of supply and demand as "a second emancipation of the serfs." Rather than protesting in the Pyrénées against global trade, European farmers these days are seeking out new international markets for their products.
Not all that long ago, it was hard to use "European farmers" and "markets" in a single sentence, unless perhaps you included the words "dumping" or "distorted." Now, thanks to the global surge in the price of food and farm products (buoyed by a new emerging-market middle class), plus a series of important reforms to Europe's 50-year-old subsidy system, market forces that haven't been felt in ages are stirring in the continent's fields, barns and meadows.
The subsidy system still exists, but its worst absurdities do not. Largely gone are the days when EU bureaucrats in cahoots with national farm ministries set prices and paid billions to buy up excess production to be stored in Europe's legendary "wine lakes" and "butter mountains," later to be dumped on world markets at a price far below the cost of production. The total Europe spends on subsidies each year has been more or less frozen at near €43 billion, even though the EU has expanded from 15 member states to 27. Export subsidies for sugar, milk and beef have been pared back from about €10 billion per year in the 1990s to €2.4 billion in 2006, and may be phased out altogether by 2013. Crucially, as of 2004, most subsidies are no longer tied directly to the production or export of specific crops. Now, farmers have an incentive to grow only what's most profitable, not what will draw the biggest subsidy check.
As a result, farmers and food producers are shifting into areas where they can get the highest returns on the world market. EU exports are dropping rapidly in sugar, poultry, cereals and other raw or nearly raw goods. But rising shipments of finished products like sausage and ham have helped Europe soar past the U.S. to become the biggest agricultural exporter.
Exhibit A are dairy products: since the European Union drastically cut export subsidies, the EU's share of global trade in dried milk powder—a relatively cheap commodity used in food manufacturing or for baby formula—has plummeted from 50 percent in 1999 to 27 percent last year. Much of that European milk is now getting made into higher value cheese, a booming global market now that the growing middle classes of Asia, Russia and the Middle East have discovered a taste for fine Gouda, Parmesan and Camembert. With its strong brands and efficient supply chains, Europe has expanded its share of the global cheese trade from 35 to 42 percent since 1999.
Of all the major agricultural powers—including the U.S. and Brazil—the EU has become the least dependent on the sale of interchangeable bulk commodities (see chart), which can be grown more cheaply in the developing world. "It's incredible," says Pierre Bascou, head of the EU's farm trade unit. "You can just watch the markets kicking in."
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Member Comments
Posted By: Jberthelot @ 03/20/2008 7:19:09 PM
Comment: I have just added euro instead of the ??? :
The two authors give a false picture of the economic and political situation of the EU agriculture, based on two non representative cases of agribusiness farms and on the EU Commission's biased data on export subsidies.
1) If the present high agricultural prices are a bonanza for the EU-27 farmers (the income per agricultural worker has increased by 5.4% in 2007 after 3.3% in 2006), the subsidies still account for the bulk of their income. In France in 2006 the subsidies accounted for 83% of the disposable income of milk farms, 135% of that of bovine meat farms and 127% of that of "great crops" farms (cereals, oilseeds, pulses and sugar beets)
(http://agriculture.gouv.fr/sections/mediatheque/periodiques/notes-et-etudes-economiques/notes-et-etudes-economiques-n-25).
2) Despite the sharp drop in formal export subsidies, the level of EU dumping has not dropped as the increased domestic subsidies benefiting also to exports has more than compensated the lower formal export subsidies. Already, during the period 1995-2001, the average euro 1.673 billion in domestic subsidies to exported cereals have been 3.5% times higher than the average export refunds of euro 477 million. For poultry meat the euro 243 million in average domestic subsidies to poultry meat exports have been 3 times larger than the euro 83 million in export refunds. The euro 288 million in domestic subsidies to pig meat exports have been 2.3 times larger than the euro 128 million in export refunds. The euro 938 million of domestic subsidies to exported meat have also exceeded the euro 859 million of export refunds. And the euro 1.030 billion of domestic subsidies to dairy products exports have represented 60% of the euro 1.717 billion in export refunds. Knowing that most of these domestic subsidies to animal products exports were subsidies to domestic feed grains (http://solidarite.asso.fr/home/textes2006.htm).
3) On the political level, the main EU federation of farmers' organisations, COPA-COGECA, maintain an inflexible stance to defend the right of EU agriculture to feed the EU population and thus oppose a large reduction of agricultural tariffs and domestic subsidies (http://www.copa-cogeca.be/Main.aspx?lang=en&page=HomePage)
Posted By: Jberthelot @ 03/20/2008 7:11:24 PM
Comment: The two authors give a false picture of the economic and political situation of the EU agriculture, based on two non representative cases of agribusiness farms and on the EU Commission's biased data on export subsidies.
1) If the present high agricultural prices are a bonanza for the EU-27 farmers (the income per agricultural worker has increased by 5.4% in 2007 after 3.3% in 2006), the subsidies still account for the bulk of their income. In France in 2006 the subsidies accounted for 83% of the disposable income of milk farms, 135% of that of bovine meat farms and 127% of that of "great crops" farms (cereals, oilseeds, pulses and sugar beets)
(http://agriculture.gouv.fr/sections/mediatheque/periodiques/notes-et-etudes-economiques/notes-et-etudes-economiques-n-25).
2) Despite the sharp drop in formal export subsidies, the level of EU dumping has not dropped as the increased domestic subsidies benefiting also to exports has more than compensated the lower formal export subsidies. Already, during the period 1995-2001, the average ???1.673 billion in domestic subsidies to exported cereals have been 3.5% times higher than the average export refunds of ???477 million. For poultry meat the ???243 million in average domestic subsidies to poultry meat exports have been 3 times larger than the ???83 million in export refunds. The ???288 million in domestic subsidies to pig meat exports have been 2.3 times larger than the ???128 million in export refunds. The ???938 million of domestic subsidies to exported meat have also exceeded the ???859 million of export refunds. And the ???1.030 billion of domestic subsidies to dairy products exports have represented 60% of the ???1.717 billion in export refunds. Knowing that most of these domestic subsidies to animal products exports were subsidies to domestic feed grains (http://solidarite.asso.fr/home/textes2006.htm).
3) On the political level, the main EU federation of farmers' organisations, COPA-COGECA, maintain an inflexible stance to defend the right of EU agriculture to feed the EU population and thus oppose a large reduction of agricultural tariffs and domestic subsidies (http://www.copa-cogeca.be/Main.aspx?lang=en&page=HomePage)
Posted By: Aargh @ 03/20/2008 2:38:10 PM
Comment: "some will farm long after every economic signal tells them to stop" : as a customer, I do buy local product I know do not contain GM
contrary to the lesson your article professes, customers are more and more willing to defend traditional farming, placing their preferences towards clean, organic produces rather than merely thinking in terms of 'competitive'. We have witnessed the damages of junk food on health and society, many I know are very sensitive to the issue of GM food, crops diversity, agro-industries side-effets...