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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)
Europe’s New Herd Mentality
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The politics that have prevented the reform of these wasteful subsidies finally seem to be realigning too. It's easy, of course, for lobbyists like Sonnleitner to praise markets when they're blessing his clients with high prices. And farm groups in other big agro states like France and Spain are as opposed as ever to change. Yet lo and behold, a new generation of young, entrepreneurial farmers has grown up, critical of the old system and its defenders.
Consider Hubertus Paetow, a grain farmer in the North German village of Gnoin, who grows barley, winter wheat and rapeseed on 800 hectares. Investments in cutting-edge technology have helped him boost his wheat yield to 9 tons per hectare, far above the global average of 2.5. He just got back from a trip to Brazil, where he toured the booming Mato Grosso farm belt. He's not afraid of cheaper competition from abroad, and plans to buy more land back home. "They have lower costs in Mato Grosso, but have to lug their crop across 2,000 kilometers of bumpy roads to get to the nearest port," says Paetow, whereas his seaport is one hour away. Paetow's profits are way up thanks to a tripling of wheat prices since 2006, and technology is bringing his costs down. "I've cut my labor and machine input in half over the last ten years," notes Paetow. Could he live without EU subsidies? "Easily," he says.
Thanks to a new crop of muckraking European NGOs, more and more EU voters are also starting to see through the shroud of myth surrounding agricultural aid. Transparency groups like UK-based Farmsubsidy.org have dug up lists of subsidy recipients, showing that the biggest profiteers are actually corporate and aristocratic landowners such as Nestlé, Unilever, and the queen of England. In a sign of the changing public mood, Dutch EU Agriculture Minister Cees Veerman barely escaped having to resign in 2005 after his undisclosed subsidy income showed up on the list. New figures also show that 80 percent of the aid goes to the largest 20 percent of farms, exposing as a sham the argument that the system is needed to support small, traditional farmers. A fresh wave of outrage will likely come in 2009, when transparency holdouts Germany and France will be forced to finally publish their lists, thanks to a new directive from Brussels.
Time also seems to be helping reform. When the 12 new member states' farm and development subsidies are fully phased in, many of the richer Western European countries that used to be net beneficiaries of EU funds will have turned into contributors—at which point they'll be keener to contain costs. Crucially, that includes France, the biggest opponent of reform so far. There is also broad agreement among member states that the total EU budget should not exceed 1 percent of the bloc's total GDP. With the EU Commission and major figures such as German chancellor Angela Merkel and French president Nicolas Sarkozy all agreeing that the EU needs more spending on military security and regional development in the EU's unstable neighborhood to the south and east, it's hard to see how the EU's biggest and least justifiable budget item (34 percent of total expenditures) can escape unscathed. Last week, EU member Sweden, which holds the rotating EU presidency next year, became the first to call for the complete abolition of agricultural subsidies.
To understand the new entrepreneurial spirit taking hold among European farmers, take a look at Co-Op Farms. At 30,000 hectares, it's Britain's biggest farming operation. A decade ago, says general manager Christine Tacon, Co-Op only grew subsidized grain to be sold to commodities traders. "We had no idea where our products ended up," she says, "it was all speculative." Now, she gets a fixed check, and can grow whatever she wants, and how much she wants. "The subsidy has gone out of the equation."
As a result, Tacon has radically changed the business model for the €50 million-a-year farm. Today, says Tacon, the farm's entire production is grown to order; half of it now goes to supply the farm's own chain of Co-Op stores with produce such as potatoes and strawberries. Tacon has added pumpkins, onions and broccoli to the offerings, and set up a packing operation. Riding a huge wave of demand for locally sourced food, Tacon is researching new, better-tasting spuds and berries. She plans to invest in equipment she says will cut water use and raise productivity by a factor of three. Already, revenue is up by 25 percent compared with the pre-reform era.
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