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You say subsidy delivers food security

Subsidies should
be retained to protect national and regional food supply. This is the view from
more than half the farmers across the globe who gave views on the best purpose
of agricultural subsidy, in a poll led by Farmers
Weekly
.

But almost a
quarter of farmers called for subsidies to be scrapped, reflecting the wide
divergence of views across the world on a topic that polarises nations. Around
12% felt the role of subsidies is to stabilise consumer prices, while a similar
proportion chose environmental protection as their purpose.

So why is it that
more than half of the world’s farmers seek the secure shelter of subsidy,
rather than the meritocratic opportunity of an unfettered world trade?

“We have support
out of necessity, not desire,” states president of the English National Farmers
Union (NFU) Peter Kendall.

“We live in a
world where global markets are distorted, where Russia closes its doors to
wheat trade and the US supports its corn farmers. If we didn’t have an
agricultural policy in the EU we would become the world’s dumping ground for
surpluses.

“We should aspire
to get to a place where world and EU markets give farmers a fair return, and
work towards no subsidies.”

But with both the
US Farm Bill and Europe’s Common Agricultural Policy up for review, there’s
little talk of either moving away from subsidised farming. Food security is the
greater concern.

“We have a duty
towards our European citizens to provide for them quality, healthy food,” says
EU Farms Commissioner Dacian Ciolo
ş
.

“Feeding the
world will be a challenge in itself. It is a challenge that Europe has to be
ready to address, as part of the global response, but also because it is a
strategic security imperative for Europeans.”

With this
imperative in mind, CAP’s direct payments give EU farmers the confidence to
supply a hostile market place, argues NFU’s head of economics and international
affairs Tom Hind.

“The support offers
a degree of income stability against the inherent volatility in input and
output prices. It gives farmers the tools and instruments to manage these as
well as the abuse of power in the market place that is fundamentally
exploitative.”

It also
recognises the higher regulatory costs of food production in the EU, and
delivery of goods the market doesn’t pay for, such as environmental management
and social cohesion in rural areas, he points out. “But the best way to deliver
public goods is to pay farmers enough and encourage them to do it voluntarily.”

This policy puts
Europe on a subsidy fix, however, according to Lachlan McKenzie, chairman of
the Federated Farmers of New Zealand dairy section. The EU drags its own rural
economy down and distorts markets the world over, he says.

“If you want to
pay your farmers to keep your grass clipped and your hedges trimmed, fine. But
when our markets are distorted through subsidy, it hurts our economy hugely,
and that of third world subsistence economies even more.”

The NZ dairy
industry is a model for the world, he argues, creating wealth for the country
through exports around the globe. This has been borne out of necessity to
innovate and adapt the sector with no subsidy or market support.

“You scratch your
heads in Europe and wonder why you can’t get young people to stay in farming.
It’s because they look at your aging farmers getting pittance from their cows,
propped up by subsidy, and come over here to farm instead.

“The whole idea
of subsidy was to ensure sufficient food production, but was it successful?
Europe, like many countries, is now worried about food security. New Zealand
exports 95% of its dairy produce. We’ve got a long way to go before we run out
of milk.”

But a different
model works in Canada and stabilises consumer prices. Rather than operating a
free market, supply management sets dairy and poultry prices at a level that gives
farmers a fair return. It is a policy that’s soundly supported by both
consumers and processors, says Ron Bonnett, president of the Canadian
Federation of Agriculture.

“The whole idea
of supply management is inventory control, so there are no surpluses. It’s very
different to straight cash payments. Farmers as a group negotiate a price that’s
fair for everyone.”

It means the
Canadian dairy and poultry markets are closed to imports and consumer prices
for dairy, for example, are as much as 10% higher than across the border in the
US.

“It’s idealistic
to believe you can have a free market for everything – the bank collapse has
shown that. The market place is the solution, but farmers have to be given
negotiating power in that market place, not government cash.”

This cash should
be spent on protecting the environment, according to the UK’s Country Land and
Business Association. “Subsidies pay for what the market doesn’t provide for,”
says policy director Allan Buckwell.

“Protecting the
environment is a public good that markets cannot deliver. One could argue that
food security is also a public good, but subsidy is not the optimal solution to
deliver this.”

Polls apart

Partnering with
five leading publications across the globe, Farmers Weekly’s 2010 global poll
asked “What is the best purpose for agricultural subsidies?”

  • Protecting
    national/regional food supply – 52.58%
  • Stabilising
    consumer prices – 12.02%
  • Protecting the
    environment – 11.48%
  • No purpose -
    agricultural subsidies should be scrapped – 23.93%

Forum fervour

The FWi forum has
seen contributions from farmers across the world. Here’s a selection of views:


glasshouse

: The WTO banned production subsidies in 2004, and
look at the result: plummeting livestock numbers, a world grain shortage,
volatile prices of vital food supplies.

Twenty years of
acreage payments have decimated working farmers. Landlords and hobby farmers
are grabbing the cash, while real farmers go belly up.

Intervention buying
of grains will return, with a pricing mechanism similar to the guarantee we had
in the eighties. The necessities of life cannot be left to the market.


stop it

: The CAP, while not linked to production, still keeps many bad farms in
business. The crutch of subsidy is a blanket policy to keep all in farming no
matter what, stifling innovation and distorting the market.

This leads to
ludicrous situations, like the dairy market, where milk prices barely match the
commodity prices. Buyers know the producers, while losing money on the
production of milk, will always have the crutch of subsidy.

If that is
removed, the onus will be on the market to deliver a fair price. As the
supermarkets won’t want to be seen as responsible for the destruction of the
dairy industry, they will pay.


andyrobbo81

: Instead of spending the money on subsidy paid to
farmers, the funds would be better spent on market reform. For dairy farmers it
would be better to have greater access and, more importantly, access
independent from outside interests to these markets.

Farmer selling
groups that can effectively do this should be encouraged. With this would be
partial regulation that would cover all parties in the selling and buying
process to allow fair and robust negotiations from all sides.


old macdonald (near Castelo Branco, Portugal)

: The average holding in the EU is a great
deal smaller than the average holding in the UK. Those of us out here are
producing human food – olive oil, wine, goat meat, almonds. If you [scrap
subsidy and] push us peasants into the city, you in Britain will have to pay
for everything we need instead of just a little of what we need.


alidonwnunder (Canterbury, New Zealand)

: I remember vividly when subsidies were
removed here – interest rates climbed to 22% and prices dropped to such a
degree that we were squeezed in the middle.

Twenty five years
on, interest rates are around 7-8% and this year prices are increasing. There
have been huge capital gains on farms in the last 5 years and farmers have been
able to use this increased equity to borrow their way through the bad years.

Here we have no
subsidies, but we are not much different from farmers around the world. The
major change is that we are much more aware of world markets and exchange and
interest rates of our trading partners.

The internal
market is a bit different as the supermarkets tend to try to dictate price. So I
guess this is where NZ farmers are at an advantage as the biggest percentage of
our produce is exported.


Buffalo Billy

: There are far too many farmers who think they have
a duty to produce as much food as they can regardless of how much they are
losing. Farmers need to raise their expectations dramatically.

Instead of being
satisfied with a few pounds profit per tonne we should take a leaf out of
Duncan Bannatyne’s book – he doesn’t invest in any business that doesn't make
30 % return per year. Bearing in mind how essential farming is to the public,
that level of return should not be unrealistic for us.

We have to
recognise that food has become too cheap and it is only by cutting supply that
we can raise prices to a sustainable level and rid ourselves of subsidies. Then
we can hold our heads high!

By Tom Allen-Stevens

Tom Allen-Stevens farms near Oxford, England, and writes for
UK’s Farmers Weekly.

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