CAP

The Common Agricultural Policy (CAP) is a Europe wide policy for agriculture and rural development. Originally focused on ensuring sufficient and efficient production through market regulation and support for farmers, it has been through a number of reforms in recent years.  Over the last twenty years there has been a steady shift away from support through markets to direct aid to producers. Over the last ten years this has been linked more with the provision of environmental benefits and development of rural communities.

The CAP does not have a direct impact on the flour milling sector but it does set the framework within which UK wheat growers operate. As a subsidy, it ensures the viability of the sectors in years when arable profitability is low.

The CAP is reviewed every seven years. The last CAP reform occurred in 2008 after the EU’s Agriculture Council carried out a ‘CAP Health Check’ to improve and reinforce previous reforms. It was during this Health Check that compulsory set-aside was abolished and the ratio of Pillar 1 (e.g. direct farm payments) to Pillar 2 (e.g. rural development) spending began to change.

The current reform is a two-part process, policy and budget, with these parts being closely related. This reform will run for a 7-year period between 2014 and 2020. There are complex interactions between these parts and adding to this is the overall climate of fiscal difficulties throughout the EU. One unique feature this time is that it is the first review following the Lisbon Treaty where the European Parliament (in addition to the Council of Europe’s Farm ministers) will have a major influence. The whole budgetary area is very contentious and it is likely that there will be a summit of Heads of State where multiple trade-offs will be made.

The Commission’s favoured reform would see direct payments, in the form of the Single Payment Scheme, continue but with an overall reduction. There will probably have to be some form of redistribution to give more to the newer members in Eastern Europe. This is likely to be a significant difficulty. Proportionately, spending on Pillar 2 is likely to increase. The CAP is also likely to be ‘greened’ to be made more environment and sustainability focused. The level of the UK rebate is also likely to be a major issue. Currently, Pillar 1 of the CAP uses approximately 34% of EU spending with Pillar 2 accounting for a further 9%.

More information on the CAP can be found on the NFU website, the Defra website and the CLA website.