Why Europe Still Loves Farm Subsidies

How many times have you heard U.S. politicians tell you ‘we don’t want to be like Europe,’ with their over regulated industries, high taxes and socialized healthcare? Well, in agriculture it appears the Europeans have something figured out that we have not. Get along with consumers and they may still be willing to pony up for farm subsidies.

That's one thing that became clear after talks with ag leaders at Green Week, the world’s largest consumer show for agriculture and food, held each year in Berlin. It's huge: Over 400,000 people were expected to drop by over 10 days to enjoy food samples from some 1,600 vendors from 59 countries . About 10,000 people were there just to cook and serve the food. It is being held at Berlin’s massive ICC exhibition hall, a 22-acre indoor fairground so vast you could go in one day and be lost for a week without ever seeing daylight. So, it’s a good thing there was a food show going on. Getting lost is not such a bad thing.

Of course, these 'unwelcome' reports always seem to surface right when Green Week comes along, probably because around 5,000 reporters show up for this gig.

Like-minded

It appears that, whatever controversies arise in Europe’s food sector, farmers always appear to be on the same side as consumers. “Antibiotics should never again be used in a careless way, and the federal and state authorities want to assist in setting up an effective monitoring system,” Sonnleitner reassured reporters. “We have nothing to hide with regard to this matter.”

The animal welfare folks have also found a friendly partner with German farmers. Sonnleitner says that farmers want to abandon pig castration and de-beaking of poultry, and de-horning calves “should be avoided wherever possible.” Likewise, “we are not happy with the continued use of battery cages for laying hens in 12 member countries of the EU.”

Meanwhile, the EU is trying to reform its Common Agricultural Policy (CAP) by next year. Here’s where that friendly connection between farmers and consumers seems to be paying off.

While direct payments in our country will likely get the axe in the next farm bill, no such cuts are expected in the EU. From my talk with the European journalists at my International Federation of Agricultural Journalists meeting, it became clear that, despite Europe’s very real debt crisis, there seems to be no real movement to cut farm spending in the cap, which accounts to upwards of $75 billion, or 45% of the EU budget (by contrast the U.S. farm spending is less than 1% of U.S. federal budget).

Roger Waite, communications director for the European Commission, explains that direct payments to Euro-farmers takes 70% of the CAP budget and will continue, but, it’s politically sensitive. “The fundamental problem is the poor justification of direct payments in their current state,” he says.

Sound familiar?

Europe’s direct payments were initially introduced years ago as a way to make up for cuts in other farm payments. In 2003 the EU moved to decoupling of direct supports. “But now when we try to explain to the tax payer why one farm receives this much and not that much it’s a little complicated,” says Waite.

That’s why the CAP reform folks are trying to push a new plan that would split direct payments into a system where farmers get paid to do certain environmentally-friendly practices – the so-called ‘greening’ concept, which includes controversial setaside programs.

“It’s important that taxpayers know that farmers are making choices for the long term good,” says Waite. There will also be incentives for crop diversity – in the proposal, crop farmers must have at least three crops with no more than 70% in the largest crop and at least 5% for the smallest crop.

There was serious pressure within the European Commission to reduce CAP spending, but it was followed by a serious response from a number of key countries, including Germany, to keep farm support levels high, says Waite. Today the proposal is to simply freeze the budget at current levels.

When the entire continent is suffering from a major debt crisis, that’s a victory for European agriculture.

“Realistically, politically, there is a need to maintain support for farmers, and that will not change,” says Waite. “The CAP is about maintaining family farms – it’s more than production, it’s a cultural thing. This is something understood in mainland Europe. The economic reality is, many farms are absolutely reliant on the maintenance of some level of subsidy.”

At an early opening dinner with German Agriculture Minister Ilse Aigner, I asked her what was happening with CAP spending. She told me the average German  farm is 75 acres and that by year 2013, CAP spending would be around $160 per acre (314 euros per hectare). “That will be the lowest amount ever coming from subsidies,” she added proudly.

We'll take another look at Europe's farm policies later this week.