The Euro Economy

One thing looks certain: 2017 will be an unpredictable year for farmers across Europe.
This will come as yet another blow to farmers who have already faced a raft of crises over the past few years. In 2014, Russia’s food-import ban slashed access to an important export market for numerous European producers. Dairy farmers have been stuck in ruinous overproduction since the end of milk quotas in April 2015. Livestock farmers, already hurting from oversupplied markets, have been worried about free trade deals on the line that might expose them to potentially devastating competition. In addition to these crises, the EU’s subsidy program has been steadily expanding requirements for environmental sustainability without sufficiently increasing pay-outs to farm owners.
Now, producers across Europe will have to brace themselves for a new set of uncertainties looming over the next 12 months, ranging from a revamp of Europe’s Common Agricultural Policy (CAP) to a potential ban on glyphosate, one of the world’s most widely used herbicides.
Indeed, in the UK alone, Britain’s decision to withdraw from the EU, while supported overwhelmingly by people living in rural areas, has raised numerous questions for British farmers. They are now unsure about the characteristics of their country’s post-trading relationship with Europe, and could see tariffs with their largest trading partner rise by up to 30%. In addition, they are faced with the prospect of losing the flow of seasonal migrant labourers from the continent, which has already begun to slow down due in part to the drop in the pound. Farmers also face uncertainties surrounding new trade deals with non-EU states. And perhaps most importantly, the Treasury has only pledged to maintain spending from the CAP through 2020 – causing huge concerns for UK producers, who currently rely on these subsidies for 55% of their income.
On the other side of the Channel, EU farmers will have to deal not only with the uncertainty caused by Brexit, but also with other complications.
These include potential slashes to the CAP after the end of the Multiannual Financial Framework that runs from 2014-2020. Over the next few weeks, the European Commission (EC) will launch a public consultation on how to reform the CAP, the generous subsidy program that disburses 38% of the EU budget to farmers. The EC will then publish a strategy paper on the future of the CAP by the end of this year. The proposed reforms are expected to have a huge impact on millions of farmers across the EU, who are highly dependent on public support and rely on EU payments for on average 40% of their income – even up to 80-90% in some countries, like France.
Although the details of the likely reforms remain murky at this point, most policymakers agree that cuts to the CAP budget are not a matter of if but of how much. And unless farming and agro-industrialist lobbying groups have their way, the CAP budget is likely to undergo significant cuts across the board for a number of reasons.

First, factors including Brexit, the weak Eurozone economy, and the need to spend on other priorities like the refugee crisis have drained the EU’s already cash-strapped budget. Second, the CAP has historically been one of the most controversial components of the EU’s programming, having been slammed for doling out millions of euros in subsidies to a Saudi prince, the Queen of England, and other aristocrats. Third, critics of the CAP, particularly environmentalists, have argued that the scheme benefits industrial farms that cause soil degradation and methane emissions, without sufficiently encouraging sustainable agriculture.
Not only is the overall pool likely to shrink, but the money that remains will probably be significantly reallocated. Currently, the balance of the CAP favours the “first pillar,” under which the EU gives a total of €278 billion in direct payments to farmers on the basis of farm size, over the 2014-2020 period. It’s likely that the balance will shift in favour of second pillar payments, which are used to promote sustainable development and total €85 billion for the same period.
In another significant decision that will affect the future of farmers across Europe, the EC will revisit its safety approval of glyphosate, one of the most widely used weed killers in the world. Glyphosate faced a deadline for safety re-approval this past June, without which it could not be sold. Following indecision caused by political gridlock, the European Commission extended the deadline until December 2017. While farmers were relieved at first, they will face renewed uncertainty and potentially disastrous disruption when the safety approval is up for renewal.
Farmers have been frustrated by the EU’s prolonged lack of consensus on glyphosate’s status especially since the substance has been deemed safe by the majority of health and regulatory agencies, including the EU’s own European Food Safety Authority, as well as the Environmental Protection Agency and a joint WHO/FAO team. The sole outlier has been the WHO’s International Agency for Research on Cancer, which labelled glyphosate “probably carcinogenic to humans” in 2015. The dispute between IARC and other regulatory authorities has raised questions about IARC’s methodology as well as potential conflicts of interest at the agency.
So for farmers still reeling from the Russian import ban, dairy, and livestock crises of the past few years, or recovering from the aftershocks of Brexit, it looks like their worries may only have just begun. Not only will British producers face a near-certain end to a generous subsidy system by 2020, but European farmers will likely see significant shifts and cuts in the CAP by that time as well. And within less than 12 months, farmers across the continent might have to find a replacement for their most widely used herbicide. Sadly, as the New Year kicks off, it looks like the European agricultural crisis might be here to stay.

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