The European Commission yesterday outlined reforms the bloc's Common Agricultural Policy (CAP), proposing further measures aimed at weaning farmers off handouts and boosting commodity supplies.
Reforms of the CAP, first initiated in 2003, are currently a hotly debated policy within the food industry, and critics accuse the European ministers responsible for effectively putting up an unhealthy barrier to trade.
The Confederation of the Food and Drink Industries of the EU (CIAA), yesterday said it supported CAP reforms for a "market-orientated agriculture" that would give processors access to raw materials at a "competitive" - read cheaper - price.
According to an European Commission , the "health check" outlined in a six month consultation of the proposals should aim to phase out export refunds, limit intervention buying of cereals to only wheat, abolish the set-aside system for land, and prepare a "soft landing" for when dairy quotas expire in 2015.
In the cereals market, the Commission proposes abolishing the set-aside regulation, a policy that required producers to leave ten per cent of their land fallow in return for a subsidy payment.
The policy was made to boost a pooly performing market, but is now outdated, the Commission said, as growing demand for both commodities and biofuels is pushing prices sky high.
In September, the Commission had said that retaining the set-aside policy at this time would "expose the internal market to potentially serious risks."
Dairy quotas also need to be removed, the Commission said, as prices, like those for cereals, are also rocketing thanks to greater global demand.
The dairy quota regime was introduced in 1984 in order to limit production in the context of depressed world prices, but "the quota now acts as a constraint hampering the sector to benefit from favorable prospects".
However, the Commission admits that prices for cereal and dairy products might decrease dramatically if the quota and set-aside policies were dropped, putting pressure on manufacturers to balance the market themselves.
The single payment scheme also will come under scrutiny, the Commission said, with an aim of simplifying payments made to farmers across the bloc.
"The communication raises the idea of moving away from payments based on historical receipts towards a 'flatter rate' system."
Overall financial support to farmers may be reduced, as the Commission also proposes increasing the amount of land a farmer must own before he qualifies for subsidies, and putting an upper limit, or cap, on payments.
Farms currently receiving more than €5,000 per year in subsidies would have their payments reduced, therefore increasing funds for the EU's rural development policy by 13 per cent, the Commission estimates.
"The impact with respect to farms affected would be felt not only in the old member states with the greatest number of large beneficiaries, such as Germany, the UK and Spain, but also in some new member states, Czechoslovakia and Hungary," Fischer Boel said.
Any money saved could therefore be used by rural development ministers to help cope with agricultural challenges such as climate change and biofuels, the Commission promised.
The Commission also proposed getting rid of coupled support, introduced to sustain production in less productive areas, such as mountainous farms.
A decoupling policy would force farmers to focus on market demand and quality products, the Commission said.
The CIAA yesterday said it supported CAP reforms as they would lead to a competitive and market-orientated agricultural system in the EU.
"The CAP has to pursue its role of supporting the production of sustainable agricultural raw materials in the single market," the CIAA said.
However, the CIAA warned that the reasons for raw materials' high prices are "multi-factorial", and any CAP reform must take both short-term and long-term market changes into account, "to prevent major market imbalances and disruptions".
Mariann Fischer Boel, the EU commissioner for agriculture and rural development, denied that the proposed reforms are a sign of any inherent weaknesses in the current system, and said the new proposals will help European farmers compete in a global market.
"It's quite normal for perfectly healthy people to visit their doctor to see whether they need to do anything different to ensure they stay in good shape," she said. "In the same way, we need to look at whether we need to adjust the CAP for an EU of 27 countries and a rapidly changing world."
The CAP bill came in at around €55bn in 2007, representing 44 per cent of the total EU budget.