Alyn Watching American Farm Support Experiment

21 May 2012
Alyn Smith MEP, Scottish member of the European Parliament's Agriculture and Rural Development Committee, has urged Scottish farmers, amidst heated debate about the future of the CAP, not to forget to keep an eye on developments in farm support in the United States, where the Farm Bill is up for renewal this year.

His call came following the recent vote on the Senate Agricultural Committee's report, approved by a bipartisan vote of 16-5, which proposes a model of agricultural support significantly different to that of Europe's.  The report proposes $23 billion of savings over ten years, achieved primarily through the complete elimination of annual direct payments (the European model), to be replaced by an expansion of farm insurance schemes, to protect not only against disasters like drought and flood, but against low market prices as well.

The report also discusses a new "shallow loss revenue programme" (for all programme crops except cotton) which would allow farmers to enrol for individual coverage (based on 60% of eligible hectares), or for country-wide revenue coverage (75% of eligible hectares); payments would also be triggered when a farmer is unable to grow a crop, but this would be limited to 45% of eligible hectares.  Farmers would be paid when decreasing yields or declining crop prices result in their revenue falling below historic averages.  The payments would cover revenue losses of between 11 percent and 21 percent, with a payment cap of $50,000 a year.  The programme is projected to save about $2b annually, but has been criticised for not taking into account the possibility of lower prices - in which case the price tag of the programme could double, eliminating savings.  

Elsewhere, the proposed bill would eliminate counter-cyclical payments, prohibit participation in farm subsidies if average adjusted gross income exceeds $900,000 from all income (farm and off-farm), create a new dairy insurance programme while repealing dairy product price support, and invest in high-speed internet services for communities of under 20,000 people.  

Alyn said:

"While we're all spending a lot of time getting stuck into the details of CAP reform, it's important not to lose sight of the bigger picture - we are part of a global chain of agricultural production and trade, and what happens in our major trading partners both affects us, and serves as a useful example of the different models of support on offer.

"While this of course is only a draft bill from one committee of one of the houses of Congress, it is of great interest to me that the Americans seem ready to go down a significantly different road to ours in Europe, through the elimination of direct payments and the decision to double down on insurance schemes.  I am sceptical of this position.  I believe that public money should be invested in public goods, namely the production of food, environmental and land management protection, and supporting rural society.  Investing public money in insurance schemes will not do this: instead, it will merely subsidise the profits of private insurance companies.  Furthermore, it is not ideal from a budgetary perspective, leading to fluctuating spends year on year depending on the state of the market, and entirely dependent fiscally on high prices continuing.  I am concerned that the European Commission have included pilot schemes in Rural Development, which will just take money from more directly effective programmes like LFA and agri-environmental schemes.  

"I believe that Europe needs to be more aggressive in defending its model at the WTO.  We have done enormous work in the last decades of making our support much less distortive of trade and of global agricultural markets - and I don't think we need to apologise for wanting to link our support, in a general way, to the active production of food."

The bill will now go to the full Senate for a debate and vote during May.