Stabilizing food prices across Europe needs to be a top priority, Europe's agriculture ministers agree. The hard part will be deciding how to best reform the system.
The farm lobby is strong in Germany
Current European Union agricultural policy encourages farmers to keep land fallow, a practice that seems to contradict the rising global demand for food. The EU seems likely to acknowledge it needs to put more land into production when it announces agricultural reforms on Tuesday, May 20.
One solution would be for the EU to phase out its program of paying farmers to keep farmland out of production, hoping that it will help stabilize food prices.
"I think it's important that we continue to increase production in Europe as much as we can within the natural limits, also taking into account environmental care," Agriculture and Rural Development Commissioner Mariann Fischer Boel told the DPA news agency.
Fischer Boel spent Monday with EU agriculture ministers in Brussels outlining her proposals to reform the bloc's Common Agricultural Policy (CAP).
Yet the road to reforming the CAP is likely to be long and riddled with obstacles. Even the relatively modest changes Boel has proposed to direct farm subsidies are likely to be met with fierce resistance, particularly from France, which is the biggest recipient of agricultural aid.
Britain calls for liberalization
Fischer Boel wants to increase production of some crops
Britain and some other member states would like to see the EU go even further in reforming its subsidies.
Britain's finance minister, Alistair Darling, called for Europe to fundamentally reform its agricultural policy. Britain has argued that the current food crisis shows the need to liberalize laws.
All elements that keep prices above world market levels should be phased out, Darling said last week. Those measures cost EU consumers 43 billion euros ($67 billion) in 2006, he said.
Darling also said he wants the EU to stop direct payments to farmers, which he said cost taxpayers an additional 34 billion euros in 2006.
"Barriers and distortions in the global food market increase volatility and stifle the incentives to increase supply to match demand," he argued.
Germany wants farmers protected
Slovenian Agriculture Minister Iztok Jarc, whose country holds the EU's rotating presidency, refused to comment on Britain's position, saying only that "there are many reasons for high food prices, so I wouldn't make a direct connection to the CAP."
"We don't only have a problem with food prices, we also have the problem of climate change and high energy prices. It's a combination of all factors," he said.
Germany and France are against liberalization. They say the current upswing in food prices show the importance of not liberalizing too much.
Germany's agriculture minister, Horst Seehofer, argues that "we have to make sure that we can provide this continent with food sustainability. This cannot be done by taking away subsidies from European farmers."
Long road ahead
The proposed changes could bring protests from farmers
Besides no longer paying farmers to leave land fallow, the EU proposals also call for phasing out quotas on milk production. Some observers have also guessed the EU will propose ending the extra bonuses given to farmers who grow crops which can be converted into fuel.
While Fischer Boel said she wants to see more money go towards environmental projects and less towards direct subsidy payments, she backed away from an earlier suggestion that subsidies to larger farms be capped. That caused an outcry from Germany and Britain.
Global food prices have nearly doubled in three years, according to the World Bank. The situation in developing countries has been of particular concern since higher costs have sparked riots and restrictions on food exports.
The CAP proposals will go to EU member states and the European Parliament for consideration in the second half of 2008, during France's EU presidency.
Massive subsidies remain
France is the biggest recipient of agricultural subsidies
Although food prices have eased somewhat in recent weeks, they remain at near record levels, with wheat up 84 percent over one year ago, corn up 21 percent, butter up 21 percent and eggs up 17 percent.
Cost increases have a variety of causes including biofuel, trade constraints, increased demand from Asia to serve changing diets, poor harvests and increasing transport costs.
If the CAP reforms succeed in putting more land into production, it would be a reversal of past reform efforts, which have tried to reign in production.
In 2003, the EU tried to discourage overproduction by "decoupling" subsidies from production. Despite reforms, farm hand-outs still make up 40 percent of the EU budget, by far the bloc's biggest spending item.