Agricultural policy: If Janusz′s CAP fits, wear it | Business| Economy and finance news from a German perspective | DW | 17.12.2019
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Agricultural policy: If Janusz's CAP fits, wear it

Janusz Wojciechowski, the EU's new agriculture commissioner, wants a reworking of the Common Agricultural Policy (CAP). But not if it hurts Polish farmers, the fifth-largest beneficiaries of EU subsidies.

Janusz Wojciechowski, the EU's new commissioner for agriculture, wants EU members that under the existing Common Agricultural Policy, or CAP, receive less than the average farming subsidy to get funding at the average level of €270 per hectare.

Such a reform  would cost the bloc €20 billion ($24 billion). Wojciechowski's home nation, Poland, would be a beneficiary. 

With farmers struggling across the Continent, and nowhere perhaps more so than in Poland's western neighbor, Germany, the stakes are high as the EU weighs up reform of one of the bloc's signature policies. EU ministers disagree on plans for the CAP and whether and how such equalization would take place is far from certain. Others want a new CAP, currently being negotiated, to be more closely linked to environmental requirements when it rolls out in 2021 for the next 7-year EU budget period.

The Commission has also floated cutting direct support for agriculture and has proposed digressive payments above €60,000 per farm and to cap them from €100,000. Wojciechowski has supported the idea, but some ministers in the EU Council want indefinite area payments, including German Agriculture Minister Julia Klöckner from the Christian Democratic Union (CDU), who wants direct payments to be linked to targets that increase environmental protection, climate protection and biodiversity.

Direct payments to the 6.4 million farmers in the 28 member states currently account for €41 billion per year. The CAP also includes instruments designed to avoid and manage crises in the sector, for example insurance and mutual funds to stabilize farm income.

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Mr Wojciechowski goes to Brussels

Wojciechowski said the CAP subsidy in Poland is €241 per hectare and would be €215 if Warsaw hadn't shifted some of the funds it gets into the development of rural areas. "That is €30 less than the average in Europe and we should try to eliminate that difference," he said. "But it is an issue not only for Poland, it is an issue for over a dozen other countries, including Portugal, Finland and Sweden." 

According to data from the European Commission, Polish farmers are today the fifth-largest beneficiaries of EU subsidies. Polish farmers have also benefited from increased domestic spending on agriculture, with spending by the  state tripling since Poland joined the EU in 2004.

Although agriculture contributes a mere 3.5% to the country's economy, over 60% of Poland's total land area is taken up by farming and 12% of its workforce is employed in the sector. Poland ranks fourth in the EU in terms of arable land, with most Polish family farms located in the south. The northwestern part of Poland is characterized by big and far more productive farms.

There are about 1.5 million small family farms of less than 9 hectares in Poland and the country's Agricultural Market Agency (ARR) has warned that they are struggling to remain competitive. With food prices low, farms depending on large suppliers, an increase in droughts and rising land prices, farms are finding it hard to survive. That is true across much of Europe.

But while the sector has gone through big changes over the past 25 years, a  productivity gap of about 59% remains between Poland the rest of the EU. "Low productivity is primarily driven by fragmented holdings. The average farm size in Poland is approximately 10 ha, compared with 50 ha in France and Germany, and 90 ha in the UK," a McKinsey & Company report states. Poland's agriculture and food industry is also skewed toward low value-added produce, the report shows.

Roter Apfel mit Herz liegt auf roten A„pfeln (picture-alliance/Bildagentur-online/Begsteiger)

Some 200 million EU citizens live within 1,000 kilometers (600 miles) of Poland's borders

Growing nicely

Since 2007, the CAP has led to investments of more than €25 billion in Poland's farming sector and rural areas, with the objective of stabilizing farmers' income, modernizing and increasing the sustainability of farms, and securing the supply of safe, affordable and quality food for its citizens, according to the European Commission.

One of the CAP's goals for 2014 to 2020 has been to support small and family-owned farms and Poland has been one of the main beneficiaries, according to the European Commission. During this period, CAP will have invested more than €32 billion in the country's farming sector and rural areas.

Between 2014 and 2015, the value of agricultural exports increased 7.7% to €23.6 billion, while imports rose 4.7% to €15.9 billion, resulting in a healthy trade balance of €7.7 billion, according to ARR. The exports of agricultural products from Poland to other EU countries in the past decade  have grown fivefold and Poland has continued to be a net exporter of agricultural products. The EU remains by far the most important market for Polish agricultural products, accounting for 80% of  exports. 

Since joining the EU, the government has attempted to preserve farming traditions by assisting small family farms to diversify and specialize to maintain a competitive edge. Poland ranks first in Europe concerning the production of apples, poultry, berries and mushrooms, while milk production is rapidly growing. Strong growth has also been witnessed in the organic farming sector and Poland now has about 25,000 organic farms and 500 companies that process organic produce.

The Polish farming sector has a higher number of young farmers than any other EU country. Approximately 14.7% of the country's farmers are younger than 35, compared with only 7.5% across all EU countries. Only 8.4% of Polish farmers are older than 64, compared with 30% across the EU.

The McKinsey & Company report argues that Poland has more advantages than many other countries in terms of becoming a major European food production and processing hub. The report notes that growing urbanization across Europe is raising Poland's position as a major food supplier. The country is fourth in the EU in terms of arable land after France, Germany and Spain, and 200 million EU citizens live within 1,000 kilometers (600 miles) of Poland's borders.

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Some way to go

Vincent Bourgeais, a spokesman for the European Court of Auditors (ECA), told DW the Commission's proposal continues to impose on member states the use of direct payments based on a given amount of hectares of land owned or used. "This instrument is not appropriate for addressing many environmental and climate concerns, nor is it an efficient way of supporting viable farm income," he said.

Bourgeais said the ECA welcomed the Commission's ambition to shift to a performance-based model. "However, we consider that the proposal does not contain the necessary elements of an effective performance system," he said, noting that the Commission would remain ultimately responsible for implementing the budget.

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