The Common Agricultural Policy (CAP)

This post is about the European CAP policy from an Irish perspective, 

aka agricultural/food subsidies.

I was having dinner out at a restaurant  recently with friends when the topic of food prices came up. 

My hears pricked, this is a topic I am very  familiar with. Each person was complaining about raising food prices and that they had decided to cut back on buying over priced meat and dairy.

Each person came from a rural farming background and they were shocked when I tried to explain to them that 'expensive' meat is actually already subsidised heavily. That in fact it is produced at cost or below by the farmer.

And that European tax revenue is used to subsidise the farmer using CAP payments. 

They were all aware that farmers received payments but had assumed it had no effect on the markets and that farmers are just lucky.

I spent much of the evening explaining how subsidies lower food prices and therefore produce a stable market that can supply consumers with reasonably price food. These factors became very important after World War 2 when the payments were originally production oriented. They later moved to flat rate per hectare to focus on environmental and animal husbandry standards and prevent the build up of food mountains that occurred in the eighties and early nineties. 

I am not sure that I am a fan of CAP payments. I think they produce a very artificial market and they do not encourage innovative farming practices but encourage 'grant' farming instead. 

In Ireland it has resulted in hyper inflated land prices that have no bearing on the lands yield/production  rates. This is a massive barrier to new entrance. 

It has given larger farms a greater advantage over smaller family farms. This makes me very sad that family farms lose competitiveness and has produced a trend of them being bought up by their larger neighbours. This has such a negative effect on rural communities long term. 

I have also noticed that many elderly farmers have tended not to pass the farm on to their family upon retirement. They choose to hold on to the farm and work it  at a minimum level in order to continue to receive payments. They either keep a small amount of cattle during the summer months to keep the herd register active and sell these on in autumn at none/little profit as the market is flooded as everyone buys/sells at the same time or  they choose to sell the summer grass as fodder. They see it as an increase in their pension payments. 

This have a negative impact on the next generation who are 40-50 years themselves before they can take over the farm. During this period they would have had to seek a livelihood elsewhere and some are reluctant to move back to the farm, uprooting their own families and careers, and choose to sell the farm instead. And who could blame them!

In Ireland the average farm is 80 acres (32.7 hectare) with a growing trend of elderly farmers.

It consists of:

80% grassland

11% rough grazing & marginal 

9% crop production

With the average farming farming recording a profit of €17,771 including €9,285 in subsidies in 2010.