6.2 Agricultural Policies Implications
The actual Common Agricultural Policy (CAP) does not take into
consideration many elements of the risk in agriculture:
- The climate risk (some subsidies are now conditioned to the
subscription to climatic
insurance, but this is a marginal phenomena yet),
- The variability of the soft commodities price.
Our results show that some years are profitable, when we
consider 2007, 2008 or even 2010. However, 2006 and 2009 were really poor in
terms of results. The future CAP will be reformed in 2014 or 2015, depending on
the complexity of the negotiations to reach a consensus among European
countries. It could be a great opportunity to consider the evolution of the
risk in agriculture during this reform. Some analysts suggest that
countercyclical tools could help farmers to maintain their revenue during
downturns and limit the overall cost of the CAP (Momagri, 2012b). This paper
shows that cyclicality of revenues and profitability are really strong.
Instability comes from the price inelasticity regarding the soft commodities: 1
or 2% change in the level of global production can lead to a price variation of
50 to 100%, and even more (Momagri, 2012b). Therefore, the opportunity of
changing the CAP to integrate countercyclical tools should be strongly
considered, even if this would lead to add complexity to a system already
considered as opaque and complex by non-initiated observers.
Other policies should be included in the CAP, which are the
public subsidies for new farmers. So far, only the French government subsidizes
the new farmers through loans at low interest rates and a front subsidy for the
first year of activity. These elements could be generalized at the European
level, particularly for the loan subsidy which could be an easy way to redirect
the CAP payments to more socially acceptable subsidies. Lower interest rates
and public support for loan's access can be as profitable in the long term for
farming activities as decoupled payments or direct aids which represent a large
part of the cost of the CAP (see Figure 6, page 16).This type of support would
have a lower impact on the price of the grains than direct payments, as it
would be more oriented on maintaining the number of young farmers high enough
to maintain the age pyramid of this population.
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