House of Commons - Environment, Food and Rural Affairs Committee

The Common Agricultural Policy after 2013 - Environment, Food and Rural Affairs Committee Contents

Written evidence submitted by the Farmers' Union of Wales

BACKGROUND

1. The Farmers' Union of Wales was established in 1955 to protect and advance the interests of Welsh families who derive an income from agriculture. In addition to its Head Office, which has 26 full-time members of staff, the Union has 35 Area Officers and eleven offices distributed around Wales which provide a broad range of services for members. The FUW is a democratic organisation, with policies being formulated following consultation with its 12 County Executive Committees and nine Standing Committees.

THE COMMON AGRICULTURAL POLICY AND FOOD SECURITY

2. The disruption caused by the Second World War to European food production and distribution let to widespread starvation, and severe, often permanent illnesses due to vitamin and mineral deficiencies. For example, in the Netherlands alone many thousands died of starvation, and in Nazi-occupied Jersey children's growth was stunted by two and a half inches due to malnourishment. In the UK, bread rationing continued until 1948, while meat rationing was not abolished until 1954.

3. Recognition of the need for viable agricultural sectors and stable supplies of affordable food led the UK Government to pass the 1947 Agriculture Act, while on the Continent the 1957 Treaty of Rome defined the objectives of a common European agricultural policy. The Common Agricultural Policy (CAP) came into full force in 1962, and from 1973 the UK support system, established under the 1947 Agriculture Act, was progressively subsumed into the CAP.

4. The food security established by the 1947 Agriculture Act and the CAP has led to significant complacency regarding the importance of agriculture to Wales and the UK, which has, in turn, led to increasing reliance upon imported foodstuffs; in 2010 UK food self sufficiency was estimated to be 59%, representing a fall of 20% since the 1980s.[28]

5. In recent years, concerns regarding rising world populations, global warming, and peak oil production has rekindled awareness of the importance of global food security. In 2007 and 2008 shortages in global food supplies became a reality, with scores of countries around the globe suffering conflict and social unrest due to food shortages, acute rises in food and energy prices, the rationing of certain foodstuffs by major retailers, and some countries introducing food export bans.

6. In July 2008, a discussion paper issued by Defra concluded that 'the current global food security situation is a cause for deep concern', listing high energy prices, poor harvests, rising demand, biofuels and export bans in some countries as main factors.[29]

7. The past 12 months have seen a range of factors, most notable severe weather conditions, leading again to major food shortages, export bans, food inflation and civil unrest around the globe.

8. It is estimated that World populations will rise to between nine and 10 billion by 2050, while global agricultural productivity per hectare is expected to fall by between 3 and 16% by 2080.[30]

9. The CAP, by design, provides a framework which allows Europe to react to the imminent challenges that growing populations, global warming, rising sea levels, and peak oil production represent in terms of food security.

AGRICULTURE IN WALES

10. Wales has some 39,000 holdings, around 17,000 of which receive CAP payments. Of those holdings considered to be agriculturally significant, 66%% are Less Favoured Area (LFA) cattle and sheep enterprises; 12% are dairy enterprises; 13% are non LFA cattle and sheep enterprises; and 2% are arable enterprises, with other crop or mixed enterprises making up the remainder.[31]

11. In 2010, 1.7 million hectares of Wales was categorised as agricultural land, equating to 84% of the country. This comprised arable land (9.9%), permanent grassland (61.0%), rough grazing (12.8%), common land (11.0%), woodland (4.1%), and other land (1.2%).[32]

12. Around two out of every five rural businesses have been classed as being involved in the farming industry.[33] In 2008, Welsh agriculture employed 57,600 people in full time, part time, and seasonal employment. This figure does not include the secondary businesses related to agriculture such as contractors, feed merchants, and food processors.

13. The proportion of the working age population in rural Wales who are working and who are self-employed is estimated to be 7% higher than in Wales as a whole, which reflects the fact that rural businesses have a high dependency on the agricultural sector.10

14. It has been estimated that agriculture supports over 10% of full time employees in Wales,[34] and the numbers directly and indirectly employed in farming therefore make a crucial contribution towards sustaining rural businesses and communities.

15. In 2007 the Sustainable Farming and Environment: Action Towards 2020 Report stated that: "Most businesses would not be able to survive on the financial returns which the Welsh agricultural industry continues to produce… If production falls below what is referred to as a critical mass the agricultural supply and processing industries will suffer irreparably as a consequence. Farming, with all its diverse effects on the landscape, the economy, communities and social structures, will only be sustainable if it returns to acceptable profitability in the short to medium term."[35]

16. Aggregate Agricultural Output in Wales in 2009 is estimated to have been £1.1 billion, with the livestock and dairy sectors contributing £552 million (49%) and £330 million (30%) to this figure respectively.[36]

17. In 2008 and 2009, total income from farming in Wales increased was £107 million and £170 million respectively.12

18. By comparison, UK Gross Aggregate Agricultural Outputs in 2008 and 2009 were £20.1 billion and £19.6 billion, while total incomes from farming were £3.6 billion and £4.4 billion respectively.[37]

19. In 2008, the food and drink supply chain was the UK's single largest manufacturing sector, accounting for 7% of GDP, employing 3.7 million people, and worth £80 billion per annum.[38] The equivalent figures for Wales are not available.

20. During the 2009-10 financial year, the average Welsh hill farm covered 97% of their lamb production costs. The figures for upland and lowland farms were 99 and 107% respectively. This compares with 84%, 88% and 95% respectively for the previous financial year.[39]

21. For all farm types during the 2009-10 financial year, Welsh lamb producers covered 101% of production costs.18

22. In the 2009-2010 financial year, Welsh beef producers covered an average of 68% of production costs. For the top third of producers this figure was 99%.[40]

23. Farm business consultants Andersons have predicted that the average total cost of milk production for a 150-cow herd averaging 7,500 litres a cow will be more than 28 pence per litre for the 2010-11 and 2011-12 seasons, which is three pence below the average UK farm-gate price.[41]

24. Average Welsh milk farm-gate prices are not routinely collected. However, data collected from FUW members in 2010 shows that the average price received by those members was 22.6 pence per litre, with the payments received by individuals during any one month being between 14 and 29 pence per litre.

25. This range largely reflects the significant differences between the contracts held by individuals and the economies of scale which can be achieved by milk producers compared with livestock producers, due to the ways in which farm-gate milk prices are invariably linked to volume.

26. Thus, while the price received for livestock is likely to be similar for large and small producers alike, volume related bonuses and penalties which are written into milk supply contracts can lead to major differences between the farm-gate prices received by large and small milk producers.

WELSH AGRICULTURE AND THE CAP

27. A total of £357.4 million in CAP payments was made to farm businesses in 2009.12 This comprised:

(i) some £275 million in Single Payments, made under Pillar 1 of the CAP (direct payments) (77%), and

(ii) around £82 million in Rural Development (Pillar 2) payments (23%); primarily comprising Axis II payments under agri-environmental schemes such as Tir Gofal, and Less Favoured Area support in the form of Tir Mynydd.

28. Single Payments made to Welsh farm businesses are currently based upon average CAP Pillar 1 payments received per hectare during reference years not affected by what the Welsh Assembly Government deemed were exceptional circumstances (predominately the years 2000, 2001, and 2002), and/or the amount of milk quota held on 31 March 2005.

29. CAP Pillar 1 payments received during the reference period were effectively based upon the number of eligible stock held on each farm, which, in turn, can be considered to be a function of the fertility, size, altitude, and climate of any particular farm.

30. Thus, the total payment received by a smaller, fertile, lowland farm can be similar to that received by an extensive, infertile, upland farm, with both payments effectively reflecting the production capacity (but not the current production) of each farm.

31. Figures produced by the Farmers' Union of Wales show that, in 2007, average Single Payments made to farms categorised as purely lowland and Severely Disadvantaged Area businesses were £12,130 and £12,869 respectively, despite lowland farms being, on average, 40% smaller than SDA farms.[42]

32. However, there exist significant variations in terms of payments made per hectare for all farm types, and a modelling undertaken by the FUW in 2009 demonstrated that transition to a simplistic flat-rate payment per hectare model would represent significant disruption for Welsh farm businesses.[43]

33. Specifically, the work concluded that:

(i) A sudden transition from the current historically based Single Payment Scheme to a flat-rate model based upon current land categorisation criteria will result in major financial disruption for the farming community.

(ii) Large-scale disruption is likely to result from a transition to any flat-rate Single Payment model.

(iii) A transition to any flat-rate model should occur over as long a period as possible, in order to reduce annual financial disruption to farm businesses.

(iv) The introduction of any flat-rate payment model is likely to result, on average, in an increase in receipts for those who received Single Payments below around €23,000, and a loss, on average, for those receiving more than €23,000.

(v) The effects for individual farm businesses will vary significantly, with variance between farms increasing for those in higher payment bands.

(vi) The most simplistic model, a single flat-rate payment per hectare for all Welsh land, could result in a net flow of as much as €36 million away from non-LFA and DA land, to SDA and common land.

(vii) Significant differences exist between the apparent disruptive effects of the models studied, suggesting further modelling will reveal flat-rate models that go some way towards minimising disruption for the farming industry. However, the financial disruption for many individual businesses will be acute, irrespective of the model chosen.

(viii) The calculation of average gains/losses for individual historical payment bands does not necessarily represent the best method of interpreting the data from individual models, and may be misleading.

(ix) Flat-rate models that ring-fence payments according to current land categories may minimise disruption for the industry.

(x) Significant further work is required in order to assess a greater range of flat-rate payment models, and their impact on particular sectors and regions, before any decision is made regarding the model that should be adopted in Wales.

(xi) Any such further work should, where possible, take into account the implications of changes such as the forthcoming CAP and EU budgetary reviews, changes to the eligibility criteria for Less Favoured Areas, and the impact of the new Glastir scheme.

34. Figures produced by the Welsh Farm Business Survey (Tables 1 to 4) show that the majority of Welsh farms continue to be significantly or wholly reliant upon payments received under the CAP.

35. Moreover, those figures demonstrate that major increases in returns from the marketplace would be required to make up for the deficits which would occur if CAP payments were abandoned.

Farm Type Net Farm Income Single Payment Tir Mynydd and Agri-Environmental Payments

2008-09 2009-10 2008-09 2009-10 2008-09 2009-10

Hill and Upland Dairy Farms £49,065 £33,966 £28,337 £31,745 £3,052 £2,967

Lowland Dairy Farms £69,328 £52,302 £34,248 £39,285 £3,274 £2,914

Hill Sheep Farms £19,327 £33,121 £34,390 £39,057 £13,151 £13,749

Hill Cattle and Sheep Farms £21,031 £30,542 £35,160 £39,780 £10,687 £10,395

Upland Cattle and Sheep Farms £24,067 £27,784 £28,577 £32,343 £7,082 £6,724

Lowland Cattle and Sheep Farms £30,397 £34,082 £28,398 £31,632 £3,391 £3,895

Farm Type Contribution of Single Payments to Net Incomes Contribution of Tir Mynydd and Agri-environmental Payments to Net Incomes Total Contributions of Cap Payments to Net Incomes

2008-09 2009-10 2008-09 2009-10 2008-09 2009-10

Hill and Upland Dairy Farms 57.75% 93.46% 6.22% 8.74% 63.97% 102.20%

Lowland Dairy Farms 49.40% 75.11% 4.72% 5.57% 54.12% 80.68%

Hill Sheep Farms 177.94% 117.92% 68.04% 41.51% 245.98% 159.43%

Hill Cattle and Sheep Farms 167.18% 130.25% 50.82% 34.04% 218.00% 164.28%

Upland Cattle and Sheep Farms 118.74% 116.41% 29.43% 24.20% 148.17% 140.61%

Lowland Cattle and Sheep Farms 93.42% 92.81% 11.16% 11.43% 104.58% 104.24%

Farm Type Net Incomes Less Single Payments Net Incomes Less Tir Mynydd Agri-environmental payments Net Incomes Less All Cap Payments

2008-09 2009-10 2008-09 2009-10 2008-09 2009-10

Hill and Upland Dairy Farms £20,728 £2,221 £46,013 £30,999 £17,676 -£746

Lowland Dairy Farms £35,080 £13,017 £66,054 £49,388 £31,806 £10,103

Hill Sheep Farms -£15,063 -£5,936 £6,176 £19,372 -£28,214 -£19,685

Hill Cattle and Sheep Farms -£14,129 -£9,238 £10,344 £20,147 -£24,816 -£19,633

Upland Cattle and Sheep Farms -£4,510 -£4,559 £16,985 £21,060 -£11,592 -£11,283

Lowland Cattle and Sheep Farms £1,999 £2,450 £27,006 £30,187 -£1,392 -£1,445

Tables 1-3: Statistics taken from the Farm Business Survey for the financial years 2008-09 and 2009-10

Farm Type Net Incomes Less Payments Net Incomes Less Tir Mynydd and Agi-environmental Payments Net Incomes Less All Cap Payments

2007-08 2007-08 2007-08

Hill and Upland Dairy Farms £18,778 £40,253 £15,150

Lowland Dairy Farms £18,680 £45,516 £15,719

Hill Sheep Farms -£16,874 -£3,827 -£33,803

Hill Cattle and Sheep Farms -£18,191 £664 -£31,208

Upland Cattle and Sheep Farms -£10,401 £8,738 -£15,797

Lowland Cattle and Sheep Farms -£7,832 £13,305 -£11,890

Table 4: Statistics taken from the Farm Business Survey for the financial year 2007-2008

36. In 2005, HM Treasury and Defra published "A Vision for the Common Agricultural Policy", setting out the then UK Government's vision for EU agricultural policy to 2020. The key policy reforms proposed included:

(i) The alignment of import tariffs for all agricultural sectors with other sectors of the economy.

(ii) The abolition of production subsidies.

(iii) The abolition of price and direct income support measures.

(iv) The abolition of export subsidies.

(v) A movement of funding from Pillar 1 to Pillar 2.

37. Following the publication of the policy, the Food and Agricultural Policy Research Institute (FAPRI) was commissioned by the UK administrations to analyse the impact of these key policy reform proposals on agriculture in the UK, using the FAPRI-UK project modelling system. The results of the modelling were published in July 2009,[44] and suggest that the policies, as proposed, would have a devastating impact on agriculture and rural communities.

38. The work summarised the impact in Wales for individual sectors as follows:

39. Dairy Sector:

(i) The phased increase and eventual abolition of milk quotas under the Health Check reforms has a depressing impact on the projected producer milk price and production in Wales.

(ii) Cheese and, to a greater extent, butter prices decline further in response to Doha WTO reforms. The decline in the prices of these commodities exerts a further downward impact on the Welsh producer milk price.

(iii) Further trade liberalisation has a small negative impact on dairy commodity prices since butter, SMP and WMP EU prices track their world prices.

40. Beef Sector:

(i) The extensive over quota tariff cuts results in a significant increase in projected non-EU beef imports

(ii) EU beef prices, including those in Wales, decline markedly in response to this large increase in imports

(iii) By the end of the projection period, the Welsh price of finished beef animals is 26% lower

(iv) The phased elimination of the SFP has a significant negative impact on suckler cow numbers and beef production in Wales

41. Sheep Sector:

(i) The full reduction in over-quota import tariffs under the WTO reform scenario leads to higher non-EU imports and, consequently, lower sheepmeat prices.

(ii) Projected Welsh ewe numbers and sheepmeat production fall in response to the decline in price.

(iii) Trade liberalisation leads to a further substantial increase in non-EU sheepmeat imports. The increase in non-EU imports has a depressing impact on sheepmeat prices. The projected average Welsh price of finished sheep and lambs is 12 per cent lower in 2018.

(iv) The decline in price reduces sheepmeat economic returns and depresses ewe numbers and production in Wales.

(v) Phasing out the SFP on top of further trade liberalisation has a significant negative impact on Welsh sheepmeat production.

42. The FAPRI report concludes that:

"Reductions in cattle and sheep numbers may have a positive or adverse impact on biodiversity depending on existing grazing levels. Moreover, it is likely that the impact would be spatially uneven, with more marginal producers in upland areas experiencing greater contractions in output. As a result, undergrazing is likely to be more problematic in the uplands."

"Reductions in livestock numbers will not only hasten the decline in agricultural employment but also employment within the wider rural economy. Agricultural employment supports both upstream (e.g. feed companies and machinery suppliers) and downstream employment (e.g. abattoirs and food suppliers) (Institute for European Environmental Policy et al., 2004).

"Furthermore, farmers play an active social role within local communities through participating on school boards, running local activities etc. Reducing the viability of farming may undermine the positive contribution played by farmers within local communities.

"Any decline in numbers engaged in agriculture may also have a direct impact on migration out of the remoter areas, hence undermining the viability of the rural population in these areas."

"The proposed 'Vision' reforms also have important implications on price volatility. Export subsidies and import tariffs have protected the EU market from the consequences of world price volatility. Following extensive trade liberalisation, it is projected that EU commodity prices are more closely linked to world prices. As a result, EU producers and processors will tend to face more uncertainty due to increased volatility as a result of external shocks, such as those due to poor weather conditions. Increased uncertainty has a negative impact on efficient production in the agricultural sectors through discouraging investment and threatening the long-term survival of producers."

"…should the 'Vision' proposal be implemented the consequences for the Welsh beef and sheep sectors, in particular, would be dramatic."

43. The publication of the current UK Government's policy regarding CAP reform is imminent,[45] and the FUW is not therefore in a position to make detailed comments regarding current UK Government policy. However, a number of comments made by the Defra Secretary of State and the Minister of State for Agriculture suggest that there may be relatively little difference between the overarching policies of the current and previous Government.

CONCLUSIONS

44. The figures and information provided herein demonstrate that Wales's environment, economy, and culture are significantly reliant on the agricultural industry, which is, in turn, reliant on payments made to farm businesses under the CAP.

45. Specifically, figures produced annually by the Welsh Farm Business Survey and Hybu Cig Cymru confirm that, under current trading conditions, the majority of farm businesses would not be viable were it not for CAP payments, and that, if returns from the marketplace were to replace CAP payments, this would require sharp increases in farm-gate prices.

46. Given the current dominance by supermarkets of the supply chain, and the absence of a mechanism which ensures equitable farm-gate prices for farmers, the FUW believes that abandoning the CAP in a manner similar to that formally proposed by the previous UK Government would:

(i) Have a catastrophic impact on UK food security.

(ii) Undermine the UK's food industry, leading to increased unemployment.

(iii) Result in significant price volatility for manufacturers and the general public.

(iv) Lead to land abandonment and an exodus of people from rural communities.

(v) Have a significant adverse impact on the UK's flora and fauna.

(vi) Drastically reduce numbers of owner-occupier and tenant farmers.

(vii) Result in a move towards "factory farming".

(viii) Lead to significantly more food being produced in countries which have lower animal welfare standards.

(ix) Accelerate deforestation in some of the world's most endangered habitats, due to UK food production being displaced by increased production in third countries.

(x) Undermine the accountability of the agriculture industry in terms of minimising its carbon footprint and other important environmental impacts.

47. The majority of these assertions are directly supported, or can be justifiably extrapolated from the conclusions published in Government commissioned research.

48. The research conducted and published by the FUW demonstrates that, in the absence of counter-mechanisms, a movement to a basic flat-rate CAP payment per hectare model would result in significant disruption for Welsh agriculture, and that a proportion of this disruption is likely to be inevitable.

FUW PRIORITIES IN TERMS OF CAP REFORM

49. During the past 12 months, the Farmers Union of Wales has undertaken a number of internal consultations with members regarding the future of the Common Agricultural Policy, and the following views are based upon the outcome of those consultations.

50. Given current scientific opinion regarding population growth and global warming, mitigating climate change without compromising food security is one of the most significant long term challenges facing mankind.

51. In order to address this challenge, joined up policies between Governments are required, and the CAP post 2013 has the potential to provide a coherent policy framework which allows Europe to react to the imminent challenges that growing populations, global warming, rising sea levels, and peak oil represent in terms of food security.

52. Members therefore believe that the UK and devolved Governments should:

(i) Oppose the CAP reform policies advocated by the previous UK Government, or any similar policies, which FAPRI has shown are likely to have a broad range of negative impacts across the UK.

(ii) Support the CAP and its core objectives, with a particular emphasis on ensuring the availability of agricultural produce to EU citizens and a fair standard of living for the agricultural community, as described under Article 39 of the Treaty of Rome.

(iii) Ensure that direct Pillar 1 payments continue to make up the bulk of CAP support for agriculture.

(iv) Oppose any moves to liberalise international trade in a manner which would adversely affect agriculture and UK food security.

(v) Recognise the central importance of the CAP as a mechanism by which the major environmental and food production challenges of our age can be addressed, and support the provision of a CAP budget that properly reflects this importance.

(vi) Ensure that any changes to the balance of funding between new and old Member States does not impact on UK agriculture and that, where necessary, the CAP budget reflects this.

(vii) Press the European Union for a compulsory pan-European scheme to help and encourage young entrants into the industry.

(viii) Support a compulsory Less Favoured Area scheme which requires all Member States and regions to recognise the socio-economic and environmental handicaps faced by farmers in many areas, in order to ensure commonality between regions and Member States.

(ix) Advocate a revision of CAP Regulations which ensures all penalties are proportionate, and that administrative errors are properly recognised.

(x) Support a policy which proactively supports family farms, and recognises their central role in terms of food production and the protection of our natural environment and rural communities.

(xi) Recognise the importance of Milk Quotas as a mechanism which supports milk production within the UK, and by which supply can be properly controlled and monitored.

(xii) Reject calls to renationalise agricultural spending within the EU, in order to ensure a genuine common policy across Europe.

(xiii) Support the proportionate distribution of Pillar 2 funding and uniform rates of modulation.

(xiv) Ensure that market instruments are available in order to manage market volatility.

(xv) Support a maximum transition period for the introduction of flat-rate Single Payments, and a flexible approach which favours family farms in order to minimise disruption for the industry.

(xvi) Ensure that any reduction in CAP payments are balanced by the introduction of market measures which ensure farmers receive equitable returns for their produce in order to ensure that food production is maintained and rural communities protected.

53. The FUW believes that there will inevitably be areas of common ground regarding which the UK Government, devolved administrations and the Welsh farming industry agree, most notably regarding the need to ensure that future CAP Regulations reduce the burden of bureaucracy for farmers and administrations alike; are flexible enough to allow commonsense to be applied in a range of scenarios; and that all penalties (including those applied to Member States and regions in the form of disallowance) are proportionate.

54. The Union has therefore urged the UK Government to adopt a position regarding the future of the CAP which does not alienate it from negotiations with the other 26 Member States regarding these important issues.

FUW REACTION TO THE COMMUNICATION FROM THE EUROPEAN COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS ON THE FUTURE OF THE CAP POST 2013

55. The FUW agrees that the challenges identified by the European Commission in its communication on the future of the CAP[46] are those which are most pertinent both globally and to the EU, and believes that the Communication correctly identifies the three main Objectives of the CAP post 2013 as being:

(i) viable food production;

(ii) sustainable management of natural resources and climate action; and

(iii) balanced territorial development.

The Union also recognises that many of the Commission's proposals are broadly aligned with those of the European Parliament.[47]

56. However, the Reform Orientation details set out in the Communication are so vague as to make anything other than making broad comments regarding the proposals impossible.

57. Notwithstanding this, the FUW's views regarding the proposals are as follows:

Direct payments: Basic income support

58. The FUW agrees with the principle that the CAP should continue to focus on direct support via Pillar 1. However, in the absence of further details regarding the proposals, and a Welsh impact assessment based upon modelling work, it is not possible to comment further.

Introducing an upper ceiling for direct payments

59. Given the current range of Single Payment rates in Wales, and suggestions that capping might be introduced for CAP payments over €200,000, it may be the case that capping would only have an impact for a handful of Welsh businesses.

60. However, during previous internal consultations, FUW members have made it clear that the option of capping payments should not be ruled out, but that the numbers of family members and employees supported by individual farm businesses should be taken into account in order to avoid disruption to businesses and communities.

61. The FUW is currently consulting with members regarding the latest capping proposals, and whether tapering payments should also be an option, given that such a system already exists for Welsh Less Favoured Area payments, and may be more proportionate and less disruptive than an abrupt cut-off.

Mandatory "greening" component of direct payments

62. The FUW is opposed to the proposal that the existing objectives of Pillars 1 and 2 of the CAP be further confused by the introduction of 'greening' components, believes that such environmental measures should remain within Pillar 2, and that this should be accompanied by the UK receiving a more equitable share of EU Pillar 2 funding.

Voluntary coupled support

63. While Wales has not taken advantage of the coupled support options available under Article 68 of the current Regulations, FUW members are generally supportive of the retention of such an option, particularly given concerns regarding falling livestock numbers and critical mass.

Simplification of Cross Compliance

64. The FUW welcomes the proposal to simplify Cross Compliance, and also advocates the introduction of a penalty system which is proportionate to Cross Compliance breaches, and recognises genuine errors and exceptional circumstances.

Targeting of support to active farmers only

65. The FUW supports proposals to target support to active farmers, including tenants.

Market measures

66. The FUW supports proposals to streamline and simplify market measures, and allowing extended intervention periods, the use of disturbance clauses and private storage.

The removal of milk quotas in 2015

67. The FUW's has long been opposed to the abolition of milk quotas, and has long maintained that the policy will have a destabilising effect on an industry already suffering as a result of market volatility, result in an increase in imports into the UK, and have a particularly adverse impact for family farms.

68. A number of reports indicate that these concerns are well founded,23^, [48]^, [49] and the FUW is therefore opposed to the abandonment of milk quotas.

69. Moreover, the Union notes that, at a meeting of the Special Committee on Agriculture (SCA), Member States recently supported a proposed scheme which would pay dairy farmers to voluntarily reduce production in cases of serious market imbalance. The FUW believes that such a scheme would not be necessary, were it not for the anticipated abandonment of a framework designed to reduce volatility and regulate milk supplies, and has advocated variable superlevies as an alternative to abandoning the current regime.

70. The FUW is also concerned that the abandonment of the quota regime will reduce the validity and effectiveness of important market support measures.

Improving the functioning of the food supply chain

71. The FUW is fully supportive of moves at a European level to promote sustainable and market-based relationships between stakeholders in the food supply chain; increase transparency along the supply chain to encourage competition and improve its resilience to price volatility; and foster the integration and competitiveness of the European food supply chain across Member States at a European level to improve the functioning of the food supply chain.[50]

72. The Union therefore believes that the UK and devolved Governments should fully support proposals to this effect.

Rural Development

73. The FUW believes that the UK should argue for a more equitable share of Rural Development funds, and that support measures for LFA, environmental and climate change measures should be retained within Pillar 2.

74. The Union is concerned that risk management toolkits could be used by administrations to reduce domestic spending in a way which undermines commonality between Member States.

75. In the absence of more detailed proposals regarding Rural Development, the Union is unable to submit further comments.

26 January 2011

28 National Statistics (2010). Back

29 Ensuring the UK's Food Security in a Changing World, Defra (2008). Back

30 Cline (2007) Back

31 Farming Facts and Figures, Welsh Assembly Government (2010). Back

32 June 2010 Survey of Agriculture and Horticulture: Results for Wales, Welsh Assembly Government (2010). Back

33 A Statistical Focus on Rural Wales, Welsh Assembly Government (2001). Back

34 The Economic Potential of Plants and Animals Not Currently Fully Exploited by the Welsh Agricultural Sector, Central Science Laboratories (2003). Back

35 Sustainable Farming and Environment: Action Towards 2020 Report, Welsh Assembly Government (2007). Back

36 Aggregate Agricultural Output and Income 2009, Welsh Assembly Government (2010). Back

37 Aggregate Agricultural Accounts for the United Kingdom 2009, National Statistics (2010). Back