Appendix 3: Call for Evidence
The House of Lords EU Energy and Environment Sub-Committee is conducting an inquiry into the various responses to price volatility and the potential for creating a more resilient agricultural sector. The Sub-Committee seeks evidence from anyone with an interest.
Written evidence is sought by 31 December 2015. Evidence sessions will be held in December 2015 and January 2016. The Committee aims to report to the House, with recommendations, by the end of the Parliamentary Session. The report will receive responses from the UK Government and the European Commission, and may be debated in the House.
The resilience of the agricultural sector underpins the secure, sustainable and affordable supply of food to the citizens of the EU, as well as providing financial security for EU farmers. A resilient agricultural sector is one which can respond to risk effectively and take steps to mitigate the wider effects of global price volatility.
Effective risk management can mitigate the adverse effects of price volatility. In the words of the OECD,
“Risk management in agriculture is now an essential tool for farmers to anticipate, avoid and react to shocks. An efficient risk management system for agriculture will preserve the standard of living of those who depend on farming, strengthen the viability of farm businesses, and provide an environment which supports investment in the farming sector.”222
The drivers behind price volatility are variable and complex, but a number of assumptions can be made: weather-related events will become more frequent and more extreme; the global population will rise, leading to an ever increasing demand for agricultural products; and the decrease in the availability of land and the increased demand for products will drive up the price of agricultural commodities.
Public policy at an EU and Member State level has a role in responding to these challenges and the ongoing reform of the Common Agricultural Policy should provide an opportunity for a co-ordinated approach.
We seek evidence on any aspect of the topic and particularly on the following questions:
(1)What is the role of public policy in mitigating the impact of potential price volatility? To what extent should the response be a shared endeavour between the EU institutions and Member State governments? What are the differing roles of industry on the one hand and individual farmers on the other?
(2)Should public policy responses make a distinction between support for the resilience of the industry as a whole, support for the resilience of specific sectors and support for the resilience of individual units of activity?
(3)Currently, what are the key elements involved in the industry’s management of price risk? What further tools are needed?
(4)What effect has the commoditisation of agricultural goods had on the ability of farmers to respond to risk effectively? How are farmers to mitigate the on-farm effects of volatile global commodity markets and currency fluctuations?
(5)What are the barriers to more effective on-farm price risk management, including longer term pricing mechanisms, diversification, co-operative working and leasing? How can those barriers be overcome and what is the role of EU and national public policy?
(6)How ‘fit for purpose’ are market-based instruments? Could the marketplace help to mitigate risks by providing ways of smoothing out the impact of volatility? Are there ways in which EU and national public policy could encourage, and reduce the risk of introducing new financial products?
(7)How realistic are terms for access to investment finance? What role is there for the European Investment Bank to support on-farm investment at a low cost? What other instruments could improve access to finance in a volatile environment?
(8)What level of information is available to farmers to engage with market-based instruments and to consider alternative options for on-farm actions? How might knowledge availability be improved? How can farmers be encouraged to acquire the skills needed to operate a modern business-like operation?
(9)What role should innovation play in creating a more resilient agricultural sector? Should more be invested in scientific research which could have the potential to transform agricultural practices?
(10)How effectively does EU agricultural policy currently assist farmers to mitigate the impact of potential price volatility? Is there a need for management of price risk to be an explicit objective of the Common Agricultural Policy?
(11)What long term changes should be made to the Common Agricultural Policy to support the agricultural industry in responding to price risk more effectively? Should insurance schemes play a more prominent role?
You need not address all these questions in your response.
222 OECD, ‘Risk Management in Agriculture: What Role for Governments?’: https://www.oecd.org/agriculture/agricultural-policies/49003833.pdf [accessed 5 May 2016]