EU farm payments an omen for Canada?

Reforms to the European Union’s Common Agricultural Policy could have reverberations in Canada, says a farm leader.

The European Parliament, the EU Council of Ministers and the European Commission recently reached an agreement on setting a new direction for a policy that accounted for 43 percent of the EU’s budget in 2011.

“What’s of interest to Canadian farmers is how they’re restructuring some of the payments and what they’re tying it to,” said Richard Phillips, executive director of Grain Growers of Canada.

Direct payments account for 70 percent of the CAP budget and make up 30 percent of incomes for the EU’s 12 million farmers.

The EU is greening that critical subsidy by requiring that 30 percent of direct payments be linked to three environmentally friendly farming practices:

  • Diversification, in which a farmer must cultivate at least two crops when his arable land exceeds 25 acres and at least three crops when it exceeds 74 acres. The main crop may cover at most 75 percent of the arable land.
  • Maintain permanent grassland.
  • Maintain an ecological set-aside, excluding grassland, of at least five percent of the arable land for farms with an area larger than 37 acres, which is the average farm size in the EU. That requirement will increase to seven percent after 2017.

All aspects of CAP reform will take effect Jan. 1, with the exception of reform to direct payments, which will be enforced one year later to give farmers time to adjust to the changes.

Phillips wonders if the EU will eventually stop buying grain from countries that haven’t implemented similar environmental practices.

There is a precedent for that in the biofuel sector, where the EU will import only ethanol and biodiesel that meets its strict sustainability requirements.

“It’s interesting where this is going and whether or not it becomes a trade issue,” he said.

“They’re out in front of this a little bit, but we might see something like this come at some point in time in Canada as well.”

If that happens, he added, Canadian growers should be eager to help shape policy for issues such as land set-aside for ecological purposes.

Phillips believes the diversification portion of the CAP reform and the overall push for sustainable farming practices may result in more pulse crop production in the EU because pulses fix their own nitrogen.

Pulse Canada has done work on the sustainability benefits of growing crops such as peas, lentils, beans and chickpeas.

“It wouldn’t surprise me if the Europeans have a look at some of that work and think about incorporating it,” he said.

Phillips was pleased to learn the EU has agreed to trigger export subsidies only under exceptional circumstances as of next year.

The EU was spending $13.6 billion per year on subsidies 20 years ago.

“What’s significant is the change in thinking to recognizing that they don’t need export subsidies,” he said.

It has a lot to do with the growing demand for crops, he added.

“You don’t see burgeoning stocks anymore the way we did back then.”

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