Common Agricultural Policy

Why does food system reform stall?

2026-08-06T02:08:43.115-07:00

Professor Alan Matthews gave the presidential address at the 100th conference of the Society of Agricultural Economics held in Oxford earlier this year. The Princess Royal, Princess Anne, was present for the address and commended the concept of academics as 'honest brokers'. I had the privilege of reading this and commenting on it in draft form. The revised version has now been made available on an early view basis in the Journal of Agricultural Economics.

I found the concept of ideal type policy ontologies particularly helpful.

Here is the abstract:

Agricultural and food policy is increasingly shaped by geopolitical instability, ecological constraints, technological disruption, political polarisation and declining trust in expertise. At the same time, calls for food system transformation have gained prominence as evidence accumulates on the environmental, health and social shortcomings of current food systems. Yet reform has frequently stalled despite extensive scientific analysis and broad recognition of the need for change. This paper examines why.

After reviewing some traditional explanations for policy persistence, the paper introduces the concept of policy ontologies: underlying ways of understanding what the food system is, how it functions, what it is ultimately for and how change occurs. Three ideal-type ontologies are identified: a productivity ontology, a power-focused ontology and an ecological ontology. These ontologies shape the definition of policy problems and the selection of preferred policy responses, helping to explain why stakeholders often appear to talk past one another.

As the Society begins its second century in a more turbulent and contested policy environment, the profession's central role remains the production of rigorous evidence. That contribution will be strengthened by a greater awareness of the different ways in which food systems are understood and of how these perspectives shape both policy debates and the interpretation of evidence. Recognising these underlying assumptions can help agricultural economists contribute more effectively to policy debate as honest brokers of policy alternatives.

Heatwave hits grain harvest

2026-07-24T02:07:47.812-07:00

Europe’s June heatwave wiped more than €2bn from the value of its grain crop, according to new analysis, with France and Hungary bearing the brunt of the damage. Almost 9mn tonnes were removed from forecasts for grain production across the EU and UK in the four weeks following the heatwave, according to Coceral, the European grain traders’ association.

Analysis by the Energy and Climate Intelligence Unit valued the lost production at about €2.1bn in national farm-gate prices for wheat, barley, maize and other grains, or about 5 per cent using 2025 production value estimates. The heat struck wheat during the critical period when kernels were filling in central and southern France, southern Germany, Austria, Poland and Hungary, Coceral told the Financial Times.

Spring barley was more badly affected than the winter barley crop, which was largely developed before the temperatures rose. The hottest June on record for western Europe follows a temperature rise of 3C over the 1991-2020 average, In France, the thermometer reached a high of more than 43C and in Hungary the peak was more than 40C. About half of the reduction in Europe’s grain forecast came from maize, used mainly for livestock feed, which was caught during pollination in France and Hungary. Coceral cut its forecast for the EU and UK maize crop from 57.2mn tonnes to 52.7mn tonnes. The EU is a net importer of the crop in poor harvest years, meaning the shortfall could increase demand for shipments from suppliers including Ukraine and Brazil.

The smaller French harvest could also reduce the amount of wheat available for export to buyers in north and west Africa, while higher feed costs are likely to filter through to livestock producers in coming months. France accounted for almost half of the grain crop damage. Its forecast was cut by 4.1mn tonnes, worth about €891mn at current prices.

Most of its reduction came from maize, for which the forecast was lowered by 3.35mn tonnes to 9.4mn tonnes — below even the crop produced during the severe drought of 2022. Hungary suffered the second-largest hit, with its grain forecast cut by 2.4mn tonnes, valued at about €444mn.

Spain lost a further 1.4mn tonnes, worth €276mn, while Germany’s forecast was lowered by roughly the same amount, equivalent to €233mn of production. The impact could be exacerbated for Hungarian farmers because domestic producer prices fell as the harvest approached, with cheaper Black Sea grain weighing on the market.

That leaves growers facing the loss of production without the partial offset from higher prices, which could be received by some French farmers. “This will hit farmers in the pockets, reducing their income and undermining European food security at the same time,” Tom Lancaster, ECIU land, food and farming analyst told th\e FT.

The losses come as EU governments negotiate the future of the bloc’s Common Agricultural Policy. Théo Paquet, senior policy officer at the European Environmental Bureau, told the Pink ‘Un that instead of subsidies being used to fund resilience to climate change, they “continue to fund harmful practices that contribute directly to these crises — fuelling an expensive and unsustainable feedback loop”.

UAE royal family benefits from CAP payments

2026-05-12T03:23:00.000-07:00

Professor Alan Matthews highlights ‘An impressive piece of investigative journalism. It not only adds support for the Commission's proposal for degressivity and capping of income support payments, but it also undermines the argument that these payments are necessary to ensure food security in Europe.’

According to a report in The Guardian, ‘The United Arab Emirates’ ruling royal family is benefiting from tens of millions in EU subsidies to grow crops destined for the Gulf, it can be revealed.

A cross-border investigation by DeSmog and shared with the Guardian found subsidiaries controlled by the Al Nahyans collected more than €71m (£61m) in six years for farmland it controls in Romania, Italy and Spain.’

However, some have that this has argued that this is populist journalism the latest version of a tired 'scandal' trope: "The “scandal” that larger farms receive more than smaller ones under area-based payments distracts from the real problem, which is that EU agricultural policy as a whole is catastrophically inconsistent from a governance ("ordnungspolitische") perspective. Industrial and structural policy cannot be justified on the basis of income arguments. This creates a class ("Stand") of privileged recipients of state funds and causes massive problems through misallocations in structural change. This fundamental problem needs to be addressed."

Another comment was: 'We already had the same story X times: the Queen of England, Rheinbraun, BASF etc. As a result more or less bureaucratic active farmer clauses were introduced which did not change a lot while creating difficult and burdensome administrative problems. Capping would be a solution which however was rejected each time it was proposed by the Commission. These stories distract from the real question: Should the CAP carry on with direct payments and, if yes, should they be merely paid for keeping areas in good agricultural and ecological condition or rather for achieving public goods?'

The CAP always leads to controversy about both policy objectives and instruments.

Is the influence of the farm lobby weakening?

2026-05-06T02:03:00.000-07:00

The Financial Times has a major article this morning on the CAP as discussions take place on the next iteration of the CAP. And who is in charge as farm commissioner? A farmer from Luxembourg who went to university in France. The Grand Duchy is always seen as susceptible to French influence.

I reproduce some highlights from the article below but add some comments of my own in square brackets.

On May 1, decades of resistance by the agricultural lobby were broken when the trade deal Mercosur came into effect. Member states earlier voted narrowly to apply the pact, albeit with significant concessions to assuage the farmers and their powerful special-interest groups. European Commission president Ursula von der Leyen exercised her power to over-rule legal challenges to the deal to ensure it came into provisional force.

It was a moment that suggested the long-held power of the farmers could be weakening. Through political protection and heavy subsidies, European farming has been designed not only to secure food supplies but also to preserve a rural way of life. [But the future of many rural areas may not be principally in farming but in tourism. Better broadband connection is vital.]

The result is a sector that remains dominated by small family farms even as agriculture elsewhere in the world has consolidated and industrialised. But the Mercosur deal has shown that the model may be coming under strain, just as policymakers are debating the future of the subsidy regime that underpins it. [But the deal has been watered down and took quarter of a century to negotiate].

Farming groups say trade deals and other reforms threaten Europe’s food security at a time of growing geopolitical risk and just as farmers come under even more pressure as the Gulf crisis forces up fuel and fertiliser prices. [It’s a good time for farmers to bang the food security drum].

But supporters of reform to the system argue that Europe’s priority has to be competing in this new geopolitical world, rather than shielding farmers from market forces with a safety net of subsidies.

Some believe these heavy subsidies are slowing down market-driven restructuring that could replace failing family farms with more efficient, large-scale agribusinesses — as is happening already in parts of southern Europe. The impact on overall food production would be limited, they say. [But the idea of the family farm has sentimental appeal to urban voters].

Smaller farms are also seen by industry groups as central to Europe’s rural identity. Organisations such as Italy’s biggest farm lobby Coldiretti argue that these holdings sustain not just local economies but landscapes, traditions and food cultures that define much of the continent. [High quality foodstuffs are niche products that can command a price well above that commanded by commodities. Many consumers are ‘foodies’ interested in cooking and provenance].

But some experts argue the risk to food security is overstated. Recent studies by the EU’s Joint Research Centre show that if the CAP were removed, agricultural production would only reduce by just over 5 per cent.

“Fertile good land is not going to be left idle if we don’t pay subsidies to farmers,” Alan Matthews, professor of European agricultural policy at Trinity College Dublin, told the Pink ‘Un. He says that to maximise food production and reduce subsidies, the EU needs bigger farms. But that goes against the grain of popular opinion and national culture. [I have recently been working on a co-authored essay with him].

The current moment “raises interesting questions about whether family farming is the way to continue the structure in the future”, Matthews told the FT, “not only when farmers have to raise their crops but have to be accountants, they have to be vets and environmentalists and work drones and all this stuff. To expect anyone to be even medium level in all these skills is a little too much.”

Institutional investors move in

As many family farmers are selling up, institutional investors are moving in. Spain and Portugal, which already supply a large share of Europe’s fruit, vegetables and olive oil, have become a focal point, where many see an opportunity to expand and modernise farming. Data from global real estate adviser CBRE shows more than €4.2bn was invested in Iberian agribusiness between 2022 and 2024, with institutional investors accounting for roughly half of that total.

“Until 10-15 years ago, the agricultural asset class wasn’t a prime consideration in investors’ portfolios,” Javier Uribarren, partner at Trifolium Farms told the leading business paper. This business acquires and manages agricultural land on behalf of institutional investors across Iberia, focusing on permanent crops such as olives, almonds and citrus.

Increasingly, however, it has become more attractive as “an inflation hedge” and as “an asset that is uncorrelated from others” in a typical portfolio, he commented. The attraction is not just the land itself, but how the sector is changing. “There’s a natural consolidation of a sector that was very much driven by family ownership and that is the succession of family ownership into institutional investors, private equity, pension funds etc,” he added, explaining that farms are often too small to compete and in many cases there is no one to take them over.

Investors are betting that bigger farms work better. “Everything that we do is mechanised,” Uribarren says. “Unless you have the necessary scale . . . it’s not profitable.” Larger operations can invest in irrigation, new planting systems and technology that smaller farms cannot afford.

This will make it easier for the EU to compete with more industrialised producers such as Brazil or Australia, where agriculture operates at greater scale and with fewer subsidies. But Europe’s farmers are unlikely to go down without a manure-slinging fight first. [Expect more angry demonstrations in Brussels and member states].

EU budget discussions reach critical stage

2026-04-30T01:55:00.000-07:00

Professor Alan Matthews looks critically at multi-year EU budget proposals which have reached the European Parliament: https://capreform.eu/europes-e1-8t-budget-fight-just-got-real/

Matthew notes: 'This calls for increased MFF expenditure of 55% in real terms compared to the current MFF (where the Commission proposes an increase of 41%, in both cases including repayment of the NGEU loan). I find increases of this magnitude implausible, raising the question where reductions in the Commission's budget proposal might be made. We will see the Council's opening gambit when the Cyprus Presidency submits the first version of the negotiating box with figures to the June meeting of the European Council.'

Has leaving the CAP been good for English farm policy?

2026-03-31T01:39:00.000-07:00

The Economist thinks that getting rid of the Common Agricultural Policy has led to a more effective farm policy in England so it is one example of a Brexit dividend (Wales and Scotland are different cases).

The journal comes from a stance that favours market oriented policies so the views expressed in an editorial and article are no great surprise. In broad terms I agree with them. This doesn't mean that Brexit was a good idea viewed in the round, but the CAP remains a dysfunctional policy in many respects.

First, I think that blanket subsidies for farmers related to the size of farm discourage innovation. They could well be used for personal consumption rather than investment in the enterprise. Scotland continues to give direct subsidies as part of a generous package for farmers (but they have elections in May). Wales offers such support to a lesser extent.

Funds should be linked to specific policy targets and in particular genuine public goods such as the environmental benefits specified in current policy.

Given the sector's poor productivity record and the need to take advantage of digital technology, money should be made available for capital investment and training. New capital grants have recently been announced, but the funding does not match the scale of the problem and is likely to run out quickly.

The conflict in the Middle East has given farm organisations the chance to bang the food security drum to justify a restoration of direct support, but food security is a merit good rather than a public good. Our imported food comes from a wide range of countries.

As The Economist points out, diversification has been important for the viability of farm businesses. A family moved from Wales to the better land of Warwickshire in the 1930s. The land is still farmed and the farm manager was short listed for farm manager of the year a few years back

However, their main now comes from a very successful removals and storage business (I am a satisfied customer of both aspects of their operation). Business is so good they have a coffee shop on site.

Watching the latest series of This Farming Life on BBC2 it is also evident that many farms rely on the off farm income of at least one partner. (One farming relative has married a university lecturer).

Farming involves hard physical work, good business sense and long hours, but this doesn't justify distorting subsidies.

CAP will be tricky subject if Iceland joins EU

2026-03-06T09:01:00.000-08:00

The news that Iceland is to hold a referendum on joining the EU in August reminds us that, apart from fisheries, agriculture is likely to be one of the most difficult topics in any negotiations. Iceland has a producer subsidy equivalent three times the OECD average and farmers on average receive nearly half their income from the state.

It is a small and shrinking sector, but is cherished and has some interesting innovations such as using geothermal power to grow tomatoes. Cucumbers and herbs are also produced in this way all year round.

The sheep sector is unsurprisingly the largest and there is some dairy production.

CAP budget stays stable but different winners and losers

2026-03-05T02:58:00.000-08:00

Professor Alan Matthews writes:'The likely size of the CAP budget in the next programming period 2028-2034 has been highly contentious since the publication of the Commission’s MFF proposal last July. Among agricultural stakeholders, the AGRI Committee in the Parliament, and the AGRIFISH Council, the amount available for the CAP under its two Pillars in the current programming period was compared with the size of the minimum ring-fenced amount for CAP income support in the proposal and found wanting.

The Commission, on the other hand, has insisted on the potential for a larger CAP budget depending on the choices made by Member States. In my latest post Professor Matthews concludes that the Commission is broadly right.

Assuming the Commission MFF proposal is agreed (a big if!), the CAP budget will be broadly similar to the current CAP in current prices and possibly bigger. However, its distribution between Member States will be different. For some Member States, especially Denmark, Austria and Ireland, it will not be possible to maintain their current CAP receipts, but other Member States already have a larger CAP budget than in the current period assuming they fully use their 'Mercosur' concession.

Full analysis here: https://capreform.eu/the-likely-size-of-the-cap-budget-in-the-next-mff-reprise/

Manure crisis hits Dutch farmers

2026-02-28T03:18:00.000-08:00

Just before Christmas, Dutch farmers received long-feared news from Brussels: they would have to drastically cut the amount of manure they put on their land because too much nitrogen was leaching into watercourses, damaging local wildlife.

The disposal of animal excrement has convulsed Dutch politics for years. When the government tried to compulsorily buy out livestock holdings to reduce production, it sparked a wave of rural protests that could return just as a new and fragile governing coalition takes office.

The densely populated nation of 18mn has almost as many farm animals as people, and the strain on nature is showing. Hundreds of farms are closing every year, and pig, sheep and cattle numbers are declining as their impact on the environment hits strict EU limits on nitrogen, phosphorus and nature restoration. It is a wrenching process for a country that is the world’s second biggest food exporter by value after the US (some of that is re-exports).

The impact of environmental rules has combined with subsidy reductions, soaring prices for inputs such as herbicides and fertilisers, and volatile agricultural prices to cut into morale in rural communities, Bart Millenaar of farmers’ union LTO told he Financial Times. Nitrogen levels are constantly monitored, while farmers must secure permits to add to their livestock herds. The crisis has fed into the country’s turbulent politics.

Rural disaffection and the pure PR system propelled a populist coalition of parties led by the far-right Geert Wilders to power in 2024. But within a year Wilders had pulled out, leaving a caretaker cabinet to limp on until this month. The Farmers-Citizen Movement, part of the outgoing government, was punished for failing to deliver on promises to farmers that it could solve their problems — including by convincing Brussels to extend the exemption to the nitrogen limit.

Following elections last year, the liberal D66 in January announced a minority government with the centre-right VVD and Christian Democrats. After two years without a clear farm policy, incoming prime minister Rob Jetten has pledged to cut nitrogen emissions from agriculture by 42 to 46 per cent from 2019 levels by 2030, and said the government will continue buying up farms to reduce livestock. He also wants to fund innovation including plant-based meat alternatives and sustainable pesticides.

Millenaar, of the farmers’ union, said farmers had been buffeted by the changes. “They want stability. In six years we’ve had three governments with different policies,” he told the FT.

Now one more safety valve is being taken away. While the EU limits nitrogen emissions to 170kg per hectare per year, the European Commission had allowed Dutch farmers to use 250kg because of its large animal herd. The Commission ended that exemption in a letter on December 23. Jessika Roswall, the EU’s environment commissioner, wrote that “the Netherlands continues to face very serious challenges in managing nitrates and nitrogen. A further derogation would add to these pressures at a time when water quality and nitrogen pollution remain a pressing concern.” She said the government had not implemented an action plan to cut nitrogen emissions, which also come from vehicle fumes, industry and households. The limit will be gradually reduced to 170kg over the coming year.

The Netherlands is not alone in struggling to meet the nitrogen ceiling: it is being breached across the wet, northern countries that produce much of Europe’s milk and cheese. Ireland has been given three more years of higher limits but is reducing its dairy herd before it is too late. Belgium and Germany have been given warnings by the Commission.

Analysis by academics at Wageningen University in January found there were only three potential solutions to the crisis: reducing livestock numbers, improving manure processing to export more or reducing the protein content of cattle feed. But such measures come too late for many farmers.

Weather in Soutrhern Europe hits food supplies

2026-02-24T06:14:00.000-08:00

Fence to keep out wild boar on a family member's farm in Spain

Voters and consumers particularly react to food price inflation which has remained relatively high. I certainly notice it on my trips to the supermarket and I am not a poorer consumer. The least well off spend a great portion of their budgets on food and often have to rely on food banks.

One of my children has a small retirement farm in Spain and tells me that January has been unusually cold and wet, albeit that has replenished their water source. The almond trees do seem to have blossomed more or less on schedule.

A lot of big fruit and vegetable producers in the UK decamp to Spain for the winter. The carbon footprint of growing tomatoes under heated glass is greater.

A wave of extreme rain and flooding across the Mediterranean countries and north Africa has battered the winter growing regions that feed Europe, disrupting supplies of fruit and vegetables and threatening food price rises. Spain, Portugal, Morocco and parts of Italy and Greece function as Europe’s winter “pantry”, exporting tomatoes, cucumbers, avocados, peppers, berries and citrus fruit northwards when domestic output is limited.

But extensive damage to crops and infrastructure in recent weeks could quickly ripple through wholesale markets and supermarket supply chains, warn economists. “When you have the types of floods that we’re seeing in Europe and north Africa, combined also with the very wet winter here in the UK . . . there’s no way around it: we’ll see the pressure on vegetable and fruit prices,” David Barmes, policy fellow at the London School of Economics’ Centre for Economic Transition Expertise told the Financial Times.

Spain, which recorded its wettest January in 25 years, has already recorded damage to 22,000 hectares of agricultural land, according to insurance association Agroseguro. Luis Planas, Spain’s agriculture minister, told the Pink ‘Un that the affected area could “nearly double” once assessments were complete. The ruin extends beyond crops to irrigation systems, farm machinery and rural roads, complicating harvesting and distribution even where produce survives.

The concentration of European winter fruit and vegetable supply in a handful of regions makes markets particularly sensitive to weather shocks. In January last year, Spain accounted for more than 70 per cent of UK sweet pepper imports and 65 per cent of cucumbers, while Morocco supplied more than a third of British strawberry and raspberry imports, according to UK trade data.

“The biggest, probably most proximate impact [from the recent weather] is the impact on fresh produce from Spain and Morocco,” Tom Lancaster at the Energy and Climate Intelligence Unit, a UK-based think-tank told the FT. “If supply tightens, buyers may find themselves competing for smaller volumes,” he said. “You might also see an impact on quality: fruit damaged by heavy rain doesn’t travel or store as well.”

The Netherlands imports 35-40 per cent of its fresh vegetables from Spain, Morocco and Portugal, which together also provide 15-20 per cent of its fresh fruit imports during January and February, according to ING. (Perhaps that explains why there are so many Dutch expats in my daughter’s area of Spain, indeed my great-granddaughter has a decent command of Dutch).

In Andalusia, one of Spain’s main agricultural regions, farmers’ association Asaja estimates that 20 per cent of all production has been lost. In one province alone, Córdoba, Asaja said losses totalled €700mn, with olive groves accounting for €550mn of that sum and further damage to cereals and citrus. Last week Pedro Sánchez, Spain’s controversial prime minister, visited the storm-hit town of Huétor Tájar, west of Granada, where the mayor explained that 80 per cent of its population depended directly or indirectly on the region’s asparagus production. With harvesting due to begin within weeks, mayor Fernando Delgado said that as much as a third of the crop remained underwater.

The adverse weather across Andalusia and other major growing regions in southern Europe meant “prices would be higher year on year”, Thijs Geijer, a senior economist covering food and agriculture at ING told the leading economics and business paper, adding that consumers would see fewer discounts. But he noted that the effect on inflation data could be muted in the Netherlands, where the affected products carry little weight in the consumer price index.

Barmes said that the latest storms were part of a wider pattern of climate shocks feeding into food price inflation. His recent research has shown that the gap between UK and euro area food inflation in recent months was largely driven by a small number of climate‑sensitive items — including chocolate and olive oil — some of which carry a much heavier weight in the UK shopping basket, leaving British consumers more affected when extreme weather hits.

“To me, there’s little doubt that we’ll see pressure on food prices later in the year, even if some of it will be more short term,” he told the FT. “It’s very difficult to substitute away from Spain and Morocco in particular for certain parts of the winter vegetable basket, so I think we’ll see that [impact] quite soon, and then later, we’ll probably see effects also on fruit, and then also on meat and dairy . . . and olive oil.”

Central banks have begun acknowledging the influence of extreme weather on inflation dynamics. In its August 2025 monetary policy report, the Bank of England noted that climate-linked disruptions were contributing to higher UK food prices and complicating efforts to return inflation to its 2 per cent target. Governments have pledged support for affected farmers through insurance payouts and EU crisis reserve funds linked to the bloc’s Common Agricultural Policy.

Spain has vowed to give farmers €2.2bn in direct aid and spend €600mn on rebuilding infrastructure. But economists say the broader concern is structural. “I think we’re really seeing that this is not a one-off,” said Barmes. “These types of climate-related supply disruptions are becoming more frequent, severe, and geographically widespread.”

Member states to do more on CAP, EU institutions less

2026-02-24T03:29:00.000-08:00

Interesting blog post recommended by Professor Alan Matthews: https://capreform.eu/institutional-reform-will-shape-the-next-cap/

This authoritative post is well worth reading in its entirety. The conclusion is: 'We can expect the trend already visible today to intensify, widening disparities between countries, resulting in very divergent emphases within the CAP, not always because of different structural needs, but because of different political priorities. Meanwhile, the big questions, how the CAP contributes to climate and biodiversity, the future of livestock, the prospects for young and small/remote farmers, will remain only half-answered. Dissatisfaction will not vanish. The main difference is that Member States will now carry more responsibility for better policy and progress, while EU institutions bear a little less.'

Where are farm incomes heading?

2026-02-17T03:29:00.000-08:00

Summary of key insights on farm income trends from a recent study commissioned by the Agri Committee of the European Parliament: https://www.europarl.europa.eu/RegData/etudes/ATAG/2026/759350/CASP_ATA(2026)759350_EN.pdf

Farm incomes are more volatile and subject to external shocks. Discrepancies in farm income across the EU are explained by structural factors such as farm size and specialization.

The case for a protein crop stategy

2026-02-11T04:28:00.000-08:00

Professor Alan Matthews writes: 'The Protein Project has just published this beautifully-produced report with detailed analysis and recommendations for a coordinated value chain approach to bringing protein crops back into the mainstream of European arable farming. Using the fava bean (also known as broad beans) as its exemplar, it makes a convincing case for what is needed for a protein crop strategy to succeed.

Broad beans are a particular favourite of mine, I have strong memories of sitting in the summer sunshine by the kitchen door as a child shelling broad beans that my father had just picked from the vegetable garden, but it is not easy to find them in supermarket aisles today.'

The report can be found here and is a significant contribution to the debate about more economically and environmentally sustainable policies: https://www.theproteinproject.eu/publications/towards-a-legume-renaissance

France becomes net importer of agriculture products

2026-02-09T01:43:00.000-08:00

France has become a net importer of agricultural products for the first time in almost a decade, prompting warnings that the competitiveness of Europe’s largest farming country is deteriorating.

The trade balance for raw products, including grain, meat, dairy and fruit and vegetables, declined for the third year in a row to reach a narrow deficit of €300mn in 2025, according to French customs data released on Friday.

Results were dragged down by higher prices of some imports like cacao and coffee, as well as a weak dollar. Exports of wheat, usually a leading category for France, also suffered from a bad harvest in 2024 which affected the 2025 figures. Imports of agricultural products rose 9 per cent to €19.7bn, a sixth consecutive annual increase and a new historical high.

Dorian Roucher, senior economist at Insee, told the Financial Times that beyond the temporary factors, which will probably improve next year, the data pointed to more worrying structural weaknesses in the sector. “France has lost much of the comparative advantage it once had in agriculture,” Roucher said, adding that the reasons included farms shutting down when their owners retired, scaling back of cattle herds and neighbouring countries improving their product quality.

For decades, France had come to rely on agrifood being surplus items in its foreign trade balance, acting as economic pillars on a par with aerospace or luxury goods. But Roucher said that could no longer be taken for granted, despite demand for food growing globally.

The trade balance was better for the broader category of agriculture and food products, which includes high-margin wine and spirits where France is a powerhouse. But even in this category, France last year eked out only a small trade surplus of €200mn, its lowest in 25 years and down €5bn year on year.

To blame were trade tensions with the US that flared when President Donald Trump initially threatened up to 200 per cent tariffs on French alcoholic drinks, including Champagne and cognac. In the last quarter, wine and spirits exports roughly halved.

The data comes as French farmers have been protesting for months over threats to their wages, driving their tractors to Paris and pelting town halls with manure. They warn of being squeezed between higher input prices — fuel, fertiliser, energy — and retail prices that fail to cover their costs.

Farming unions also complain that stifling administrative and environmental regulations are handicapping them on world markets, making it impossible to compete with imports produced under looser standards.

Their anger has crystallised around the Mercosur trade deal between the European Union and Brazil, Argentina, Uruguay and Paraguay, which the bloc clinched recently after years of wrangling. Yannick Fialip, head of agriculture lobbying group CNPA, told the Pink ‘Un that the worsening of the trade balance for farm products should be a wake-up call to spur the industry and government to action. “More than merely confirming the slow decline of France’s agricultural and agrifood trade balance, this [data] seals the country’s downgrading among the world’s major exporting powers. It is a shock of unprecedented scale that calls for a general mobilisation,” he said.

Winners and losers from new funding formula

2026-02-03T02:12:00.000-08:00

Professor Alan Matthew writes: ‘There is great interest in what the Commission's MFF proposal and the subsequent modifications announced by the Commission President might mean for future EU support for farmers through the CAP. One of the sure things is that the impact will not be uniform across Member States, partly because the new allocation formula for the National and Regional Partnership Fund (NRPF) redistributes EU funding between Member States.

In previous blog posts, I attempted to estimate how the new funding formula (including the ring-fencing for specific objectives) can constrain the ability of Member States to transfer NRPF resources to increase the CAP budget beyond the minimum ring-fenced amounts proposed by the Commission, and thus to provide a level of CAP funding equivalent to that available to farmers in the 2021-2027 period.

This finding qualifies the conclusion in my previous post that there is a good chance that the level of CAP support would be maintained in current prices if the Commission’s MFF proposal were approved as it stands. This assessment may still stand for the EU as whole, but not necessarily for each Member State. ‘ In short, potentially there will be winners and losers.

Full analysis: https://capreform.eu/further-reflections-on-cap-governance-and-budget/

My cow is a stranded asset

2026-01-27T03:30:00.000-08:00

A 'stranded asset' in the Azores. Remote and peripheral areas may find a shift in diets particularly challenging.

As consumers shift to plant based diets for a variety of reasons, livestock are likely to become 'stranded assets', something that has implications for the decisions made by farmers and also public policy. Professor Alan Matthews reviews an important contribution to this debate: https://capreform.eu/dealing-with-stranded-assets-in-the-green-transition/

In particular, there are implications for the green transition. Matthews comments: 'Obviously, eliminating subsidies that might encourage farmers to invest in assets that could become potentially stranded should be a first priority. High stranded asset exposure, especially in bovine, pig meat and dairy systems, may delay EU dietary and climate action by increasing political resistance or financial vulnerability among producers. The paper argues for targeted policy support to farmers who want to adjust their farm businesses and possibly compensation for those who are unable to adjust.'

Mercosur deal upsets French farmers

2026-01-24T03:27:00.000-08:00

The EU made some last minute concessions on agriculture to get the trade pact with Mercosur signed after 26 years, but farmers are still not happy

Brussels won over waverers including Italy with extra subsidies and possible bans on some agricultural imports. The EU also agreed safeguards to temporarily suspend tariff exemptions for certain agricultural products if imports surge or prices drop. Transition periods for removing tariffs range up to 30 years.

French farmers were still strongly opposed and more than 5,000 of them and 750 tractors demonstrated in Strasbourg leading to clashes with riot police outside the European Parliament. They also set up road blocks outside the ports of Cherbourg and Le Havre and stopped container lorries.

Beef imports into Europe will be limited to 99,000 tons a year and poultry to 180,000 tons, but European farmers complain that their Mercosur counterparts face less stringent regulations on animal welfare and pesticides. They also complain that meat from there contains antibiotics and growth hormones,

In an article on the deal, the Spectator points out that there were 1.6 million farms in France in 1970 and today there are just 450,000, but some of us might see that as an efficiency gain.

However, the prospect of an EU trade deal with India is likely to lead to further tensions with French farmers Meanwhile, the Federation of German Industries has praised the deal as a strong signal for free trade.

Can the EU borrow the money it needs?

2026-01-07T07:34:00.000-08:00

Professor Alan Matthews looks at the EU's capacity to borrow in the light of the new budgetary framework: https://capreform.eu/the-role-of-borrowing-in-the-eus-mff-budget-discussions/

Key issues for agricultural stakeholders are

1. Whether the EU should be endowed with permanent borrowing powers.

2. How to expand the EU’s own resources.

3. Whether agriculture and rural development might benefit from the proposed Catalyst Europe loan programme in the next MFF.

Bleak outlook on US-EU trade relationship

2026-01-04T02:20:00.000-08:00

Professor Alan Matthews provides an in depth authoritative look at the US-EU trade relationship in 2025: https://capreform.eu/navigating-the-eu-u-s-trade-relationship/

He expects the relationship to break down in 2026. How should the EU respond? There aren't many or indeed any good choices. Retaliation is not very effective given the EU's limited ability to inflict pain on the US economy.

However, that does not mean a passive acceptance of the status quo. Matthews argues:'The necessary response is to reduce our dependencies to allow more room for manoeuvre in any future stand-off, recognising that this is easier said than done.'

Farm lobby forces delay to Mercosur pact

2025-12-19T05:54:00.000-08:00

Europe's farm lobby has once again shown its strength with a further delay to the signing of the trade deal with the Latin American trade bloc Mercosur which has now been over 25 years in the making

The EU has agreed to delay the signing of its trade deal with South American countries until early January after Italy and France said they needed more time to convince farmers to accept the pact. The decision, which ends plans to complete the long-delayed Mercosur free trade accord by this weekend, came after Italian Prime Minister Giorgia Meloni pleaded for more time during a phone call on Thursday with Brazilian President Luiz Inácio Lula da Silva.

“We have reached out to our Mercosur partners and agreed to postpone slightly the signature,” European Commission president Ursula von der Leyen posted on X. The Brazilian leader had warned on Wednesday that if the landmark deal was not signed this weekend it would never be signed during his presidency. But he softened his tone after the call with Meloni, the exponent of pragmatic nationalist politics.

“Meloni explained that she is not against the agreement, she is simply experiencing some political embarrassment because of the Italian farmers, but that she is certain she is capable of convincing them to accept the agreement,” Lula said. “She asked me that if we have patience for a week, 10 days, at most a month, Italy will join the agreement,” he said, adding that he would relay Meloni’s comments at a meeting of Mercosur countries this weekend.

The EU’s biggest free trade deal has taken 25 years to negotiate, having been agreed a year ago, pending formal ratification. France has also sought to delay the signing of a deal until its concerns about the impact on farmers were assuaged.

The politics have been complicated by a separate dispute involving French farmers which has somehow become related, at least in the minds of conspiracy theorists.

The French government's handling of an outbreak of bovine lumpy skin disease (LSD) has led to the blocking of highways and inter city railways along with the traditional dumping of manure outside government offices. The disease can be fatal for cattle, but is harmless for humans.

Ministers have ordered the culling of herds in affected areas and the vaccination of those nearby. However, internet rumours say it is part of an EU plot to kill off French cattle in favour of South American beef imports. Riot police have had to be brought in to protect vets implementing the culls, The army has been drafted in to speed up vaccinations.

What does the rise of the populist right mean for the CAP?

2025-12-16T08:36:00.000-08:00

Alan Matthews writes about the changing political landscape in the EU. ‘The right-wing parties in power or close to power are generally Eurosceptic, though on a spectrum ranging from soft to hard Euroscepticism. This will inevitably influence the debate on the future CAP.

These parties favour the traditional priorities of agricultural policy, such as income support, productivism and food sovereignty, while objecting to Green Deal objectives. They also seek to repatriate powers from Brussels and thus favour greater subsidiarity in the CAP. On the other hand, they also favour a strong budget for farmers, but they may split on whether this should be funded by national budgets or by the CAP.

A more nationalistic stance in net budget contributor countries can put at risk the scale of transfers under the main transfer policies of CAP and cohesion. The Commission's MFF proposal keeps the amount of funding for transfer policies broadly constant in current prices. And its proposed allocation formula for these funds under the NRPF Regulation generally increases the transfers from richer to poorer countries though with notable exceptions (e.g. Belgium and Netherlands will get more while Czechia, Slovenia and Estonia will get less than in the current MFF period).

With the shift favouring Eurosceptic parties across the EU, net contributor countries may well see merit in a lower CAP (and cohesion) budget where the saving in their national contributions to the EU budget would more than allow them increase their national funding to their farmers. Both the scale of funding for transfer policies as well as the allocation formula will come under increasing scrutiny as the MFF negotiations proceed.’

One commentator observed: ‘From an analytical perspective, it is striking that food sovereignty—a concept rooted in left-wing peasant movements and their critiques of globalised, industrial agriculture—is increasingly taken up by right-wing parties. This illustrates how normative concepts can be reinterpreted and repurposed across ideological lines, often becoming detached from their original foundations. It shows why paying attention to how and why terminology travels, changes meaning, and is co-opted in political debates really matters.’

A Spanish perspective wax: ‘Speaking from the Spanish case (a net CAP receiver for 30+ years, with a lot to lose from re-nationalisation), the far-right narrative is that Brussels is dominated by “woke” elites pushing an agenda perceived as anti-farmer. By re-nationalising, they expect to regain sovereignty over what gets funded and under which conditions, so that support better matches their (climate change denialist) ideology. At the end of the day, I don’t think they care much if the pie gets smaller; what matters is choosing who gets a slice and being able to claim the medal of “defending farmers”. Something they can never do under the current CAP after years of demonising Brussels. Basically, nationalist clientelism.’

The farm finance conundrum

2025-12-14T07:54:00.000-08:00

Professor Alan Matthews writes: 'DG AGRI EU Agriculture and Food has published a news item 'Access to finance: unlocking investment for Europe’s next generation of farmers' which states that affordable credit is one of the biggest barriers to entering agriculture for younger farmers.

I am puzzled by some of the inconsistencies in the item. For example, it states that across Europe young farmers tend to operate smaller farms. This is factually incorrect, as is documented in the DG AGRI Analytical Brief No. 10 on young farmers in EU agriculture which makes clear that young farmers tend to operate larger farms than the average (an average of 26 ha compared to an average of 16 ha for other farmers) and that on average they are also bigger in economic size terms.

The news item also highlights that young farmers have higher debt ratios than older generations, a fact confirmed in the Analytical Brief. But this does not support the view that young farmers are necessarily shut out of the credit market - otherwise how would they become more indebted?

I do not dispute that young farmers due to a lack of a credit history may find it difficult to obtain credit finance, and no doubt all businesses would like to see easier access to credit, but does the evidence suggest that young farmers have greater difficulty than other farmers? Of course, we all want to see more young farmers in the industry, but is this focus on credit a bit of a red herring when the real issue is the large number of older farmers beyond pension age continuing to farm and to draw down CAP payments?'

In the distant past (1994/5) I took part in a multi-country study of farm finance, contributing the coverage of the UK and the Republic of Ireland. (The US, Canada, France and Germany also featured). I had some fascinating interviews with bankers, government officials, accountants and farm organisations and I wish we had published more from the study (I had a very able Irish research assistant who undertook a lot of archival work on the history of farm finance in the UK and Ireland.)

The interviews reports are lodged with the Modern Records Centre at Warwick University.

If I was to summarise the findings in one sentence I would say that farmers, or at least larger scale ones, had some pretty good financial deals (and tax concessions).

It is, of course, hard for younger farmers to break in, but that has much to do with older farmers clinging on, as I know from my own family.

Tough tines for Europe's farmers

2025-12-04T08:08:00.000-08:00

Farmers are known for complaining, but right now they may have a point. Agricultural commodities such as grains and sugar have plummeted on futures markets as global supplies have surged. European farmers are suffering in particular as they contend with high input costs and increasingly competitive global rivals.

Benchmark wheat futures in Paris have fallen more than 20 per cent this year to multiyear lows, dragged down by bumper harvests in Russia, Australia and parts of South America. Meanwhile, speculators are building bets on further price falls, with investment funds adding more than 280,000 new short lots in milling wheat futures in the week to November 21, extending their net short position, according to Euronext data.

For UK growers, the fall has been brutal. Wheat prices are now little more than half the levels reached in 2022 following Russia’s invasion of Ukraine. Yet fertiliser, fuel and machinery costs — inflated during the energy shock — have barely retreated.

For arable farmers in Europe, “it’s not a happy situation at all,” Ole Hansen, head of commodity strategy at Saxo Bank told the Financial Times. There is a big gap between “the cheap crop that leaves the farm gate” and the price of bread “when it hits the store”, he said. While the upcoming harvest in Norfolk looks promising, the UK’s wheat yields at this year’s harvest fell after last winter’s torrential rain. But because international markets are well supplied, that does not translate into higher prices.

The financial squeeze is prompting visible restructuring. Brown & Co, the UK’s largest dedicated agricultural auctioneer, said the number of agricultural machines being put up for sale has risen sharply. “It’s become hard to find a day of the week without an auction,” said partner Simon Wearmouth. “I’ve never known the calendar this crowded.”

Even as grain markets sink, UK shoppers have seen little relief in the cost of bread, beer or baked goods. That is because the raw commodity typically accounts for only a small fraction of the retail price. In a loaf of bread costing £1.50, wheat may only account for 16.5 pence to 22.5 pence, according to Financial Times calculations based on research by the Agriculture and Horticulture Development Board, while barley only accounts for a small proportion of a pint of beer.

Energy, packaging, transport and processing costs and retail margins are the main components of the final price. Annual food inflation in the UK was 4.9 per cent in October, up from 4.5 per cent in September. The rise has been driven by five products — beef, butter, milk, coffee and cocoa — where supply shortages globally have pushed up prices.

Across the Channel, growers say the situation is similarly dire. In France, where sugar beet is a flagship crop, producers describe a sector under existential pressure after global sugar prices plunged almost 50 per cent over the past year.

Concessions for South Africa, Mercosur countries in South America and traditional cane exporters have added to supply on a market where European consumption is flat or declining. The result, has been factory closures, with six sites shutting in France since the end of EU sugar quotas in 2017, with more expected if 2026 prices fail to recover.

Producers on both sides of the Channel emphasise a structural problem: Europe’s high environmental and labour standards, while politically popular, make production significantly more expensive than in major exporting nations. In Brazil and India, cane cultivation benefits from favourable climates, large vertically integrated estates and looser rules on pesticides and labour.

The Commission's view of the CAP 'facts'

2025-09-30T02:38:00.000-07:00

Professor Alan Matthews writes: 'The Commission has published a Fact Sheet on "The CAP post-2027" in the next EU budget' which includes, for the first time, an Annex showing how the minimum ring-fenced amount for CAP income support interventions will be allocated among Member States (this will eventually become Annex XVIII in the proposed NRPF Regulation). These minimum ring-fenced amounts per MS are based on their relative shares in the total CAP envelope for 2027.

Farmers and commentators should not fall into the trap of comparing the current national Pillar 1 and Pillar 2 envelopes with these minimum amounts as countries are free to add additional resources from the non-ringfenced amount in the NRP Fund. The Commission also highlights that the budget proposal has higher mandatory minimum amounts of national contributions (co-financing) which, in its view, will create a larger financial volume for CAP support, though the precise impacts will depend on the relative shares of expenditure on interventions that require national contributions and those that do not. Overall, the total CAP budget in a Member State can go up or down (in nominal terms). The eventual amounts cannot be known until draft National Plans are submitted and approved, optimistically in 2027.'

Read what the Commission has to say: https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/cap-post-2027-next-eu-budget_en#national-and-regional-partnership-plans

My personal view is that any formula is always subject to political bargaining which means that policy instruments become less attuned to their stated objectives.

At the end of the day it comes down to raw politics

2025-09-16T06:36:00.000-07:00

Here are some extracts from the conclusions to an important post by Professor Alan Matthews on changes in CAP governance based on a recent conference presentation. I certainly agree with his observation that these issues are ultimately political rather than technical but with such a complex policy one has to grasp the technicalities which he helps us to do. His full analysis is here: https://capreform.eu/strategic-planning-in-the-new-cap/

The proposed NPRR and Performance Regulations represent a structural shift in CAP governance. By embedding agriculture within a horizontal EU performance framework, it moves oversight from predominantly ex post checks to a model combining ex ante compliance verification with real-time monitoring. This will require significant adaptation by Member States and CAP actors but offers the potential for earlier intervention, greater transparency, and stronger alignment with EU-wide objectives.

The fundamental question is whether the proposed changes make genuine strategic planning in the CAP more likely or not. Good strategic planning in the EU budget context requires that objectives are specific and clearly defined, measurable, achievable, relevant, and time-bound (SMART). It also requires that interventions are logically linked to these objectives through a coherent theory of change. Resources should be allocated in ways that reflect political priorities and trade-offs rather than institutional inertia.

Monitoring and evaluation should provide timely and credible evidence both for accountability and for course correction, while the system as a whole should allow learning and adaptation. Strategic planning is about much more than indicator reporting: it aligns objectives, resources, and accountability mechanisms.

Several limitations in the Commission proposal might be highlighted. I am not convinced that linking output and result indicators to intervention fields rather than specific objectives is a positive step. The CAP alone (including forestry) has 40 different intervention fields, and there are hundreds specified in Annex 1. This proliferation in the number of intervention fields is hardly conductive to making reasoned choices between strategic priorities. There is a danger of formalism, where indicator compliance substitutes for genuine strategic steering.

Ultimately, we must recognise that agricultural policy can never be reduced to solely technical considerations and trade-offs. Strategic planning will always be subject to political dictates. But a question for debate could be whether the proposed strategic planning framework for the CAP does as much as it could to align the incentives of Member States with the needs of the Union as a whole.