1. Ⓒ Olof S. Future directions of EU agricultural policies The CAP towards 2020 Tassos Haniotis, Director Economic Analysis, Perspectives and Evaluations DG for Agriculture and Rural Development European Commission ABARES Outlook 2011, 2 March 2011

2. Haniotis - ABARES Outlook 2011 2 Outline 1. The objectives of CAP reform 2. The context of CAP reform 3. The CAP at a glance 4. Policy challenges and options 5. Next steps

3. Haniotis - ABARES Outlook 2011 3 CAP reform objectives at a glance Future challenges Economic challenges Environmental challenges Territorial challenges Food security Price volatility Economic crisis GHG emissions Soil depletion Water/air quality Habitats/biodiversity Vitality of rural areas EU rural diversity Regional growth Equity and balance of support Contribution to Europe 2020 strategy Viable food production Sustainable management of natural resources Balanced territorial development CAP2020 reform objectives

4. Haniotis - ABARES Outlook 2011 4 The wider context of CAP reform The future of the CAP is debated within the context of: A cost-driven commodity price boom –the “baseline” to assess the impact of potential policy changes is full of major uncertainties, mostly of uncertainties outside agriculture A new set of EU institutional realities –co-decision after the Lisbon Treaty increases the role not just of the EP in the decision process, but also of the wider public in the consultation process A parallel process of multiple EU policy decisions –CAP reform is linked to the debate about the future EU budget and the wider EU 2020 strategy of “smart, sustainable and inclusive growth”

5. Haniotis - ABARES Outlook 2011 5 Real commodity prices

6. Haniotis - ABARES Outlook 2011 6 Energy and agricultural prices Source: World Bank. Agriculture + 50 %Energy + 223 %

7. Haniotis - ABARES Outlook 2011 7 Price developments in the EU food chain Source: European Commission – DG Economic and Financial Affairs, based on Eurostat data FOOD PRICE CRISIS PRODUCER LAG RETAIL LAGDEJA VU? Agricultural commodity prices Overall inflation (HICP) Food producer prices Food consumer prices

8. Haniotis - ABARES Outlook 2011 8 EU agricultural prices Source: Eurostat

9. Haniotis - ABARES Outlook 2011 9 The policy outcome of CAP reform… CAP expenditure and CAP reform path (2007 constant prices) Source: European Commission - DG Agriculture and Rural Development EU-10EU-12EU-15EU-25EU-27

10. Haniotis - ABARES Outlook 2011 10 …and its market impact Sources: European Commission – Eurostat and DG Agriculture and Rural Development

11. Haniotis - ABARES Outlook 2011 11 The evolving role of EU support prices - wheat Sources: European Commission - DG Agriculture and Rural Development and World Bank Note: years are market years July-June. 2010* = average July 2010-January 2011.

12. Haniotis - ABARES Outlook 2011 12 The evolving role of EU support prices - SMP Sources: European Commission - DG Agriculture and Rural Development and World Bank

13. Haniotis - ABARES Outlook 2011 13 The CAP today – budget relevance Rural Development Direct payments Markets Pillar I Pillar II Modulation

14. Haniotis - ABARES Outlook 2011 14 The CAP today – policy relevance Direct payments Basic rate Markets Rural development Innovation Environment Territories Income Public goods Structural adjustment Price volatility Market instruments Food chain issues Other criteria GAEC Budget Economic crisis Economic crisis Climate change Climate change

15. Haniotis - ABARES Outlook 2011 15 Drivers of the broad CAP reform policy options Option 1 Continue the gradual reform process Adjust the most pressing shortcomings (e.g. more equity in the distribution of direct payments) Option 2 Capture the opportunity for reform More sustainable and balanced CAP (between policy objectives, MS and farmers) More ‘green’ targeted measures Option 3 More fundamental reform Focus on environmental and climate change objectives through rural development Move away from income support and most market measures

16. Haniotis - ABARES Outlook 2011 16 Main priority the “greening” of the CAP A greener CAP within Resource Efficient Europe (Europe 2020) Greener Direct Payments Stronger Rural Development Enhanced cross compliance

17. Haniotis - ABARES Outlook 2011 17 The debate about policy instruments Better targeted to objectivesBased on two pillar structure Direct payments Market measures Rural development Continue market orientation Streamline and simplify safety nets Improve food chain functioning Main guideline themes environment climate change innovation Improvements in coherence with other policies delivery mechanisms Address risk management New distribution criteria Redistribution among MS within MS Redesign basic uniform rate “greening” of direct payments coupled support provisions Better targeting areas with specific natural constraints capping payments small farmers

18. Haniotis - ABARES Outlook 2011 18 Average direct payments per potentially eligible area and beneficiary Direct payments net ceilings fully phased-in (in 2016) Source: European Commission - DG Agriculture and Rural Development

19. Haniotis - ABARES Outlook 2011 19 Next steps Inter-institutional debate on the Commission Communication Preparation of Impact Assessment (IA) Preparation of Legal Proposals In-depth Commission analysis of new policy settings, options and their economic, social, environmental and administrative impactsIn-depth Commission analysis of new policy settings, options and their economic, social, environmental and administrative impacts Stakeholders consultation: analytical contributions from stakeholders based on a Consultation documentStakeholders consultation: analytical contributions from stakeholders based on a Consultation document Legal proposals presented in 2011

20. Haniotis - ABARES Outlook 2011 20 Thank you http://ec.europa.eu/agriculture/cap-post-2013