Europe’s food manufacturing industry has given a lukewarm welcome to the European Commission’s new priorities to reform the EU’s Common Agricultural Policy (CAP) after 2013 – but its representatives want more concrete action.

The Confederation of the Food and Drinks Industries of the EU (CIAA) said immediately that it welcomed the Commission’s recognition of food security as an important issue for manufacturers – Brussels wants to make sure producers are protected better from price collapses – but it wants a more joined-up approach to EU policy making. The CIAA wants the impact of the CAP to be expanded to other issues that indirectly affect food production, for instance the promotion of biofuels, which consumes additional land. The association also cited non-CAP regulations covering food safety, technology, trade, development, environment, consumer issues and social affairs as having a direct impact on the food supply chain and food prices. 

“There are an increasing number of other policies which are impacting farming activities and the supply of raw materials,” the CIAA said yesterday. “The CIAA calls on policy makers to ensure a more holistic approach between policies driving supply, which is essential for ensuring the availability of raw materials needed by the food and drink industry.” 

The Primary Food Processors Association of Europe (PFP) has taken the same line, saying: “Ensuring consistency between the objectives of the various EU policies, in particular regarding internal market and external relations, is crucial. This is particularly relevant for the relationship between the CAP and the EU’s trade and development agendas.”

The Commission’s policy paper outlined the preferred changes to the current system to make it “greener, fairer, more efficient, and more effective”. It outlines several options for reform, including a complete overhaul, but seems to press for a more conservative approach that would implement practical reforms to the current CAP, such as simplifying direct payments to primary food producers and streamlining other subsidies and market supports, while strengthening environmental obligations to CAP beneficiaries. 

The key is using market intervention measures at a “safety net level” (for crises such as last year’s collapse in dairy prices), while maintaining stable incomes for farmers through direct payments. 

“We want [farmers] to get a market signal; that has been the philosophy of the reform of the last 15 years. But we want them to be able to minimize this volatility with a certain level of fixed income support,” the Commission said, explaining that direct payments to farmers would be redesigned to offer a more equitable distribution across the 27 member states, and encourage a more market-driven industry.

The PFP supported the approach to fix the current system rather than build a new one, urging the Commission to strike a balance between market controls and high prices in an effort to keep the industry stable. 

“The recent price hikes and increasing concern about food security have highlighted that responsible regulatory controls have to form part of a sustainable global balance. Market forces along cannot ensure that the world’s goals for food security, stability of supply and sustainable production are achieved. EU and global public and private sector co-operation is essential.”

Indeed, Paolo de Castro MEP, the Italian chair of the European Parliament’s agriculture committee welcomed a drift towards intervention. Speaking to just-food, he said that given increasing shortages of certain foodstuffs, manufacturers should concern themselves with guaranteeing supplies rather than scoring the best price in unfettered free markets. 

A member of Italy’s left-of-centre Democratic Party, de Castro said: “We have entered an era of scarcity. The market alone does not solve all the problems.” Referring to global demand for food outstripping growth in supplies, he added: “We hope that the CAP after 2013 can help us find a solution to this problem.”

De Castro cited the EU’s recent subsidised closure of 85 sugar manufacturers across Europe, in parallel with the abolition of price controls that had kept many processors afloat in the past in a bid to take care of an oversupplied market. “Now we are paying a lot to import sugar,” he said, pointing to global shortages. 

Highlighting last year’s collapse in dairy prices, he added: “We don’t want to distort the market but we need a safety net for farmers, to give them enough help, or they will close. If farms close, food manufacturers will not get the raw materials, and they will not reopen easily.”

De Castro added: “The free liberalisation approach of the last decade – it’s changing – and we need to make a policy change.”

However, Dairy UK, which represents the entire UK dairy industry, sounded a note of caution about increased CAP intervention in EU food markets. It has released a CAP briefing urging the European Commission to embrace globalisation, stating that “the EU must recognise that agriculture cannot be exempted from the process of trade liberalisation and retreat into fortress Europe.” Nevertheless, it warned that increased world market exposure will increase price volatility, and the EU must prepare contingency plans in its reform.

That said, regardless of how the EU acts, higher input costs are on the horizon for food manufacturers and, according to Amanda Cheesley, spokesperson for Copa-Cogeca, the organisation that represents farmers and farming co-operatives in the EU, CAP reform could add a greater financial burden to farmers facing higher raw-material bills.

“The main issue for us is that the ‘greening’ of the CAP could raise our costs because there won’t be any increase in budgets,” she warned, pointing to growing pressure from member states facing austerity to trim EU spending.

Dairy UK also expressed concerns about the cost of new burdens such as potential CAP-linked environmental performance obligations. “These need to be addressed, either by facilitating greater returns from the market place, or by measures that ensure EU producers remain internationally competitive,” the policy said.

The Commission expects that further impact assessments and industry consultations will lead to a legal formal proposal for CAP reforms being tabled by mid-2011.