U'S' and EU Agricultural Policy

1
U.S. and EU Agricultural Policy

• Kathy Baylis
• Department of Agricultural and Resource Economics
• August 2, 2002

2
Outline

• Perceptions of Food Safety
• Food Policy
• Farm basics in U.S. and EU
• Agricultural Policy

3
Consumption expenditure on Food ()
Source USDA
4
Perceptions of Food Safety

• European Union
• Higher concern about food safety
• Biotech
• Animal welfare
• Link between production methods and food safety
• Higher consumption of organics

• United States
• Smaller concern, but increasing
• Bacteria
• Focus on food processing, not production

5
U.S. Confidence in Food Safety

6
U.S. Food Safety Concerns
7
EU Food Safety Concerns
8
Food Policy

• Regulation
• New products (e.g biotech)
• Technology (e.g. hormones, pesticides)
• Processing
• Labeling
• EU biotech

9
Primary Responsibility for Food Safety
Source Food Market Institute
10
Whos In Charge? U.S.

• USDA
• FSIS meat
• APHIS plant and animal diseases
• HHS FDA most food
• EPA Pesticides
• Homeland Security?

11
Whos in Charge? EU

• Consolidation after BSE
• Removed from Ag Depts.

12
Issues

• Cost vs. Benefit?
• Who Pays?
• Unintended Consequences
• E.g. pesticide regulation and vegetable
  consumption
• Trade?

13
Trade effects e.g. U.S. biotech exports

• Soybean exports to EU
• 2.5 billion in 1997,
• 27 of U.S. exports to EU
• 34 of U.S. soybean exports

14
Agricultural Policy

• A Few Random Facts
• History
• Current Policy

15
Farm Characteristics
16
Agricultural Cash Receipts by State, 2000 ( of
U.S.)
5.6
13.0
0 - 0.9
6.9
1 - 1.9
2 - 2.9
3 - 3.9
Source ERS 2001
gt 3.9
17
Direct Commodity Payments by State, 2000 ( of
U.S.)
5.0
6.6
10.0
6.3
8.7
5.3
0 - 0.9
7.0
1 - 1.9
2 - 2.9
3 - 3.9
gt 3.9
Source ERS 2001
18
CRP Rental Payments by State, 2001 ( of U.S.)
7.2
7.0
5.8
11.5
5.9
6.5
6.4
0 - 0.9
9.1
1 - 1.9
2 - 2.9
3 - 3.9
gt 3.9
Source FSA 2001
19
EQIP Allocation by State, 2001 ( of U.S.)
0 - 0.9
12.2
1 - 1.9
2 - 2.9
3 - 3.9
gt 3.9
Source NRCS 2001
20
Senate Agriculture Committee Members, 2001
Members from states in white
Close 2002 senate elections
Source Senate 2001
21
EU Agricultural Spending
Source EC EAG EF
22
U.S. Agricultural Spending
23
Wheat yield in U.S. and EU
24
History of the Common Agricultural Policy (CAP)

• Treaty of Rome 1958
• Food supplies at reasonable prices
• Fair standard of living for farmers
• Improve agricultural productivity
• CAP introduced in 1962

25
EU Net Trade of Agricultural Products
26
The CAP

• Objectives
• Increase Productivity
• Standard of Living
• Stabilize Markets
• Guarantee Supply
• Reasonable consumer price

• Tools
• Intervention prices
• Export restitution
• Set Aside
• Consumer Incentives (for dairy)
• multifunctionality

27
CAP Reform

• Two weeks ago, EC proposed reform
• Increased focus on direct payments
• Less focus on price supports
• Payments more directed to environment and food
  safety goals

28
History of U.S. Farm Bills

• Background
• Depression
• Dust bowl
• 1933 Farm Bill
• Price supports
• Conservation measures

29
2002 Farm Bill

• Countercyclical Payments
• Loan Rate
• Fixed Payments
• Conservation Programs
• Land set aside (92 of conservation)
• Working land

30

31
Proposed Loan Rates
Ave Jan-Mar 2002 Mar 2002
32
Target Prices Fixed Payments
33
Corn Price and Support Level
34
Soybean Price and Support Level
35
Issues

• What are the objectives of farm policy?
• Distribution? (who gets the )?
• Production distortions? (Trade?)
• Environmental effects? (Is farming a cost or a
  benefit)?

36
Summary U.S.

• Less consumer concern with food safety (may be
  due to less dense production)
• Payments went to traditional farm states
• Farm bill increases conservation, but increase
  price supports too
• Historically, conservation land retirement
  Distribution may be blocking move away from price
  supports

37
Summary - EU

• More consumer concern about food safety
• Induced government response which links
  environment to food safety (to farmer )
• Reducing price supports and increasing
  environmental funding, but still distorts trade
• Whether reforms will stick is yet to be seen