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Agriculture: fighting market price volatility effectively

Jean-Luc Feixa
12.12.2016 - 12:00
One euro coin among wheat grains

Long winters, wet springs, hot summers: Europe's farmers have always been exposed to natural risks. In the past few years, macro-economic factors such as exchange rates, energy and fertiliser processes, interest rates and external policies have played a more and more decisive role on farmers’ activities. The result: an imbalance between supply and demand in agricultural markets and increasing price volatility.

Price volatility is a complex phenomenon with many causes. It creates an insecure environment for farmers and represents a threat in the long term to European food independence.

For example, the average price for cauliflower varies a lot between the EU Member States and from year to year. While a cauliflower cost around €1 in 2012 there was a sharp increase in 2014. The price varied between €1.20 and €1.50, before decreasing drastically in 2015.

Using risk management tools to address price volatility

The Common Agricultural Policy (CAP), as reformed in 2013, provides for a set of risk management measures, but these are not properly used and do not address price volatility specifically.

Price volatility creates an insecure environment for farmers and represents a threat in the long term to European food independence

"Volatility in agricultural product prices is one of the main factors behind the calamitous situation currently faced by many European farmers. Resolving that situation – in particular via the CAP – is part of the European Union’s mission. The original system was built around guaranteed prices. The long-term aims for the CAP must be to ensure fair standards of living for the agricultural community, stabilise markets and guarantee viable food production," explains MEP Angélique Delahaye.

Delahaye is calling for a pragmatic approach to finding a way out of this vicious circle: "Protecting farmers’ incomes is more effective through the use of risk management tools that can address price volatility. This insurance system already exists for diseases that impose quarantines and it is really efficient. Furthermore, it is the key to strengthening the organisation of the various agricultural sectors and contractual systems. And in the end, the consumer benefits."

This insurance system already exists for diseases that impose quarantines and it is really efficient Angélique Delahaye

The setup of this insurance system is one of the several proposals that Angélique Delahaye has put forward, in the name of the EPP Group, in a report dedicated to fighting market price volatility.

Increasing market transparency

“To reverse this situation, I think it is important to also develop better contracts between stakeholders in the agricultural sector, including farmers, processors and distributors. Furthermore, we have to increase market transparency by establishing price observatories. A lack of transparency between the farmer and the customer is a clear problem especially," adds the MEP.

It is important to also develop better contracts between stakeholders in the agricultural sector, including farmers, processors and distributors

As a farmer herself, Angélique Delahaye speaks from experience: "In the agricultural world, we always hear the same thing: we are suffering. Price volatility bears a huge responsibility in this situation. This report is much awaited by European farmers. It is very important to show, especially in times of crisis, that the European Union is active in finding solution to improve farmers' lives."

Editor's note: The European Commission set up a Task Force on Agricultural Markets in January 2016. It issued its conclusions in November, laying down a series of recommendations aimed at improving the functioning of agricultural markets and strengthening the position of farmers in the food supply chain. These, including the proposal for a legislative framework against unfair commercial practices, are in line with the proposals of Angélique Delahaye, which is an important victory for the EPP Group.

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