Risk management in the Common Agricultural Policy Multi - beneficiary workshop on the reform of the Common Agriculture Policy of the EU (CAP) Brussels, December 2014 Tessa van Blaricum Kathrin Maria Rudolf DG Agriculture and Rural Development European Commission

Outline 1. Why risk management? 2. Types of risks and instruments 3. Risk management within the new CAP 2

Why risk management? 3 Increased exposure of EU farmers to volatile global markets Greater market orientation -> more opportunities, but also vulnerabilities Price volatility Growing role of factors outside agricultural demand and supply Increasing and heterogeneous production uncertainties Different geographical impact of climate change in the EU

4 Source: DG Agriculture and Rural Development. EU-10EU-12EU-15EU-25EU-27 CAP expenditure path: Decreasing market intervention

Heterogeneous effects of climate change in the EU 5 Source: European Environment Agency (2012), Climate change, impacts and vulnerability in Europe 2012, p. 27.

Possible types of risks: Price risks Production risks Possible instruments: Before occurrence of risk: General income support Preventive investments (e.g. for diversification, training) Subscription to insurance schemes or mutual funds After occurrence of risks: Market stabilisation Compensatory payments Restoring investments Types of risks and instruments Risks for income stability 6

CAP instruments Several constraints Variable risks across the EU –> subsidiarity EU budget under MFF Need to ensure equal treatment/no distortion of competition WTO commitments CAP: General instruments for risk and crisis management General income support through direct payments Preserving natural resources for agricultural production in the long run: Greening and agri-environment-climate measures Crisis management through market instruments Preventive (diversification, support for training and innovation) and restoring investments (of agricultural production potential) through Rural Development policy Also: State Aid rules (ABER and guidelines) CAP: Specific instruments for risk management 7

CAP risk management instruments Direct paymentsArticles 68/70/71 of Reg. (EC) No 73/2009: 1.Insurance premium subsidy 2.Mutual funds - Market measuresCMO wine and fruits and vegetables: 1.Insurance premium subsidy 2.Mutual funds SCMO (wine and fruits and vegetables): 1.Insurance premium subsidy 2.Mutual funds Rural development -Articles 36 – 39 Reg. (EU) No 1305/2013: 1.Insurance premium subsidy 2.Mutual funds 3.Income stabilisation tool (Measure 17 for the Rural Development Programmes (RDP)/Chapter 16 of Annex I of the Implementing Act) 8

: Risk Management Toolkit Principles guiding risk management in Rural Development: Allows for flexibility (choice of measure and targeting) Increased coherence and complementarity: Possibility of combining specific support for risk management with complementary rural development measures Incentive to better risk management given the co-financing requirements Possibility to monitor and control A Risk Management Toolkit of 3 components: 1)Crop, animal, and plant insurance (insurance premiums) 2)Mutual funds for adverse climatic events, animal and plant diseases, pest infestations and environmental incidents 3)Income stabilisation tool

10 Insurance Premiums Article 37 of Reg. (EU) No 1305/2013: Financial contributions To premiums for crop, animal and plant insurance Against economic losses to farmers Caused by adverse climatic events, animal or plant diseases, pest infestation, or an environmental incident

11 Mutual Funds Article 38 of Reg. (EU) No 1305/2013: Financial contributions To mutual funds To pay financial compensations to farmers, For economic losses Caused by adverse climatic events or by the outbreak of an animal or plant disease or pest infestation or an environmental incident

12 Income Stabilisation Tool (new) Article 39 of Reg. (EU) No 1305/2013 Support shall only be granted to mutual funds Which provide compensation where the drop of income Exceeds 30% of the average annual income of the individual farmer in the preceding three-year period or a three-year average based on the preceding five-year period excluding the highest and lowest entry Payments by the mutual fund to farmers shall compensate for less than 70% of the income lost in the year the producer becomes eligible to receive this assistance

13 Risk Management in Rural Development - Overview Disclaimer: Approval of RDPs still pending. * Budget allocated but no description provided. Source: DG AGRI M InsuranceM Mutual Funds M Income Stabilisation Tool Belgium - FlandersX Bulgaria*--- Croatia X France – RDP national (risk management) XX Greece X Hungary X X Italy – national framework XXX LithuaniaX Malta X NetherlandsX Portugal – Acores X Portugal – ContinentX Portugal – Madeira X Romania X Slovakia X Spain – Castilla y Leon X Latvia X UK - Wales X 16/27 MS 18/118 RDP including national schemes for IT and FR 1443

Important steps still to be finalised… 14 Implementation of Direct Payments Implementation at national/regional level of the new direct payments architecture New DP architecture to enter into force in 2015 Implementation of Rural Development Approval of the Rural Development Programmes at the level of the MS/region

Looking ahead… 15 Challenges for the agricultural sector Policy context after the last CAP Reform Jobs, Growth and Investment Political Guidelines for the next Commission A Resilient energy Union Free Trade Agreement USDeeper Internal Market Food supply Scarcity of natural resources Climate change Subsidiarity Pressure on CAP budget The CAP Simplification

16 Thank you