The EU agro-food system in transition Linking the Common Agricultural Policy (CAP), research and innovation Bologna 18 September 2013 Pierluigi Londero DG Agriculture and Rural Development European Commission

Outline 1. Main drivers of world and EU agriculture 2. Structural change vs. productivity 3. Linking the CAP, Research and Innovation 2

3 The shifting balance of constant needs… Food Feed FibreFuel Population, income and demand drivers Population, income and demand drivers Policy challenges in globalised markets Policy challenges in globalised markets Supply constraints and productivity Supply constraints and productivity

4 Domestic and trade policies (from G-2 and 3 pillars to G-20 and export bans) Weather variability increased due to climate change … and the new realities of agricultural markets Food supply and demand interaction Financialisation of commodities Energy links (high energy prices, biofuels) Domestic and trade policies (from G-2 and 3 pillars to G-20 and export bans) Weather variability increased due to climate change Macro linkages (GDP, interest rates, exchange rates) Energy links (high energy prices, biofuels)

5 Long term commodity price trends Source: World Bank..

2.Impact on structural change and productivity in EU agriculture 6

The agricultural area has stayed stable 7 Source: Eurostat, Farm Structure Survey

… but the number of farms in the EU continues to decrease 8 Source: Eurostat, Farm Structure Survey EU-27: -3.7%/year

And agricultural* employment is still declining, but at a lower rate 9 Source: Eurostat, National Accounts * Branch A of NACE R2: agriculture, forestry and fishing; employment in number of persons

And labour use in agriculture is declining … 10 Source: Eurostat, Farm Structure Survey

In countries most affected by the debt crisis, people try to hold on to their farms 11 Source: Eurostat, Farm Structure Survey

Farms that remain are bigger in both ha UAA/farm… 12 Source: Eurostat, Farm Structure Survey EU-27: +3.8%/year

… and in economic terms (Standard Output/farm) 13 Source: Eurostat, Farm Structure Survey

…but slow down in labour productivity* growth 14 Labour productivity annual growth EU %+2.1% EU-N12+4.2% EU % * Labour productivity index, 2005=100, 3 year moving average, 2011 = avg(2009,2010,2011), calculation based mainly on the EAA

…while most TFP gain comes from labour productivity and capital productivity decreases in the EU = avg(09/10/11)

…yields are already very high in the EU Cereals Milk t/ha

Still some large margins of improvement of TFP in the EU-N12 17

And already a higher TFP growth in the EU-12… 18

…mainly driven by an increase in labour productivity 19

3. Linking the Common Agricultural Policy (CAP), research and innovation 20

21 From linear to complex innovation systems Old linear model of science push: basic science leads to applied science which causes innovation and wealth – popular approach in post second world war years. This approach established a link between the flow of new knowledge and economic innovation However, innovation often does not come straight from science. Actually, sometimes it comes before science (steam engines and thermodynamics) Innovation uses a vast pool of existing knowledge, recent or old, whether it is with scientists or practitioners or in other places In this context, Research and Development should not be seen as a process of discovery that initiates innovation but as a problem-solving activity within already-existing innovation processes Hence the linear model has to be replaced by complex innovation systems implying a variety of actors interacting in networks In agriculture this implies to recognise the importance of various actors, to acknowledge the importance of tacit knowledge, the importance of networks, the role of facilitators of innovation (brokerage activity) and the importance of putting (part of) agricultural research into a problem- solving mode

22 European Innovation Partnership (EIP) Closing The Innovation GAP Research Farming Practice Interaction

EU research in agriculture EU funded research represents less than 10% of agricultural research done directly by the Member States About €2 bio spent on agriculture and forestry, food chain and biotechnologies in , of which roughly €700 mio for agriculture and forestry Proposal by the Commission for to double the above amount (€4.7 bio for the Societal Challenge 2) 23

24 Europe 2020 Priorities Tackling Societal Challenges - Health, demographic change and wellbeing - Food sec., sust. agri., mar. res. & bioeconomy - Secure, clean and efficient energy - Smart, green and integrated transport - Supply of raw materials, resource efficiency and climate action - Inclusive, innovative and secure societies Creating Industrial Leadership and Competitive Frameworks  Leadership in enabling and industrial technologies (Biotechnology,…)  Access to risk finance  Innovation in SMEs Excellence in the Science Base  Frontier research (ERC)  Future and Emerging Technologies (FET)  Skills and career development (Marie Curie)  Research infrastructures Common rules, toolkit of funding schemes European Research Area Simplified access International cooperation Coherence with other EU and MS actions EIT will contribute to addressing these challenges Shared objectives and principles Framework Programme for Research and Innovation Horizon 2020

25 Horizon 2020 Societal Challenge "Food security, sustainable agriculture, marine and maritime resources & the bioeconomy" Sustainable agriculture and forestry Sustainable and competitive agri-food sector for a safe and healthy diet Unlocking the potential of aquatic living resources Sustainable and competitive bio-based industries Cross-cutting marine and maritime research

What's new with Horizon 2020? Covers research and innovation Larger topics, more challenge-based and less prescriptive SME instrument Financial instruments Rules for participation: 100% of direct costs, 20% of direct cost envelope to cover indirect costs Up to 100% co-funding in case of primarily research, up to 70% when it is primarily innovation activities One project = one rate of funding All entities participating refunded at the same level (NGOs, Research Organisations, SMEs, big businesses, farmer organisations, Universities, etc.) 26

Fostering innovation with the EIP Rural Development programmes Cooperation (Article 35), including pilot and demonstration projects "OPERATIONAL GROUPS" Knowledge exchange, training and advisory services Business development Investments in physical assets, quality schemes, etc. European Union Research policy (Horizon 2020) Basic and applied research enhancing the knowledge base Close-to-user activities (farm experiments, demonstrations and pilots) Collaborative projects with a "multi-actor approach" and networks 27

Some concluding comments Challenges (to be) faced by agriculture call for ambitious research and innovation at national and EU levels The new CAP and Horizon 2020 are coming with instruments and resources to contribute to this endeavour Innovation is a priority in the new rural development policy. Due attention to the relevant measures by MS is necessary (in particular Article 36 on cooperation) AGRI will be directly involved in management of part of the resources of Societal Challenge 2. "Phasing in" in 2014 and

29 Thank you for your attention!