Each week, BBC Radio 4 broadcasts readings from a book serialised in five 15-minute episodes. In the week beginning 18 January 2021, the readings were from English Pastoral: An Inheritance by James Rebanks, a farmer from the Cumbrian fells. His farm is relatively small, covering 185 acres.
He has attempted to make it much more sustainable and less intensive, reintroducing traditional Herdwick sheep, having a mixture of cows and sheep rather than just sheep, a greater sub-division of fields, and more natural scrubland, peatbogs and trees. As a result, soil quality has improved and there has been an explosion of biodiversity, with an abundance of wild flowers and insects.
Apart from being an autobiography of his time as a farmer and his attempt to move towards more traditional methods, the book examines broader issues of agricultural sustainability. It looks at the pressures of consumers wanting cheap food, the market power of supermarkets and wholesalers, the cost pressures on farmers pushing them towards monoculture to achieve economies of scale, and the role of the agrichemicals industry promoting fertilisers, feeds and pesticides which bring short-term financial gains to farmers, but which cause longer-term damage to the land and to biodiversity.
Rebanks has gained quite a lot of media attention after the publication of his first book, The Shepherd’s Life, including being one of the guests on Desert Island Discs and the subject of an episode of The Food Programme.
Listen to the Food Programme podcast and try answering the questions, which are all based on the podcast in the order of the points made in the interview.
- What are the incentives of an unregulated market for food that result in monoculture and a loss of biodiversity?
- To what extent are consumers responsible for changes in farming methods?
- Have the changes helped the urban poor?
- How is the monopsony power of supermarkets and food wholesalers impacting on food production and the pattern of agriculture?
- There are various (private) economies of scale in food production, but these often involve substantial external costs and long-term private costs too. How does this impact on land use?
- What are some of the limits of technology in increasing crop, meat and dairy yields?
- Will more recent changes in the pattern of food consumption help to increase mixed farming and biodiversity?
- Is it ‘rational’ for many farmers to continue with intensive farming with high levels of artificial fertilisers and pesticides?
- Is diversity in farming across farms within a local area a public good? If so, how could such diversity be achieved?
- How can farmers be encouraged to think and act holistically?
- Is there a trade-off between food output and biodiversity?
- What are the dangers in the UK reaching an agricultural trade deal with the USA?
- What are the benefits and costs of encouraging local food markets?
The European Parliament, Council and Commission have agreed on reform to the Common Agricultural Policy as part of the EU’s long-term budget settlement for 2014–20. The CAP accounts for some 38% of the EU’s budget and, over the years, has drawn considerable criticism for resulting in food mountains and support being biased towards large intensive farms.
As section 3.5 in Economics (8th ed) explains, the CAP has been through a number of reforms since the early 1990s. Prior to that, the main form of support was that of guaranteed minimum prices backed up, where necessary, by levies (tariffs) on imported food. Any surplus of production at the minimum price was bought by the relevant EU Intervention Board and either stored or exported at world prices. The effect of minimum prices is shown in the diagram.
Assume that the EU demand is DEU and that EU supply is SEU. Assume also that the world price is Pw. This will be the equilibrium price, since any shortage at Pw (i.e. b – a) will be imported at that price. Thus before intervention, EU demand is Qd1 and EU supply is Qs1 and imports are Qd1 – Qs1.
Now assume that the EU sets an intervention price of Pi. At this high price, there will be a surplus of d – e (i.e. Qs2 – Qd2). Assume for the moment that none of this surplus is exported. It will all, therefore, be bought by the appropriate Intervention Board. The cost to the EU of buying this surplus is shown by the total shaded area (edQs2Qd2: i.e. the surplus multiplied by the intervention price). Unless the food is thrown away, exported or otherwise disposed of, there will obviously then be the additional costs of storing this food: costs that were very high in some years as wine ‘lakes’ and grain and dairy ‘mountains’ built up. If, however, the surplus is sold on world markets at the world price Pw, this will earn the green area for the EU, leaving a net cost of just the pink area.
From 1992, there was a gradual move towards lowering intervention prices and paying farmers direct aid unrelated to current output. From 2004, the main form of support became these direct aid payments. Annual payments to each farm were based on the average support it had received over the three years from 2000 to 2002. At the same time, payments to large farms were gradually reduced, with 80 per cent of the money saved in each country being diverted to rural development. Payments were also made conditional on farmers making environmental improvements to their land.
A problem with this system is that farmers who had high average output in the years 2000–2 have been receiving the same large payments ever since, while farmers who had small yields in those years have received correspondingly small payments.
A proposal two years ago by Dacian Cioloş, the EU Commissioner for Agriculture, was for flat-rate payments per hectare. But objections were raised that this would benefit inefficient farmers who would receive the same as efficient ones. In the end a compromise agreement was reached which saw a capping of the amount of payment per hectare. The result is that the most intensive farmers will see a reduction in their payments by some 30% – a process that will happen gradually over the period 2014–19.
In addition it has been agreed that 30% of the direct aid payments will be conditional on farmers adopting various measures to protect the environment and wildlife.
Farmers will have to be ‘active’ producers to receive direct aid payments. This is designed to exclude businesses such as airports or sports clubs, some of which had been receiving support under the previous system.
It was also agreed to provide 25% extra support for five years to farmers under 35 in an attempt to attract more young farmers into agriculture. Other details of the settlement are given in the EU documents, videos and articles below.
The great shake-up of the Common Agricultural Policy EPP Group in the European Parliament (25/1/13)
Planned reforms of Common Agricultural Policy under fire BBC News, Roger Harrabin (24/6/13)
Mixed response to compromise CAP deal RTE News (26/6/13)
Farm reforms may not increase food production, warns MEP europeandyou, Diane Dodds MEP (26/6/13)
Big farms to see European subsidies slashed The Telegraph, Rowena Mason (26/6/13)
Common Agricultural Policy deal agreed at last RTE News, Damien O’Reilly (26/6/13)
CAP Reform: MEPs, Council and Commission strike deal FarmingUK (27/6/13)
EU agricultural overhaul puts onus on farmers to be green Financial Times, Joshua Chaffin (26/6/13)
CAP reform deal agreed in Brussels Farmers Guardian, Alistair Driver (26/6/13)
‘Bad for farmers and wildlife’ – CAP reform reaction Farmers Guardian, Alistair Driver (27/6/13)
Political agreement on new direction for common agricultural policy Europa Press Release (26/6/13)
CAP Reform – an explanation of the main elements Europa Press Release (26/6/13)
Press release, 3249th Council meeting : Agriculture and Fisheries The Council of the European Union (25/6/13)
- Why will a system of agricultural support based solely on direct aid not result in any food mountains?
- Show in a diagram the effect of high minimum prices (plus import levies) on an agricultural product in which a country is not self-sufficient (and is still not made so by the high minimum price). How much will be imported before and after the intervention?
- What are the arguments for and against making direct aid payments based solely per hectare?
- Find out how sugar quotas have worked. What will be the effects of abolishing them by 2017?
- What ‘green’ measures are included in the agreement and how effective are they likely to be?
- Consider the arguments for and against removing all forms of support for agriculture in the EU.
- What are the effects of (a) price support and (b) direct aid payments unrelated to output for EU farmers on farmers in developing countries producing agricultural products in competition with those produced in the EU?
- Why may the environmental measures in the new agreement be seen as too weak?
A bumper olive crop in Spain would seem to be good news for Spanish olive growers. But the effect has been a fall in the prices of olives and olive oil. With 43% of the global supply, Spain is the world’s largest olive oil producer and changes in Spanish output have a big effect on the world price.
Premium extra virgin olive oil has fallen to its lowest level (even in nominal terms) since 2002. Today the price is around $2900 (£1850) a tonne in the wholesale market; in May 2006 it peaked at nearly $5854 – double today’s price.
And while this is bad news for Spanish farmers, for farmers in countries without bumper harvests, the low prices are even harder to bear.
The problem is being exacerbated by a fall in demand in many countries currently suffering recession, such as Greece, Portugal and Italy – all big olive oil consumers. Although olive oil prices have fallen, it is still more expensive than various substitutes. Many people are thus buying these cheaper alternatives, such as sunflower oil, especially for cooking.
What is more, cheaper substitutes for olive oil are increasing in supply. Take the case of rape seed oil in the UK. As the Mail Online article, linked to below, reports:
“UK rape planting is thought to have hit an all-time high this year as British farmers take advantage of the high prices being demanded for rapeseed – base ingredient of many vegetable oils and other edible oils.
Much of the UK crop is used by the local food industry, although some analysts are predicting strong UK yields will give farmers the opportunity to export more to Europe. Because of rising export demand, oil users in the UK claim there is little to indicate the price they are paying for rapeseed oil will drop substantially in the near future.”
The market for olive oil is global. Crop yields in one part of the world, both of olives and of substitute crops, affect global prices and hence growers’ incomes worldwide.
Debt hit countries suffer from olive oil price dip Euronews (28/5/12)
Olive oil price slides as glut hits southern Europe Gulf News, Javier Blas (29/5/12)
Farmers feel squeeze as olive oil price slips The National, Gregor Stuart Hunter (29/5/12)
Olive oil surplus adds to economic pain in Spain The Week (29/5/12)
Olive oil price fall brings further pain for Spain, Italy and Greece The Telegraph (28/5/12)
Pass notes No 3183: Olive oil Guardian (28/5/12)
More Storage Aid for Virgin Olive Oil Olive Oil Times, Julie Butler (17/5/12)
Yellow Britain from the air: Rapeseed’s relentless march across the country pictured in vivid colour as farmers cash in after price of crop’s oil soars Mail Online, Sean Poulter (29/5/12)
Commodity Prices Index Mundi
Olive Oil, extra virgin Monthly Price – US Dollars per Metric Ton Index Mundi
- Identify the factors that have contributed to the fall in the price of olive oil. Illustrate the effects on a demand and supply diagram.
- Explain what is meant by the fallacy of composition and how it relates to a price taker, such as a farmer.
- How do the price elasticities of demand and supply of olive oil help to explain the magnitude of the price fall?
- What developments in other vegetable oils are affecting the olive oil market? What determines the magnitude of these effects?
- What actions have been taken by the EU to support the olive oil market? Is this the most appropriate policy response?
- Why are Middle Eastern olive producers unable to compete on cost with the major EU producing countries?
The European Commission is concerned that the economic downturn may have put the livelihoods of dairy farmers at risk. To try to prevent any problems for farmers, the Commission has re-introduced export subsidies for dairy products. The last time subsidies were paid to dairy farmers was June 2007 and the EU insists that the payment will meet World Trade Organisation (WTO) rules.
EU gives boost to dairy exports BBC News Online (23/1/09)
- Using diagrams as appropriate, illustrate the impact of the EU export subsidies on the market for milk.
- Additional support for dairy farmers comes in the form of EU intervention – European Commission purchases of surplus produce at a guaranteed price. Using diagrams as appropriate, illustrate and explain how this ‘guaranteed price’ scheme will work.
- Explain the role of the WTO in determining world trade rules.
- Discuss the likely reaction of other countries to the EU’s payment of export subsidies to dairy farmers.