The common agricultural policy (CAP) is aimed at helping European farmers meet the need to feed more than 500 million Europeans. Its main objectives are to provide a stable, sustainably produced supply of safe food at affordable prices for consumers, while also ensuring a decent standard of living for 22 million farmers and agricultural workers.
The EU agriculture sector has roughly 11 million farms, which provide work for roughly 22 million agri-workers. But this figure doubles to 44 million if you include also the jobs created in the food processing, food retail and food services, making the EU agri-food sector the largest employment sector in the economy.
It is also a sector that has performed particularly well in recent years, despite the recession and the increasing challenges to farming caused by climate change, water scarcity, soil fertility, energy costs, etc. The agri-food sector accounted for 6% of EU GDP.
Moreover, the EU has become a net exporter of food and drink, with an average annual 8% growth in the value of exports over the past 10 years, reaching €129 billion in 2015.
Concerns about climate change and issues such as biodiversity loss, water and soil quality mean that agriculture also plays an increasingly important role in the sustainable management of natural resources.
As EU Commissioner Phil Hogan has said on many occasions:
"By producing steady supplies of safe food, European agriculture provides the bedrock on which the EU's dynamic agri-food industry is built and remains a vital motor for the wider rural economy."
With an annual budget of roughly €59 billion, the CAP strengthens the competitiveness and sustainability of agriculture in Europe by financing a range of support measures through the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), notably:
- Direct payments provide an important support for farmers in order to help stabilise their incomes, linked to complying with safety norms, environmental and animal welfare standards.With these annual payments predominantly "decoupled" from production – i.e farmers choose what to produce on the basis of the likely return from the market, rather than on the basis of public support -they support the long-term viability of farms in the face of volatile markets and unpredictable weather conditions, and recognise the environmental contribution and public goods that farmers provide to society. These payments are fully financed by the EU, and account for over 70% of overall CAP spending. With the 2013 reform, 30% of direct payments are linked to respecting three sustainable agricultural practices which are beneficial to environmental and climate change concerns, notably soil quality, biodiversity and carbon sequestration – the so-called "Greening" measures. For the rest, the 2013 reform also introduced a 25% top-up to the basic payment scheme for young farmers in all Member States, and different options for how Member States make their internal allocations including a limited amount of "coupled" payments, a possible ceiling on the amount received per individual beneficiary, and a simplified scheme for small farmers.
- Market measures provide a range of tools including measures to address the situation if normal market forces fail. For example, if there is a sudden drop in demand because of a health scare or a fall in prices because of a temporary oversupply on the market, the European Commission can activate market support measures. Such spending, also from the EAGF, is by its nature rather unpredictable, but tends to account for around 5% of overall CAP spending. This part of the budget also includes elements such as promotion of EU farm products and the EU school schemes.
- Rural development programmes provide a framework to invest in individual projects on farms or in other activities in rural areas on the basis of economic, environmental or social priorities designed at national or regional level. Funded through the EAFRD, this covers projects such as on-farm investment & modernisation, installation grants for young farmers, agri-environment measures, organic conversion, agri-tourism, village renewal, or providing broadband internet coverage in rural areas. Accounting for almost 25% of CAP funding, these measures are generally co-financed by national, regional or private funds and generally extend over several years.