EU Common Agricultural Policy | 4 Things to Know About Farming Subsidies

The EU's Common Agricultural Policy (CAP), while unknown to many EU citizens, has a huge impact on agricultural landscapes, farmers and citizens across the continent and beyond.

In 1962, the Common Agricultural Policy (CAP) was passed in the EU, and it remains one of the longest-standing European policies today. It sought to establish a self-sufficient and stable food supply in Europe by giving farmers income security while providing consumers with affordable food.

Today, the CAP continues to provide us with inexpensive food and allows all farmers a viable income.¹ But despite being one of the most consequential policies in the EU and affecting everything we eat, many Europeans are unaware of the CAP’s existence.

So, here are four fundamental points to know about the hand (or policy) that feeds us: 

1. Income support for farmers

The Common Agricultural Policy began by providing consumer price guarantees and income subsidies to farmers.¹ Depending on seasonal variation and other environmental factors, farmers often face fluctuating crop quantity and quality harvests – this makes a farmer’s income susceptible to variation from season to season. The CAP provided a financial safety net for farmers, creating a bigger appeal for the farming profession today.

Today, farmer income support continues to be the most recognized aspect of the CAP. Still, the CAP has significantly widened its scope and goals since its creation in 1962, including:²

• Rural development
• Protecting local foods
• Supporting biodiversity and taking climate action

2. It’s expensive, but...

The Common Agricultural Policy takes a major slice from the EU’s budget. In 2018, 38% of the EU’s budget (around 60 billion euros) was allocated to CAP.¹

Direct payments, also known as income support for farmers, constitute 72% of the total CAP budget (~30 billion euros).³ On average, more than half of a farmer’s income depends on these subsidies - in other words, farmers need the CAP to receive adequate wages.⁵ 

In addition to direct payments, the CAP provides market stabilization by allowing the EU Commission to buy or release volumes of agricultural produce to stabilize market prices (like a Central Bank does with currency).

3. Repercussions outside of Europe

Direct payments and subsidies, while essential to farmers, can lead to “distorted prices” (meaning that the price we pay for food doesn’t always represent the “real” cost of a product) and to food surpluses.⁶

Food surpluses stem from farmers growing more food than the market demands. Why do they produce more food than the demand? Because the EU’s income support is primarily given – amongst other factors – on the basis of cultivated hectares, encouraging farmers to maximize production.⁶ The surpluses are often shipped to lower-income countries (primarily in sub-Saharan Africa) and sold at a very low price, unfairly competing with local farmers and depressing world market prices.⁶

The problem with agricultural subsidies 

The Common Agricultural Policy has controversial policies. For instance, many criticisms target the per-hectare allocation of direct payments to farmers. It is argued to favour those with more land, thus favouring large farms over smaller ones – 3% of EU farms are ‘large’ or ‘very large’ farms, yet they own over 52% of all farmland.⁷

While large farms have been found to offer employment opportunities for many, there is mixed evidence about their environmental impacts. Large farms have higher livestock density figures and a smaller diversity of crops since they are more prone to specializing.⁹ Additionally, landscapes in big farms are more ‘linear’ (or uniform) to allow machinery to circulate effectively,¹⁰ but linear landscapes have been found to have a detrimental effect on surrounding biodiversity.¹¹

Many other policies or practices of the Common Agricultural Policy are heavily disputed.^12,13 However, the EU is receptive to criticism and makes an effort to incorporate citizens’ and farmers’ voices in their future amendments through online consultations and projects like Citizens’ Dialogues and European Citizens’ Initiatives.¹⁴

The Common Agricultural Policy is always a work in progress

The CAP is reformed every seven years, and renovations have strived towards (and continue to strive) several goals, including:¹⁵ 

1. The “greening” of the CAP. While this has long been a declared goal, many environmental NGOs have complained that the CAP has not fulfilled its environmental promises. With the expansion of unsustainable agriculture come biodiversity loss and chemical pollution issues. 

Today, policies are introduced to bring coherence between the Common Agricultural Policy and other EU policies that help maintain biodiversity. For example, the Bird and Habitats Directive mandates farmers to grow at least three different crops on their farms to promote crop diversification.¹⁶ Still, academics and activists protest that policies are not specific enough and that efforts have to be increased if we want to avoid further soil, water and biodiversity degradation and loss.^{4, 17,18}

2. Encouraging more young people to enter farming by offering additional financial support to farmers under the age of 41. This is dubbed “generational renewal”, and it is presently a big topic in European agriculture, as only 0.6% of all farmers are under 25. 

3. Increase support for smaller farms. The negotiations for the new support period of food in the EU “beyond 2020” (2021-2027) are in full swing, albeit delayed because of COVID-19.

Food is essential to life, but it is also a social, cultural, and political matter. It is important to value those who make it possible for food to reach our tables, while also valuing the natural systems that allow food to be grown. The future calls for a resilient agricultural sector integrated into the European Green Deal that is economically and physically equipped to handle crises and one in which European citizens are informed and involved in how their food is grown.