The Commission today adopted a communication that reports on risk and crisis management tools available in the Member States and at EU level. The document also looks at possible new measures to help farmers in the European Union manage risk and to provide an improved response to crises in the agricultural sector. Three options - agricultural insurance, mutual funds and an income crisis tool - are presented for discussion. Recent reforms to the Common Agricultural Policy (CAP) encourage European farmers to be more market orientated. However, crises caused by natural disasters, livestock diseases or plant pests, or economic circumstances, may endanger a farm’s viability or even affect the economic stability of an entire rural area.

“As entrepreneurs, our farmers have to assume responsibility for the production and price risks that go with running a farm business”, said Commissioner Fischer-Boel, introducing the Communication. “However, farmers should also have access to appropriate risk and crisis management strategies.”

The Communication identifies three options for encouraging the development of risk management tools at EU level and providing an improved response in the event of crisis:

• Option 1 explores the possibility of contributing to the payment of premiums, where farmers take insurance against natural disasters, extreme weather conditions or disease. The role of reinsurance is also considered.
• Option 2 encourages the development of mutual funds for agriculture, by granting temporary and degressive support for the funds’ administration.
• Option 3 puts forward the idea of new instruments to provide basic coverage in the event of income crises.

In presenting these options, the Commission’s aim is to help farm businesses withstand temporary shocks and improve their access to finance for developing their activities. Any new measures would be in line with the principles of the reformed CAP and would be compatible with WTO requirements.

BACKGROUND

The purpose of the Communication is to launch a broad debate on risk and crisis management in the context of the reformed CAP. It fulfils the Commission’s commitment to the Agricultural Council when CAP reform was agreed. The mandate was to examine two issues: how some of the funds generated by the new “modulation” mechanism might be used to finance risk, crisis and disaster measures in agriculture; and whether it was appropriate to include provision for crisis in each Common Market Organisation (CMO), as exists already in the beef CMO.

Under the modulation mechanism, direct payments to farmers are gradually reduced and the money saved is transferred into rural development funding. With part of this modulation money, Member States would have the possibility of financing the risk management measures under “Priority Axis 1” of the proposed new rural development regulation. This is the Axis that aims to improve the competitiveness of the EU’s agricultural and forestry sector.

The Communication is accompanied by a Commission staff working document that describes the risks and crises agriculture is subject to and the management measures that currently exist.

Both documents are available on the internet at: http://europa.eu.int/comm/agriculture/publi/communications/risk/index_en.htm