# EUR-Lex - 52006IP0067 - EN

Important legal notice

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# 52006IP0067

**European Parliament resolution on risk and crisis management in the agricultural sector (2005/2053(INI)) **

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Official Journal 290 E , 29/11/2006 P. 0407 - 0412 *

P6_TA(2006)0067

Risk and crisis management in agriculture

European Parliament resolution on risk and crisis management in the agricultural sector (2005/2053(INI))

The European Parliament,

- having regard to the Communication from the Commission to the Council on risk and crisis management in agriculture (COM(2005)0074),

- having regard to the Commission memorandum of 6 September 2005 (MEMO/05/302) establishing a "Five-point plan to react to the surge in oil prices",

- having regard to the study commissioned by the European Parliament on "Risk and crisis management in agriculture",

- having regard to Rule 45 of its Rules of Procedure,

- having regard to the report of the Committee on Agriculture and Rural Development (A6-0014/2006),

A. whereas the risks associated with agricultural production occur at different levels, and it is accordingly necessary to differentiate in assessing and dealing with them:

- on the one hand, there are the risks at the level of individual holdings, that is to say individual risks relating to investment and financing, use of certain production methods, trends in producer prices and marketing,

- and, on the other hand, there are the risks associated with external natural and economic conditions, for example climate change and changes in precipitation, the increasing occurrence of natural disasters, or the effects of liberalisation of agricultural trade as well as market disturbances resulting from trade,

B. whereas, in keeping with the objectives of the Common Agricultural Policy (CAP), the priority of risk management in agriculture should be to serve the general interest, guaranteeing the supply of healthy foodstuffs and agricultural raw materials to the population and safeguarding the environment against damage,

C. whereas, since the most recent reform of the CAP in June 2003, the instruments of market and price stabilisation have increasingly been dismantled and replaced by decoupled direct payments to farmers, which, on the one hand, has the effect of making farmers become more market-oriented, but, on the other hand, may increase the production risks for individual holdings,

D. whereas "cross-compliance", which places demands on farmers in relation to environmental protection and protection of animals, was also introduced in the context of this reform,

E. whereas — given that an environment is gradually taking shape which entails greater risks than in the recent past, since the variety, intensity and frequency of risks associated with agriculture are expected to change for the worse for farmers — the changes in the risks associated with agriculture are expected to relate to the intensity and frequency of natural phenomena, the economic environment and its associated risks, technological risks, social perceptions of the environment, food safety and consumer behaviour,

F. whereas the risks which climate change, soil degradation, water shortages, erosion of genetic resources and other factors pose for agricultural production will increase,

G. whereas new technologies, such as the use of genetic engineering in agriculture, which is associated with unknown future effects on living organisms and the environment, present particular risks, which must be dealt with on the basis of the precautionary principle and the "polluter pays" principle,

H. whereas, in the face of oil price fluctuations and scarce oil supplies, the heavy dependence of EU agriculture on fossil energy for use of fertilisers and pesticides and operation of machinery poses risks, which should be headed off by achieving savings and by making greater use of renewable energy sources,

I. whereas agricultural insurance is included in the State aid which is accepted by the World Trade Organization (WTO); whereas, in particular, trading partners such as the USA and Canada systematically use internal aid for mechanisms to secure agricultural incomes as compensation for the effects of natural disasters as well as exceptional emergency payments to compensate for damage and loss of income owing to a change in market prices (paragraphs 7 and 8 of Annex 2 of the WTO Agreement on Agriculture), thereby creating a "safety net" income policy for farmers, which the EU cannot ignore,

J. whereas the three risk and crisis management options being considered by the Commission (insurance against natural disasters, mutual funds and basic income guarantees) are not, in fact, preventive measures for reducing risks or damage, but financing models for providing compensation in the event of damage,

K. whereas the Commission is proposing that the said measures be financed from 1 % of funds from modulation, or more precisely from national rural development programmes, which, according to expert opinion, will probably cover nowhere near the resources required for the measures proposed,

L. whereas young farmers are especially vulnerable to crises and disasters, as they are often deeply in debt as a result of buying their farm,

M. whereas the new Member States are excluded from the modulation mechanism until 2013, and direct payments in these countries are subject to a gradual increase to the full amount (phasing-in), and it should therefore be ensured that they have access to other CAP funding,

Commission proposals

General

1. Welcomes the Commission's efforts to put forward various risk and crisis management options for discussion, but questions the one-sided approach, based on compensation and indemnification, underpinning the proposals; calls on the Commission to pay greater attention to preventive measures to reduce risks and avert crises such as the use of vaccination and better surveillance for illegal imports;

2. Considers that, if risk and crisis management policy is to be developed into a more cohesive policy, it should have the following aims:

- the insurance companies, public or private, and the mutual insurance cooperatives should carry out direct insurance business for the insurance of insurable risks either independently or after joining an agricultural insurance scheme;

- States should be restricted to covering uninsurable disaster risks and State funding for such activities should be allowed under certain conditions;

- State subsidies for insurance premiums and State funding for reinsurance of insurance companies should be allowed, provided they are compatible with the EU framework;

- the participation of the insurers and the farmers insured should be voluntary;

3. Considers, as regards Community funding, that, should a common framework policy be adopted on agricultural insurance and compensation, the following developments are likely:

- there will be Community funding to cover part of the cost of setting up and operating schemes to safeguard agricultural income,

- both national and Community funding will be consistent with the current or future provisions of WTO agreements,

- funding will be provided only for those schemes which satisfy the minimum standards required by the common policy or which adhere to a timetable for making the relevant adjustments;

4. Refers in this connection to the increasing damage caused by climate change and natural disasters such as flooding, drought and fires, and the damage caused by animal diseases, which are being spread more rapidly at the international level through the transport of animals and illegal imports;

5. Considers that the Commission's proposals do not take sufficient account of the risks and the possibility of crises which the liberalisation of agricultural markets within the framework of WTO negotiations entails; calls on the Commission, therefore, to carry out a more detailed assessment of instruments and measures that could prevent or deal effectively with collapses in prices, market crises, farmers income losses and all obstacles standing in the way of their continuing to farm, and also to examine the role of cost-priceincreasing measures in the animal welfare and environment field;

6. Considers that the Commission proposal should take into account the market crises, which greatly affect Community producers, resulting from the restrictions on exports of agricultural products from the Community introduced by third countries; calls on the Commission to extend the definition of a crisis to cover the above issue;

7. Is emphatically against surrendering Community preference; considers that there is an urgent need for a more detailed examination of the instruments and measures used by the Union and its Member States for preventing risks and dealing with crises; refers above all, in this connection, to possibilities for managing supply in order to prevent overproduction and collapses in prices, and to the new rural development programmes; considers that in particularly vulnerable areas, such as fruit and vegetable production, measures under common market organisations (COMs) continue to be justified and considers it necessary to maintain them in the forthcoming revision of the COM in fruit and vegetables;

8. Calls on the Commission to introduce safety net provisions in the event of a crisis not only in the COM in beef and veal but also for other sectors, such as fruit and vegetables, wine, pigmeat and poultry;

9. Calls on the Commission to examine the effectiveness of certain specific measures, such as:

- aid for storage in the event of a sharp fall in prices,

- aid for processing in order to decongest the market in cases where that solution is feasible,

- measures to mitigate the possible negative impact on public opinion and minimisation of its effects (as, for example, in the case of the consumption of beef after the BSE crisis),

- aid for voluntary production cutbacks if the prospects indicate difficulties in finding market outlets;

10. In the face of the far-reaching removal of duties on agricultural products agreed within the framework of the WTO, is in favour of defining the conditions for market access, as a preventive measure, to prevent economic, ecological and social dumping; considers that levies on agricultural imports remain justified where products are produced under conditions which breach human rights and international agreements and European legislation on protection of the environment and protection of animals; proposes that the proceeds of such levies be channelled into improving food security and averting crises in developing countries affected;

11. Considers that the Commission should introduce possible sources of funding for the proposed measures in the new Member States; believes that the use of funding for this purpose should not lead to a reduction in support received by the new Member States in terms of direct payments and rural development support;

12. Considers co-financing by the Commission, the Member States, the farming industry and farm holdings of measures for preventing risks and dealing with crises to be acceptable, provided that it can be made mandatory and does not lead to inequalities between Member States and groups of farmers;

13. In view of the importance of rural development measures and their role in preventing risks, is opposed to the Commission's proposal to finance risk and crisis management solely from 1% of funds from modulation; given the challenges faced, believes, rather, that it is necessary to increase funds for crisis prevention, including reserves; proposes, in this connection, exemption from the principle of budget annuality, in order to cope with fluctuations in demand in crisis situations;

14. Calls on the Commission, in view of the fact that the volume of resources from modulation fluctuates at different levels for each Member State, to examine alternative sources of funding for these measures, which will be at the discretion of the Member States, for example a percentage determined on the basis of the gross value of their agricultural production;

15. Calls on the Commission to produce a quantitative analysis in order to provide a reliable assessment of the impact of the emerging problem of scarce oil supplies and possible scenarios for dealing with it, providing for the possibility of granting aid for the purchase of fuel in times of exceptional fuel price rises; considers, at the same time, that the production of energy crops should be made more attractive to producers through a substantial increase in the aid granted per area of production under Council Regulation (EC) No 1782/2003 [1];

16. Calls on the Commission to explore how, within a context of direct payments and rural development programmes, farmers can be encouraged to use economic and other methods that reduce risks;

17. Calls on the Commission to devote special attention to the position of young farmers in all its actions concerning risk and crisis management;

18. Considers that the policy of insuring against crises in agriculture should be based on flexibility and a pluralist approach since opting for a single model of dealing with crises is not feasible owing to the complexity of the insurance schemes and national differences;

Option 1: Financial contribution towards premium payments for private insurance against natural disasters

19. Considers that, with regard to the range of insurance tools available, the role of insurance is important because:

(a) it is the most tried and tested tool on the market, institutionally the most integrated and the most wellknown and applied,

(b) for that reason it is more suitable than other tools for an international market in agricultural produce,

(c) insurance premium subsidy is clearly an accepted form of aid within the WTO,

(d) the insurance market has vast experience in such matters, has already dealt with difficult situations, and it can use innovative insurance tools;

20. Welcomes the Commission's deliberations on the co-financing of premiums paid by farmers for insurance against natural disasters, or reinsurance schemes; considers that this option requires substantially greater funding from the Community and national budgets than the intended one percentage point of modulation; considers that conditions for access should be very clearly defined and that the possibility of providing funding for this solution out of national budgets should also be looked at;

21. Notes that the system has been operating satisfactorily in several Member States and calls on the Commission to present a more detailed analysis, based on selected uniform risks (e.g. hail, drought, storms) and with reference to the same crops (e.g. corn, maize, rape), of benefits provided, costs and competition among private insurers in respect of insurance against natural disasters and animal diseases, and to compare these with the costs currently incurred and compensation provided by national and European public authorities;

22. Calls on the Commission to set up a public insurance scheme financed by the European Union for individual production areas and production methods, with a view to creating a better policy framework for risk management and crisis prevention;

23. Calls on the Commission to set up a consistent and affordable reinsurance scheme for all Member States under the common agricultural policy;

Option 2: Mutual funds

24. Welcomes the Commission's suggestion that support could be provided for mutual funds for sharing producer risk; points, in this connection, to the major importance of producer organisations, which, through risk spreading and pooling of interests vis-à-vis capital markets and the private insurance sector, are able to provide more effective insurance cover;

25. Points to the advantages of collective responsibility on the part of sector-specific or cross-sector funds, which, thanks to the sharing of infrastructure, use of State aid and producer reserves, could mean more action being taken in terms of preventive measures;

26. Calls on the Commission to explore the possibilities for protecting farmers against the risk of collapses in prices by means of commodity futures transactions and hedging and against the risk of volume losses by means of private insurance;

27. Considers that accompanying national and EU measures in the area of tax relief and credit facilities, designed to encourage private investment and contributions, are needed in order to make it easier for producers to contribute to the proposed mutual funds; points, in particular, to the example of the European Parliament's demands and proposals set out in its position of 15 November 2000 [2] on the common organisation of the market in pigmeat;

28. Calls on the Commission to examine options 1 and 2 with regard to making a possible distinction between social and private risk management and, if necessary, to differentiate support, taking account of the size of holding and of any crisis prevention measures taken;

Option 3: Providing basic coverage against income crises

29. Notes the Commission's proposals on providing general coverage against income crises and considers that this question should be discussed in the context of the future revision of the CAP;

30. Refers to the difficulties, already being experienced at national level, in determining, and recognising claims for, damage and income losses; considers that the administrative demands of such a system would be enormous and would lead to high costs;

31. Calls on the Commission not to develop coverage provided by the state against crises in competition with private insurance models, but rather to ensure that private insurance schemes are reliable and efficient thanks to proper accountability and monitoring systems;

32. Stresses that it should be one of the Commission's basic concerns to set up a rapid and flexible crisis intervention system, cutting to the minimum time-consuming bureaucratic procedures which reduce the effectiveness of the measures;

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33. Instructs its President to forward this resolution to the Council and Commission.

[1] OJ L 270, 21.10.2003, p. 1.

[2] OJ C 223, 8.8.2001, p. 176.

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