bly expensive to store. The EU has become one of the largest net-exporters of food in the global economy – not least because of the structural excess supplies created by the system of farm support. Although the scale of the farm surpluses have diminished in recent years – the financial cost of maintaining high intervention prices and also paying farmers to keep their fields fallow (the so-called set-aside scheme) has become a matter or urgent concern GRAIN SURPLUSES are increasing again as yields rise and demand remains static. This is leading to a vast increase in grain stocks since the World Trade Organisation puts limits on export subsidies to food markets in other countries.Such is the political nature of the Common Agricultural Policy that any reforms are by necessity messy compromises between member nations with radically different objectives and interests to defend. France and Germany for example are both opposed to the abolition of milk quotas because of the impact they believe this would have on their own milk producers. Britain is against the set-aside scheme (introduced through the MacSharry reforms of 1992) as it believes it distorts the free market for grain production. In nearly all cases, the 1999 CAP reforms are to be implemented gradually. This should help to soften the blow of farmers in particular sectors of the industry. THE COSTS OF REFORMReform has its costs. Many UK farmers will lose out from the staged reduction in far support. British farms tend to be larger than their continental partners. For them to retain their profitability they will have to maintain control of their fixed costs and look to diversify production. There is plenty of anecdotal evidence that businesses in the hands of one family for several generations are being sold-up as farmers decide that long-run demand and profits will be insufficient to generate a reasonable rate of return....
