Examination of Witnesses (Question Numbers
Mr Osmo Ronty
5 MARCH 2009
Q460 Chairman: What categories are there?
Do you have mountain areas? Perhaps you could give us an idea
of the distribution of the different types of LFA categories and
how important the relative contribution of LFA payments to farm
incomes are to farmers. Could you help us with those?
Mr Ronty: Yes, with pleasure. Perhaps
I might just say at the beginning two points. First of all, we
do not have the Commission communication yet, so we do not have
the Finnish government position, so what I am about to say are
initial comments. I would like to start with another background
issue, and I will circulate a picture which is quite illustrative
of our situation. It is quite simple but it illustrates very well
our situation in agriculture. The whole of Finland is north of
the 60th parallel and when you follow that parallel around the
globe you will find places like Greenland, Hudson Bay, Alaska,
Siberia, et cetera. So, yes, we are working in very specific circumstances.
Sometimes it is not so easy for people in the middle of Europe
to remember that.
Q461 Chairman: They are concerned with
Mr Ronty: Yes, unfortunately with drought.
To answer your questions, yes, the whole of Finland is classified
as LFA, but at the same time you have to remember that a little
bit less than nine per cent of the area is an agricultural area.
The land is covered by forest mainly and that gives a specific
taste to those who receive the LFA payment. I will come back to
that later. I will show you another picture. Your question was,
how is it classified? The whole country is classified as LFA.
Everything north of the 62nd parallel is considered to be mountain
area, the southern coast is classified under Article 20 as specific
LFA and the area in between is the Article 19 area that we'll
be speaking about in the Commission communication. It is the rather
fragmented area with the black border on the paper I have given
you. On your question about the significance of LFA support, I
do not have the exact figures but, yes, it is very significant
in our circumstances. If you think about the farm income, it varies
between sectors and between years because in our circumstances
the yields vary greatly between years and accordingly the income
that the farmer gets from his product varies, but the LFA payment
may be an average of somewhere close to 40 per cent of the income
of the farmer.
Q462Chairman: Just LFA?
Mr Ronty: Just LFA, so you can see it
is very significant for keeping agriculture in Finland. It is
not so important in some sectors but it is very important, for
example, in these areas where the proportion is higher. However,
as I have said, this varies a lot between the years, the sectors
and the different parts of the country. Basically, the conclusion
that we can come to from this is that in Finland we have very
high production costs. Very often the production cost is higher
than the market income, that is, the market income cannot cover
the variable costs of production. In this situation you can see
that it is very important for keeping the production there. So
that we can say that the very existence of farming is dependent
on these natural handicap payments.
Q463 Chairman: So it is absolutely fundamental
to your agriculture?
Mr Ronty: Yes, very much so.
Q464 Chairman: As that is the case, what
are your general concerns about the review, just the headline
Mr Ronty: I will come back to that as
well later but, of course, our general concern is to keep the
whole country as LFA because of our geographical position, and
I will give you another map on that. And, of course, to keep a
sufficient level of LFA payments.
Q465 Lord Brooke of Alverthorpe: We now
come to the rationale and objectives behind the scheme and how
it is viewed in Finland. We understand that Finland allocates
more than 30 per cent of its rural development budget to the LFA
scheme. Could you explain what the Finnish government sees as
the rationale for the LFA payments? I think in part you have probably
touched on that with your earlier response but what do you think
the public is paying for through the scheme and at present is
the support targeted precisely enough? Certainly, it is pretty
widespread within Finland but could not a case be advanced that
it should be targeted more, given the objectives of the scheme?
Mr Ronty: I will come back to the share
of the agricultural area in our country. It is a little bit less
than nine per cent. That means that the open agricultural landscape
is very important for the Finns; we have so little of it. We think
that the public in Finland appreciate having their own agriculture
and having this agricultural production and agricultural landscape,
and therefore support for agriculture and for rural areas is widely
accepted in Finland. If there was a decline in this open and managed
landscape it would have effects not only on agriculture, of course,
but also on other industries like rural tourism. The area is not
so attractive any more if the land is abandoned. You can sum up
that without these natural payments farming could not be continued
in a country like Finland. This is because of our short growing
season and long winters. We have great variations in temperature
between the different times of the year. So yes, this is the rationale.
On the targeting point, yes, I think it is well enough targeted
now. If there was some differentiation needed we could give a
little bit more support to animal production because animal production
is the first one to leave, but that is just an initial idea.
Q466 Viscount Ullswater: Because Finland
is in this unique situation of being 100 per cent in an LFA what
do you think is the difference between the single farm payment
under Pillar 1 and the LFA under Pillar 2, and, of course, any
agri-environment scheme that you might run as well? Do you see
them in a way converging as just general support for agriculture
with a minimum of land management criteria to support that?
Mr Ronty: The way we see it is that the
objective of these natural handicap payments is to make possible
continuing agricultural use of the land in the Less Favoured Areas
and in that way contributing to the maintenance of viable communities
and rural areas and promoting and maintaining sustainable farming
systems, et cetera. The agri-environment scheme is more of a tailored
measure. It has very clear environmental objectives. The other
CAP instruments do not really have such landscape objectives which
are important in the LFA. To sum that up, we can see that the
LFA scheme is the basis for maintaining agriculture and the agricultural
landscape in our circumstances. The agri-environment scheme complements
it by guiding the farmer to act in an environmentally friendly
way. We do not really see that these schemes could be merged.
We see different meanings between the different Pillars and I
do not think you can combine them. The objectives and the requirements
are different in the two Pillars.
Q467 Viscount Ullswater: What about cross-compliance
and the single farm payment? Is that not almost the same objective
in your case as the LFA payment?
Mr Ronty: We can look at the single farm
payment in many ways. One of the ways to look at it is that it
has more to do with the income of the farmer. You can see some
convergence, yes, but still we do not think that they are exactly
the same. There is another way to look at the LFA scheme and that
would be perhaps to see that the purpose of it is to even out
the differences between the production areas so that the farmers
can continue also in the weaker areas where the production costs
are high. This would be in line with the wish of the European
Council which has stated many times that the CAP must enable farming
to continue in all areas of the Union, including the ones with
specific difficulties. Also, I see perhaps a connection to the
global food market situation and the way it will evolve in the
coming years, so that would speak for maintaining our own food
production as well. We can see many meanings to the system.
Q468 Earl of Arran: Because of the terrain
of your country I suspect you have answered this question already,
but, turning to the two forms of criteria, first, the designation
criteria, taking into account the criteria that are currently
under examination, in your opinion are there any additional or
alternative criteria that should be taken into account?
Mr Ronty: No. In regard to the criteria
that we have on the table now, the climate criteria are the most
important and I would also say that they are quite sufficient,
or seem to be sufficient, for us. The most important one of the
criteria would be the length of the growing period. I gave you
a picture earlier under the heading "JRC Length of the Growing
Period". If you have a look at that you will see that, if
you take the areas where the thermal growing period is the maximum
190 days, that would cover Finland quite nicely. This would be
justified also because if the growing period is shorter than this
it will affect agriculture in many ways. First of all, you cannot
use high yielding species like maize, for example. We do not grow
maize in Finland, at least not on any commercial scale. Some experiments
have been done but normally they have failed. Also, you cannot
use high yielding varieties of the species that you can use, so
mainly we grow spring wheat, for example. The proportion of autumn
wheat is very low, five per cent perhaps. If you go up in the
country in this area there is no maize at all. This is about the
limit where you can grow wheat. North of that it normally fails.
If you go up to this other level, this would be the limit for
barley and oats, so north of that everything is based on grass.
You can see that the length of the growing period really has an
effect on farming and if they used the 190 days limit here it
would cover Finland. It would cover parts of Scotland as well,
as you can see.
Q469 Chairman: This is my little bit
of Scotland just there. I am just in it.
Mr Ronty: You do not see the full picture
if you only take the technical length of the growing period because
there are other factors which affect farming as well. The effective
growing season is cut at both ends. It is shorter than it could
be. In Finland normally the ground is frozen during the winter
and it takes time before it melts and dries up enough for the
farmers to start work in the fields, so this will shorten the
period at the spring end, and at the autumn end we have quite
heavy rains and you cannot go to the fields at these times. So
you have to do the harvest very quickly.
Q470 Earl of Arran: So I imagine the
farmers are not urging you to rush to the negotiating table. They
are pretty keen to keep the status quo.
Mr Ronty: Yes, I think they would prefer
to keep the status quo, except for one point that I will come
to later. I was now speaking just about the climate criteria and
the length of the growing period. For us, we do not need any of
the other criteria as long as this one is taken into account.
What we feel is that whatever the criteria, they will have to
be applied in an objective way in all the Member States and in
a similar manner in all the Member States. This is important for
us, to try to make some genuine EU policy.
Q471 Chairman: Can I tease this out a
little bit? You stick to the climate criteria. That covers the
whole of Finland, so you are using biophysical criteria.
Mr Ronty: Exactly.
Q472 Chairman: But actually what those
biophysical criteria do is deliver the socio-economic benefit.
Mr Ronty: I suppose you could put it
that way, yes.
Q473 Chairman: And you do not need to
have socio-economic criteria because you get the same result by
using biophysical criteria.
Mr Ronty: Yes, I suppose you can put
it that way. In the case of Finland we think the biophysical criteria
are very strong.
Q474 Lord Cameron of Dillington: It may
be the same answer, but turning now to the eligibility criteria,
you presumably would look for a greater degree of harmonisation
across Europe as well in the eligibility criteria, would you,
and, if so, what sort of eligibility criteria in general, covering
Sicily to Finland, would you have, and would you wish to exclude
any farmers or farming practices?
Mr Ronty: Here the answer is different.
We have severe doubts about this idea of having the eligibility
criteria. To begin with, how do you do away with a handicap due
to climate? It cannot be done. It cannot be removed by any cultivation
technology. How do you lengthen the growing season?
Q475 Chairman: You want everybody in,
do you not? Basically, you want everything in.
Mr Ronty: Yes.
Q476 Lord Cameron of Dillington: Is there
any form of cross-compliance attached to your LFA payment at the
Mr Ronty: Yes, there is a connection.
Q477 Lord Cameron of Dillington:
Do you exclude people for some reason?
Mr Ronty: We do exclude some people but
I do not have the exact details in my mind.
Q478 Lord Cameron of Dillington: But
they have to behave very badly to be excluded?
Mr Ronty: Yes. I cannot answer directly
because I do not have all the details in my mind about our system.
Coming back to the eligibility criteria, as I said, we do not
think the handicap can be removed so how do you pick up the ones
to be excluded? Also, if you did this we would have a very strange
situation. Neighbouring farmers working in the same climatic conditions
would be put in different positions through the support policy,
which we do not find very acceptable in the government, and I
do not think the public would find it very acceptable either.
Also, we fear that the administrative burden would be quite dramatic.
I do not know if this would be done in at regional level, at municipal
level or at farm level. There could be some eligibility conditions
established by the EU, perhaps a certain minimum area, for example,
or fulfilling of the cross-compliance conditions, but what comes
over and above that is, we feel, up to the Member State. The Member
State knows better its regional needs. We feel that the designation
criteria, the biophysical criteria, should be applied at EU level
in a common way. There might be this cross-compliance condition,
but defining the eligibility criteria above that should be up
to the Member State. So we do not support any further harmonisation
of that. We also feel that it should be voluntarily managed, whether
there are any further eligibility criteria or not. In Finland,
if we wanted to apply some eligibility criteria on a national
basis, we could perhaps think about the age of the farmer or the
minimum surface area. We have not really thought about that.
Q479 Earl of Caithness: Can I move on
to the payment formula? Could you tell us please what payment
formula you use at the moment as to how to get to your LFA payment,
and what do you think of the new proposed payment that the Commission
have put forward, "additional costs and income foregone related
to the handicap"?
Mr Ronty: First of all, on the calculations,
we are already doing the calculations to this formula, additional
costs and income foregone. The LFA payment we are paying now is
based on this kind of calculation. The problem here is that in
Finland the climatic conditions are so severe that if you did
an objective calculation, you would end up with higher amounts
than we can pay at the moment according to the regulation. So
it would be in our interest to remove the limit that we have at
the moment in the regulation and do a genuine objective calculation
and compensate for the real handicap. Also, how do you compare
when doing these kinds of calculations? In the case of Finland,
the whole country is classified under LFA. We do not find it very
fair to make a comparison to the Finnish average, for example,
as the whole country is already suffering from the handicap compared
to the other Member States. So we should develop something else
to compare to other areas or maybe to the EU average, but this
comparison to the national average we do not feel would be feasible
in our circumstances. In the Member States where there are LFA
areas and non-LFA areas this would work, but in our case not really.
1 Of farm income (total gross return minus total costs). Back
In Finland, the respect of cross-compliance is a prerequisite
for receiving any area payment funded fully or partially by the