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About2018-10-08T13:48:31+00:00

Overview

Title: SUstainable FInance for Sustainable Agriculture and fisheries

Number: 635577

Acronym: SUFISA

Project coordinator: KU Leuven, Division of Bioeconomics, Department of Earth and Environmental Sciences

Partners involved:
Katholieke Universiteit Leuven (KU Leuven), Belgium
Universita Di Pisa (UNIPI), Italy
University of Gloucestershire, United Kingdom
Fondation Institut de Recherche pour le Developpement Durable et les Relations Internationales (IDDRI), France
Alma Mater Studiorum – Universita Di Bologna (UNIBO), Italy
Universiteit Hasselt (UHasselt), Belgium
Nodibinajums Baltic Studies Centre (BSC), Latvia
Universidade de Evora, Portugal
Aarhus Universitet (AU), Denmark
Agricultural University of Athens (AUA), Greece
Hochschule für Nachhaltige Entwicklung Eberswalde (HNEE), Germany
Uniwersytet Jagiellonski, Poland
Ekonomski Fakultet – Univerzitet U  Beogradu (BEL), Serbia
University of Southern Denmark (SDU), Denmark

Funding: Horizon 2020

Duration: May 1st 2015 – April 30th 2019

Short description:
A good functioning of the European food system is key to deliver food and nutrition security for all Europeans. However, that system faces many economic, environmental and social challenges as well as opportunities following socio-economic and technological developments, that are not equally distributed throughout the EU. Future policymaking aiming at healthy and resilient systems needs to take into account this differentiation and diversity of approaches, which necessitate foresight activities that take into account both the development of important driving forces as well as the social and spatial diversity. Primary production—that is agriculture, fisheries and aquaculture—forms the foundation of the food system. Its structure and performance is influenced by various conditions shaped by both the public and the private sector. As economic agents, primary producers aim at generating a sufficient amount of income, but their financial conditions are highly dependent on public and private actors, such as government regulators (including the EU’s agricultural and fisheries policies), the financial sector, suppliers, the food industry, retailers, etc. In other words, the web of policy requirements as well as input and output market imperfections greatly shape farmers’ and fishermen’s livelihoods. Knowledge on the conditions of primary producers and the driving forces influencing these conditions exists, but in a fragmented way: not all primary producers and regions are covered, not all driving forces have been investigated, cross-linkages between them have been insufficiently analysed, future opportunities are not well integrated, etc. The purpose of SUFISA is to identify sustainable practices and policies in the agricultural, fish and food sectors that support the sustainability of primary producers in a context of multi-dimensionsal policy requirements, market uncertainties and globalisation.

Work packages

WP1 aims to construct a conceptual framework of market imperfections, policy requirements and their implications for farmers. It will be built in order to capture the multidimensionality of conditions shaping primary producers’ strategies, vulnerabilities and performances (economic, environmental, social), the complexity of their drivers and their diversity across commodity sectors and regions.

WP1 will result in a CSP matrix, i.e., an n x m table that crosses farmers’ n conditions (regulatory, factor, demand and financial) with m strategies and performances that are found in the subset of countries contributing to SUFISA (Belgium, Denmark, France, Germany, Greece, Italy, Latvia, Poland, Portugal, UK and Serbia). A matrix will be constructed in each of these countries using a combination of insights gained from previous research, desk-based media analysis and a Q methodology study among stakeholders. Based on the member state matrices, a generic CSP matrix will be drawn up and hypotheses with respect to how conditions shape strategies and performances are derived.

The purpose of WP2 is to investigate the nature of market imperfections, policy requirements and their implications for specific commodity sectors and regions using the conceptual framework developed in WP1. WP2 aims to go beyond the relatively fragmented insights consolidated in WP1 to yield a holistic view on CSP across commodity sectors and regions. For this, WP2 will use a mixed-method multiple case study approach in three steps:

  • 1) In each country two case study regions at NUTS 2 level (22 cases in total) will be purposively selected to capture the variety of issues to be addressed by the project. Case selection is based on a confrontation of the CSP matrix with specific groups targeted by the project, such as young farmers, farmers with high capital requirements, female farmers, vertically integrated farmers, poor farmers, economically vulnerable contexts (due to the financial and economic crisis), etc.
  • 2) To diagnose CSP, a desk based study will populate the CSP matrix with secondary empirical data on regulatory and market conditions. As part of the desk-based study agro-food standards in the EU and important third countries will be assessed and the role of financial markets on commodity price formation will be evaluated. This CSP inventory will be complemented and validated by carrying out focus groups and interviews involving various stakeholder groups (farmers, input suppliers, food processors, retailers, banks, extension officers, government officials, etc.), as well as a workshop in each case. The focus groups and workshop will also be used to explore solutions to tackle the various issues.
  • 3) The case-specific hypotheses on the role and importance of CSP generated from WP1 will be tested by collecting primary data through a farmers’ survey in each case study. The survey will involve about 150-300 questionnaires (amount depending on the underlying complexity of the case) in each of the case study areas. The questionnaire will apply structured insights from WP1, the desk based study, the focus groups and workshop in order to elicit farm level information about the relevance of major conditions, how they interact at the farm level and how the farm would react to potential future changes in such drivers. The results will be treated both through descriptive and econometric analysis to identify the relevance of drivers in affecting farm behaviour and the factors affecting vulnerability/resilience and decision making as a reaction to changes in such drivers.

WP3 aims to analyse the impact of market imperfections and relevant policy measures on the efficiency and performance of farmers through the concept of value added. Value added measures to which extent farmers receive higher prices for their output than the prices that have been paid for the inputs used in the production process to produce that output. Value added is used to remunerate all inputs and is essential to study market imperfections.

WP3 will determine production frontiers, to show what the maximum attainable output is for a given vector of inputs. By analyzing the characteristics of the different firms involved, we will determine which elements characterize a highly efficient firm/production process and how technical efficiency changes when the inputs change. By integrating input prices the allocative efficiency can be determined. The allocative efficiency in input selection involves selecting the mix of inputs that produces a given quantity of output at minimum cost. We will determine how changes in input prices affect the allocative efficiency of the different sectors considered. By combing technical and allocative efficiency an overall measure of cost efficiency will be determined. The estimation of technical, allocative and economic efficiency is well known to support decision making. However, in this research, market imperfections will be considered. Another challenge is to take the inter-temporal nature of producers’ decision making process into account. Such a dynamic efficiency measurement considers costs of adjustment in quasi-fixed factors of production such as low prices for second-hand machinery (due to asymmetric information), disposal costs and human capital related costs (Emvalomatis et al., 2011).

WP3 will use a quantitative approach in five steps:

  • In a first step, a market power analysis will be carried out. A new empirical industrial organization model will be built using farm accountancy data network (FADN).
  • In a second step, an asymmetric information analysis will be carried out. Asymmetric information about product or agent characteristics is a well known issue which negatively affects market functioning and chain relationships, leading eventually to market and chain collapse in extreme cases.
  • In a third step, an economic performance analysis will be carried out. Whereas the power structure is mostly studied at sector level, firm level analysis can be important for a correct interpretation of market imperfections. Especially, because market power indications can be modified in the case of economies of scale and scope or if large efficiency variations are present in the sector.
  • In a fourth step, a sustainability performance analysis will be carried out. Environmental aspects (such as energy and water use, nitrogen surplus) will be integrated.
  • A fifth step involves an analysis of what these findings imply for short-term forecasts and long-term foresights and particularly for the quantitative models underpinning these forecasts and foresights, as these insufficiently take into account challenges such as heterogeneous products (product differentiation), vertical relationships, market power and the changing nature of government support (Rude and Meilke, 2004).

WP4 aims to identify sustainable practices and policies in the agricultural, fish and food sectors that support the sustainability of farmers and to develop future scenarios aimed at countering the identified market imperfections (objective 4). The implications of consensus practices and policies will be analysed both in a qualitative and quantitative way where possible. The work-package will involve three inter-related steps.

  • Step 1. Thematic analysis of previous work package data (WP1-3) to: (a) identify sustainable practices and policies, and (b) develop an initial set of scenarios related to sustainable financial practices that can deliver food and nutrition security. The added value of these scenarios is to look at those different practices and policies in a systemic and dynamic way: the interactions between these issues will be examined using the SUFISA multidimensional framework.
  • Step 2. The first versions of scenarios elaborated in step 1 are then presented to key food chain stakeholders in a series of workshops for review. In a first workshop, participants will provide feedback on the likelihood, coherence and systemic reasoning of the scenarios which will then subsequently be modified as necessary. Involving stakeholders in scenario development generally implies co-designing the scenarios with them: in this project, the first version scenarios are elaborated to be the best basis to launch the process with stakeholders: the participants to the scenario workshops are considered as a scenario development panel, and they will be given the capacity to develop new scenarios or adjust the ones proposed in step 1. In a second workshop, participants are invited to quantify the main assumptions of the storylines, in order to use the quantitative frameworks developed in WP3 to assess the impacts of future scenarios. Discussion in this workshop will also lead to a discussion of the common models used in foresight and forecasts (see WP3 – fifth step) and of their limitation if we are to take into account the major changes that are envisioned by stakeholders in their scenarios. In a third workshop, quantitative analyses developed in WP3 based on the quantitative assumptions of the second workshop will be discussed by stakeholders, in order for stakeholders to express their evaluation of the sustainability of the different scenarios and the different solutions at hand. This workshop will particularly lead to the identification of levers of action, and individual or collective strategies among the various stakeholders.
  • Step 3. Workshop findings will be further tested in a Delphi survey involving a range of experts from across all member states as well as at the EU level. Members of the Delphi panel will be experts recognized for their knowledge in, for example, sustainable finance, agriculture, fisheries and aquaculture. The Delphi survey will provide an opportunity to forecast, quantify and qualify the proposed scenarios, increasing their robustness by submitting them to critical assessment by a wider audience, and allowing for their subsequent integration into project recommendations and dissemination.

WP5 aims at carrying out work in a transdisciplinary way using a multi-actor approach, that is, to actively engage relevant stakeholders from the beginning of the project in order to optimise both the relevance of the work carried out and its dissemination and uptake by stakeholders. Transdisciplinarity involves working both interdisciplinary and with stakeholders as equal partners in the project, stakeholders’ involvement is considered an essential part of the project. This transdisciplinary methodology is in keeping with the project’s overall approach, which is inspired by the principles of post-normal science and applies to policy-related problems characterized by high uncertainty and a plurality of legitimate perspectives (Funtowicz and Ravetz, 1993).

The organization of interaction with stakeholders is thus aimed at challenging existing scientists’ paradigms and assumptions and to identify new research avenues, and for this reason it will accompany the consortium from the beginning of the project. Relevant stakeholders range from farmers and fishermen to actors in the whole supply chain (processing, retailing, consumers, but also input industry, cooperatives and extension services), local authorities, policy makers at national or European scale, financial institutions (insurance, banks, regulation authorities,…), and also stakeholders like environmental NGOs or workers unions, if relevant. Balanced representation of the diversity of supply chains and regions will be sought. Stakeholders will be engaged at two levels: the national level and the EU level. In each country involved, a stakeholder group will be formed that will interact with researchers during each step and in each WP. A similar group will be formed at EU level with representatives of EU level organisations.

WP6 contains all managing activities for the consortium. The actions and results of this WP remain internal and as such contains no public deliverables.

Cases

Belgium

In Flemish popular newspapers, on which this media analysis is based, we observe that regulatory
and policy conditions are by far the most reported conditions. On the contrary, socio-demographic
issues are seldom reported. A key person in the media debate is Piet Vanthemsche, former director of
the Federal Agency for the Safety of the Food Chain, as well as of the largest farmers’ union. In contrast,
farmers are seldom directly heard. The only farmers that tend to get a voice in the press are
small-scale farmers. At the sector level, meat and milk are the most mentioned for various reasons:
the abolition of milk quota, the manure surplus, the financial situation of pig farmers, illegal practices
related to the use of hormones, and the ritual slaughtering of lambs. From 2014 on, the apple and
pear sector gained attention, as the Russian embargo had a major impact on the Belgian fruit sector.

Denmark

The Danish media analysis shows that the SUFISA project coincides with a significant financial crisis
and structural development in Danish farming. On the surface, Danish farming is very successful in
terms of being efficient and high yielding with a low carbon footprint. However, Danish farming is currently
in a financial crisis as farmers on average have a significant debt problem, difficulty generating a
sustainable income and challenges raising capital for reinvestment. Furthermore, the analysis indicates
a growing debate about future modes of finance and its implications for production strategies,
generational succession and the farm economy. Another important theme in the media analysis is the
rapidly evolving Danish organic food market (currently with a market share of around 8%) and in the
agricultural media emphasis is given particularly to how farmers respond to these new quality demands
on primary production.

France

The French media discuss three main agricultural narratives: (1) An agroindustrial narrative where
competitiveness is the main performance indicator, and where strategies involve increasing the size
and capital intensity of farms, inevitably leading to a radical restructuring of the sector; consequent
social damage and the very existence of very large farms face a problem of acceptance in the French
debate. (2) A narrative of transition in technical systems, from a current unsustainable pathway to a
double performance system, able to drastically reduce the environmental impact of farms as well as
maintain their economic viability through collective strategies and differentiation. (3) An alternative
narrative of complete transformation of the food system, to regain the technical and economic autonomy
of farmers, to stop the decrease in the number of farms and to ensure their environmental soundness.

Germany

The analysis highlights four thematic fields that appear regularly in general media articles in the period
2012-2016: environmental and consumer protection, animal welfare, availability of agricultural production
factors, agricultural policy and markets for farm products. The key issues discussed are the price
crisis (mainly in the dairy sector), factory farming (in the context of animal welfare), food safety (e.g.
mislabelling), the reform of the Common Agricultural Policy (‘Greening’), the regulation of organic farming,
free-trade-agreements (mainly TTIP, CETA), the diversity of seeds (legal restrictions), land shortage
(rising land prices), green gene technology, and the banning of glyphosate. The media coverage
illustrates the interrelations between the protection of consumers, environment and animals, and the
difficult economic situation of farmers. Sustainability issues in relation to agricultural production are
also discussed. The positions differ significantly between the professional media and the public media.

Greece

Fishers face both internal and international competition from aquaculture and illegal fishing, while
also displaying a limited degree of cooperation which leads to a dependence on intermediaries. Extensive
sheep and goat production on the other hand is characterized by poor shelters, a lack of
holding licenses, complex legislation, and bureaucracy. The producers in both sectors are ageing
and succession is an issue. They all share financial constraints, mainly high operational costs and
indebtedness, aggravated by the financial crisis which leaves few opportunities for credit access and
“dictates” measures like increases in social security and tax rates. Additionally, they have to cope
with regulatory (i.e. landing obligation for fisheries and the absence of an electronic record system
for dairy farms) and environmental limitations such as a decrease in stocks and weather.

Italy

Regulatory and policy conditions are discussed mainly in relation to the bureaucracy burden, taxation
issues, restrictive food regulation, as well as European legislation (CAP) and international agreements.
Factor conditions are related principally to land, access to raw materials (seeds) and stocks
(fish) and availability issues. Demand conditions were identified as low farm-gate prices and unpredictability.
The most debated financial issues are a credit crunch for farmers and inadequate finance and
risk management. Socio-institutional conditions are discussed in terms of administrative efficiency and
the presence of socio-technical innovation systems. Technological conditions are mostly examined in
terms of the availability of innovative high-tech solutions that are not fully exploited by farmers. Ecological
conditions are considered in relation to global warming and desertification, eutrophication, and extreme weather events.

Latvia

The Latvian media analysis identifies key conditions that shape farmers’ strategies across a diversity
of agricultural sectors in Latvia, with special attention paid to the wheat and dairy sectors. Some of the
key external factors for dairy producers are related to the abolition of EU milk quotas, the Russian
trade embargo, and price and income volatility. In the wheat sector, the main external conditions faced
by farmers have to do with access to international markets, the land market, and producer cooperation.
The analysis reveals two dominant farmer strategies in Latvia: agro-industrial competitiveness
and rural development, with a political support strategy being equally important but used as a strengthening
factor for the main strategy. In the context of the economic crisis, the media also highlight other
strategies, such as in-sourcing or performing certain tasks on-farm which previously may have been
outsourced or provided by external commercial actors.

Poland

The professional education of farmers is stressed in relation to the adaptation of new technologies as
well as non-agricultural activities that lead to the implementation of a multifunctional model of rural
development. The themes of food safety (quality of food) and food security (quantity of food) are presented.
Two modern solutions: GMOs and renewable sources of energy (including biofuels) are discussed.
Financial issues are discussed in the context of production-oriented models and in terms of
bio-diversity, greening or non-agricultural activities. Policy and regulations are connected with environmental
care and ecological farming (including fraud in the form of emerging fictional ecological farms)
and preserving the traditional character of Polish agriculture, allowing farmers to resist structural
changes. The state should support the process of farm enlargement and improved labour use.

Portugal

Media analysis in Portugal covered two case studies in the Alentejo region: extensive beef production
in a Montado (agro-forestry) context and intensive olive oil production. Over 20 different media
sources were examined spanning the period between 1992 (McSharry Reform) and 2015 for beef, and
between 2002 (construction of the Alqueva reservoir) and 2015 for olives. A discourse-based approach
was used. The results indicate a clear dichotomy in the dominance of news between a Neoclassic
approach and a critical socio-economic perspective. Opinions and interviews dominate the
media examined, with facts mainly restricted to the professional publications examined. It is especially
interesting to note the different interpretations of the concept of ‘sustainability’ that are applied by different
media, reflecting their diverse ideological positions and interests.

Serbia

In spite of a good natural environment, agriculture is faced with a range of unfavourable sociodemographic
and economic conditions (rural depopulation, an agricultural budget which varies in both
size and structure year by year, an absence of cooperation among food chain stakeholders, significantly
constrained agribusiness finance, climate change etc.). The strategies adopted are based both
on both a very low risk awareness and underdeveloped individual risk control. The producers argue
about the importance of government measures that address sustainability in practice. Existing strategies
are seen as follows: (1) traditional approach: diversification and rural economy; (2) “the old story”
– state and agricultural subsidies; (3) management quality and skills (training, education and innovation).
The most frequently mentioned topics are: generic risk strategies, agribusiness “restructuring”,
extension and advisory services, risk control instruments/agricultural insurance and price hedging.

United Kingdom

In terms of the agricultural sector generally, price volatility was a predominant theme in the articles
sampled. Price volatility in media publications is understood to mean excessive price fluctuations and
variations in agricultural commodity prices over time. Price volatility is not a new topic: it has featured
in media discourses for some time, but particularly since the 2008 credit crunch. The media discourse
related to the sustainability of inshore fisheries businesses is mostly debated in regional and
more specialised media sources, with much of the discourse framed in relation to the Common Fisheries
Policy (e.g. discard bans, marine conservation zones and quota allocations). The milk price that
farmers receive and the abolition of the milk quota system were the two prominent issues discussed
in the media sources examined for the UK dairy sector, alongside price volatility.