Food and agriculture are right back on top of the political agenda. Not a day goes by without new reports of rising prices, food shortages and the search for both a cause and a cure for what some are calling the "food crisis".

Against this background, the timing could hardly be better for the European Commission's review of the Common Agricultural Policy (CAP).

Today in Strasbourg, I am presenting what we have dubbed the 'Health Check of the CAP'.

This is not a fundamental new reform, but an effort to further modernise, simplify and streamline the CAP. Crucially, it also aims to clear aside remaining obstacles that hinder farmers from responding to market signals and the growing demand for food.

Last autumn saw the EU react quickly to the rapid changes on world and European commodity markets.

We increased milk quotas, freed arable farmers of their obligation to set aside 10 per cent of their land and suspended import duties on cereals.

The health check allows us to take a number of more permanent measures to equip our farmers to respond to the new situation in which we find ourselves.

This is no knee-jerk reaction, but a well-thought-through and wide-ranging review of the CAP, which fits very well with the current market situation. It brings together a number of review clauses agreed upon in 2003 when the CAP was radically reformed and takes them a step further.

We are proposing to abolish mandatory set-aside once and for all, to allow arable farmers to fulfil their full production potential.

However, we are well aware of the environmental benefits which have been a by-product of what was originally a measure designed to stop overproduction. We want to introduce new measures to help to retain these.

Milk quotas will expire in 2015. They are an anachronism in the era of market-orientated farming. Between now and then, we need to ensure a 'soft landing' for the dairy sector, to avoid a sudden market crash on April 1, 2015.

That is why I have proposed to increase quotas gradually. This liberalisation at a sensible pace will allow our producers to respond early to booming global demand, but will not cut the legs from under the healthy market that we have now.

When the CAP was originally established in the early 1960s, it was based on a guarantee that the EU would buy up products that could not be sold on the open market at a high guaranteed price.

Such so-called 'public intervention' has been substantially slimmed down. But we need to go further.

We must make sure that intervention and our other market tools work as an effective safety net for times of genuine crisis, but do not get in between farmers and market signals.

That is why we are proposing to abolish intervention for durum wheat, rice and pig meat. For feed grains, intervention will be set at zero. And for bread wheat, butter and skimmed milk powder, there will be a new emphasis on tendering.

The 2003 CAP reform was revolutionary in that it "decoupled" direct aid to farmers. In other words, financial support to farmers was no longer linked to the production of a specific product.

This freed farmers to produce what the market and the consumers wanted, instead of forcing them to look for the best subsidy combination.

Certain member states took the option of keeping some production-linked payments.

In too many cases, this has continued to stifle farmers' responses to market signals while adding to the administrative load.

Therefore, we must push ahead with full decoupling - except in a very few cases where doing so would bring a heavy economic, social or environmental cost.

This year, farmers face a number of new challenges. But meeting these challenges requires money, and we have a strict limit on our agricultural budget.

That is why I am proposing to reduce direct payments to farmers and shift this money into our budget for rural development policy.

Under my proposals, the transfer of funding into rural development and out of direct aid paid to all farmers receiving more than €5,000 every year would rise to 13 per cent.

This money would be used to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity.

There would be bigger cuts to the biggest direct payments, in response to the public's serious concerns about the balance of spending in the CAP.

The list of standards farmers need to respect to receive their cheques from Brussels will be updated to retain the environmental benefits of set-aside and improve water management. And other unnecessary and burdensome standards will be withdrawn.

Other proposals aim to cut bureaucracy, redistribute aid to farmers in seriously disadvantaged regions and support the establishment of risk management measures such as insurance schemes for natural disasters and mutual funds for animal disease crises.

We will also abolish the special subsidy for the production of the raw materials used in biofuels. Now that the EU has a fixed target for biofuel usage, this money can help the biofuel sector in better ways - especially in terms of preparing for second-generation fuels.

I think we have put forward a set of pragmatic and effective measures to further modernise the CAP and free our farmers to face the growth in demand for food.

I hope ministers will give them their backing.

Ms Fischer Boel is European Commissioner for Agriculture and Rural Development.

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