The problem that now exists is the declining importance of the agricultural sector and people who have remained within farming have been receiving ever-decreasing incomes. It is therefore necessary for governments to practice some sort of control over the agricultural market with methods such as price supports and subsidies. These two methods fall under the Common Agricultural Policy.

Farmers are also subject to uncertainty, which is inherent and unavoidable in agriculture. For example a farmer cannot accurately predict his output and can only provide a ‘planned’ output. If the actual output is more or less than expected then this will have an effect on the price due to the effects on supply and demand. The farmer cannot guarantee his own income without any support such as the CAP and in this situation will not invest in new machines and equipment that will help agriculture in the long run. The uncertainty might also make people decide to leave the agricultural sector. Another problem with agriculture and a reason for the existence of the CAP and its renewed use is that in modern economies people spend less on agricultural produce. As incomes rise, as is the case in most modern economies, people focus more on luxury items and spend less on more mundane agricultural goods. This means that the CAP is very much still a necessity and will continue to be well into the future as incomes are likely to continue to rise. This is also a ‘double-edged sword’ for the agricultural sector as whilst the average wage is increasing theirs is likely to be decreasing as consumers buy less and less agricultural produce. For this reason incomes within the agricultural sector will always lag behind those of other sectors.

OBJECTIVES OF THE CAP

The legal basis of an agricultural policy for the whole Community is defined in Articles 32 to 38 in title II of the EC Treaty.

The objectives of the cap are clearly defined in Article 33.