The Agricultural Treadmill characterised world agriculture between 1870 and 2000. During this time period farmers produced ever more food for ever more humans at ever declining prices, and farm income growth lagged behind income growth in other industries.

The turn of the millennium marked the end of the Agricultural Treadmill. Growth in global food demand is now outstripping growth in supply. As a consequence, world prices have gone up. For the next few decades the trend in the price of food will be positive.

Global food demand will continue to be rapid because of continuing swift population growth in addition to income growth in developing and newly industrialising countries. However, food supply growth is not likely to keep pace with the growth in global demand. One reason is that the land available for food production is limited at a global scale. The production growth necessary to meet the needs of the rapidly growing world population, therefore, must come predominantly from an increase in the productivity of the land already being farmed. However, productivity growth in agriculture has been on the decline since the time of the Green Revolution. In addition, water for irrigation is becoming scarcer and more expensive. Add to this the growing demand for bio-energy and it becomes clear that world agriculture, after more than a century of economic decline, is prospering again and will continue to do so for the foreseeable future.

World agriculture, after more than a century of economic decline, is prospering again and will continue to do so for the foreseeable future.

A key political argument in favour of the CAP has been that because of the Agricultural Treadmill described above farmers were in need of income support. However, with a long-term positive trend in prices there is no longer a need for agricultural income support. For the next few years the average price of wheat can be expected to be around €160 per mt rather than the €100 it attracted just a few years ago.

Consider German farmers. They have averaged a wheat yield of about 7.5 mt per ha in recent years. With market prices around €160 per mt rather than €100 the revenue would be about €450 per ha higher. This implies that, compared to the turn of the millennium, farmers in Germany would still be better-off than just a few years ago, even if the direct payments provided by the CAP were to be discontinued.