Common agricultural policy CAP: support schemes for farmers
PURPOSE: to establish common rules for direct support schemes for farmers under the CAP and to establish certain support schemes for farmers.
PROPOSED ACT: Council Regulation
CONTENT: this proposal follows the Commission Communication "Preparing the Health Check of the CAP reform" of 20 November 2007. It should be noted that this proposal is closely linked to the following procedures: CNS/2008/0104, CNS/2004/0105, and CNS/2008/0106.
It is recalled that in recent months, there has been a sharp rise in the price of many agricultural commodities to exceptional levels. Their steady increase in 2006 and 2007 had already supported the conclusion that any remaining supply controls of the CAP (namely, dairy quotas and set-aside) should be removed. The Commission proposes further to break the link between direct payments and production and thus allow farmers to follow market signals to the greatest possible extent. Among a range of measures, the proposals call for the abolition of arable set-aside and a gradual increase in milk quotas before they are abolished in 2015, and a reduction in market intervention. These changes will free farmers from unnecessary restrictions and let them maximise their production potential. The Commission also proposes an increase in modulation, whereby direct payments to farmers are reduced and the money is transferred to the Rural Development Fund. This will allow a better response to the new challenges and opportunities faced by European agriculture, including climate change, the need for better water management, and the protection of biodiversity.
The main points of the proposals are as follows:
Abolition of set-aside: the Commission proposes abolishing the requirement for arable farmers to leave 10 percent of their land fallow. This will allow them to maximise their production potential. However, under the proposals for cross compliance and Rural Development, Member States are given the appropriate tools to ensure that the present environmental benefits of set aside can be retained.
Phasing out milk quotas: milk quotas will be phased out by April 2015. To ensure a 'soft landing', the Commission proposes five annual quota increases of one percent between 2009/10 and 2013/14.
Decoupling of support: the CAP reform "decoupled" direct aid to farmers i.e. payments were no longer linked to the production of a specific product. However, some Member States chose to maintain some "coupled" – i.e. production-linked - payments. The Commission now proposes to remove the remaining coupled payments and shift them to the Single Payment Scheme, with the exception of suckler cow, goat and sheep premia, where Member States may maintain current levels of coupled support (as it exists currently) in order to sustain economic activity in regions where other economic alternatives are few or do not exist.
Moving away from historical payments: farmers in some Member States receive aid based on what they received in a reference period. In others, payments are on a regional, per hectare basis. As time moves on, the historical model becomes harder to justify, so the Commission is proposing to allow Member States to move to a flatter rate system.
Extending SAPS: ten of the 12 newest EU members apply the simplified Single Area Payment Scheme. This is supposed to expire in 2010, but the Commission proposes extending it to 2013.
Cross Compliance: aid to farmers is linked to the respect of environmental, animal welfare and food quality standards. Farmers who do not respect the rules face cuts in their support. This Cross Compliance will be simplified, by withdrawing standards that are not relevant or linked to farmer responsibility. In particular, the proposals aim at withdrawing certain Statutory Mandatory Requirements that are considered not relevant or linked to farmer responsibility, and to introduce into Good Agricultural Environmental Conditions requirements that retain the environmental benefits from set aside and address issues of water management.
Assistance to sectors with special problems: currently, Member States may retain by sector 10 percent of their national budget ceilings for direct payments for environmental measures or improving quality and marketing of products in that sector. The Commission wants to make this tool more flexible. The money would no longer have to be used in the same sector; it could be used to help farmers producing milk, beef, goat and sheep meat in disadvantaged regions; it could be used to support risk management measures such as insurance schemes for natural disasters and mutual funds for animal diseases; and countries operating the SAPS system would become eligible for the scheme.
Shifting money from direct aid to Rural Development: currently, all farmers receiving more than EUR 5 000 in direct aid have their payments reduced by 5 percent and the money is transferred into the Rural Development budget. The Commission proposes to increase this rate to 13 percent by 2012. Additional cuts would be made for bigger farms (an extra 3 percent for farms receiving more than EUR 100 000 a year, 6 percent for those receiving more than EUR 200 000 and 9 percent for those receiving more than EUR 300 000). The funding obtained this way could be used by Member States to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity.
Intervention mechanisms: market supply measures should not slow farmers' ability to respond to market signals. The Commission proposes to abolish intervention for durum wheat, rice and pig meat. For feed grains, intervention will be set at zero. For bread wheat, butter and skimmed milk powder, tendering will be introduced.
Payment limitations: 46.6% of the total direct payment beneficiaries in the EU-25 receive less than EUR 500. This number essentially includes small farmers, but it also includes in certain Member States recipients whose value of payment is below the administrative cost of managing it. In order to simplify and reduce the costs of administration of direct payments, it is proposed that Member States shall either apply a minimum amount of payments of EUR 250 or apply a minimum size of eligible area per holding of at least 1 hectare or apply both. Nevertheless, special provision is made for those Member States whose agricultural sector is mainly composed of very small holdings.
Other measures: a series of small support schemes will be decoupled and shifted to the SPS. For hemp, dried fodder, protein crops and nuts this would happen immediately. For rice, starch potatoes and long fibre flax, there would be a transitional period. The Commission is also proposing to abolish the energy crop premium.
Budgetary impact: proposals for modulation in the Single Payment Scheme and Rural Development are neutral with the respect to the EU budget, as it is a simple compulsory transfer between the second and the first pillar of the CAP. For national budgets the increased modulation could lead to additional national expenditure in view of the necessary co-financing needed in Rural Development. This would mean that some Member States have the possibility of returning to the (higher) level of national expenditure originally provided for before the decision on the Financial Framework 2007–2013. As regards the transfer of measures into the Single Payment Scheme there could be moderate financial consequences for the EU-budget, but most of the transfers are also budgetary neutral.
The expiry of the dairy quota will bring additional pressure on butter under all options. These proposals, by initiating a gradual process of a quota phasing-out, are more beneficial for the sector and for the long-term developments of the CAP. However, the need for some limited additional expenditure on butter exports cannot be excluded. Whether this materialises will depend on factors that are at this stage unknown (Doha Development Agenda, world market developments). Therefore the present proposals include a review clause in 2012 that would allow developments in dairy markets to be assessed to determine if additional measures will be needed to avoid any increase in the budget. Some savings are foreseen as a consequence of abolition of existing measures. However, the biggest budgetary effect of the soft-landing on the milk quota is a loss of budgetary revenue due to the decrease in milk levy.