The single farm payment could be abolished and farmers placed on income support, according a document leaked from Brussels.
The proposal is contained in a draft communication on the future of the Common Agricultural Policy after 2013.
Three broad scenarios for CAP reform are outlined in the 13-page document, which has been seen by Farmers Weekly magazine.
The first proposal would leave the current system largely unchanged, while distributing payments between countries more equitably.
But the second and third proposals are more radical.
The second proposal would see farmers paid a basic rate of income support, topped up with environmental payments.
Further voluntary payments would be made to producers in less-favoured areas, such as hill farmers, and those in specific regions and sectors.
The Commission believes this would make support more balanced, targeted and sustainable.
But the third proposal goes further still, suggesting the complete abolition of market and income support.
It would see direct payments phased out in their current form.
In their place, farmers would receive limited payments for environmental public goods and additional specific natural constraints.
The draft proposals could change considerably in the run-up to CAP reform. But they are the best indication yet that direct payments will be cut.
“The future CAP should contain a greener and more equitably distributed first pillar,” says the leaked document.
The second pillar should focus more on competitiveness and innovation, climate change and the environment, it adds.
The leaked document emerged just days after UK farm minister Jim Paice urged farmers to prepare for life after the single farm payment.
“I have believed for a great many years that the day will dawn when there is no direct payment to farming, in terms of the single farm payment,” he said.
“I don’t want to be held to ransom on a particular date but I still believe it to be the case.”
The government’s job was to help farmers prepare for that day, Mr Paice told an NFU fringe meeting at the Conservative Party Conference.
“It may still be some way away but I believe farmers will eventually have to depend entirely on the market for their income,” he said.
Farmers are likely to be divided over the contents of the leaked document.
Many producers rely on the SFP to keep their farm businesses afloat.
But the Country Land and Business Association said Brussels was “absolutely right” to address the food and environmental challenges facing Europe.
CLA president William Worsley said the paper showed the European Commission was taking a sensible approach.
“The Commission has tried to steer a course between those defending the status quo and those saying the CAP should only be about the environment.”
The paper acknowledged the need to retain both pillars and the need for further evolution to face the food and environmental challenges ahead.
It stressed a balanced approach, said Mr Worsley.
It suggested encouraging innovation and productivity while encouraging farmers to provide more environmental public goods.
Mr Worsley stressed the document was a leaked paper, setting out the agriculture commission’s views on CAP reform.
“We have yet to see what the other Commissioners think of it especially the ones in budget, finance, trade and environment.
“This paper is not necessarily the final word.”