Co-operation may threaten subsidies

By FW staff

GREATER co-operation between farmers, spurred on by lower prices at the farm gate, could put valuable subsidy payments at risk.

“Direct subsidy receipts often exceed net farm income by substantial amounts and new structures must be created in a way that does not detract from the ability of the business to claim maximum subsidies,” says Sandy Ramsay, Scottish Agricultural College senior rural business adviser.

“One danger which must be recognised and avoided is the possibility of linking unrelated businesses together.” Creating a single IACS business could lead to penalties that outweigh the benefits.

“There is also the distinct prospect that farm expansion may be thwarted by subsidy capping in the Agenda 2000 reform package. Wherever possible, separate IACS status must be maintained to minimise the effects of modulation.”

Properly structured contract farming agreements should be able to pass the IACS separateness tests. Share farming, with two businesses farming a single area of land, might lead to complications; full partnerships need even more planning. “Savings in fixed costs should be very carefully considered in relation to modulation thresholds and other subsidy receipt limitations.”

Partnerships and companies established to share machinery and provide services to members must be created as contracting organisations to provide services, he adds.