12 July 2002

One capped cheque is what awaits UK farms

By Philip ClarkeEurope editor

A SINGLE aid cheque based on past receipts, subject to annual cuts of up to 20%, with a maximum payment ceiling for larger holdings, are the prospects for UK farmers from the mid-term review of Agenda 2000.

In line with all the earlier leaks, farm commissioner Franz Fischler presented his plans in Brussels this week, calling for far-reaching reforms to make the CAP more market-oriented.

Central to his strategy is the idea of decoupling all subsidies from production by introducing a single income payment per farm.

"Such a system would integrate all existing direct payments a producer receives from various schemes into this single payment, determined on the basis of historical references," says the report.

The plan is to divide the total payment by the area of the farm concerned to give a number of payment rights.

"This is a logical extension of the shift of support from production to the producer," said Dirk Ahner, EU head of agriculture. "It will lead to improved market orientation so farmers can really work as rural entrepreneurs."

This would have the advantages of simplifying the support mechanism, guaranteeing farmers a level of income, while allowing them to focus on supplying the products consumers demand, says the report.

Decoupling would also be good for the environment – by removing production specific incentives, and would make it easier to integrate new member states to the EU and would be easier to defend in the World Trade Organisation talks.

To strengthen the environmental, animal welfare and food safety benefits, the commission also plans to introduce more "cross compliance", by establishing a number of statutory standards and introducing a new farm audit for all but the smallest farms.

And to achieve a betterbalance between market supports and rural development, Dr Fischler is also calling for "dynamic" modulation, progressively trimming all directaids by 3% a year, climbing to 20% by 2010.

Redirecting money

Under the plan, the first k5000 (£3225) of direct payments on all farms will be exempt from modulation, with a further k3000 (£1935) a worker allowed on farms employing more than two people. "This will ensure the majority of (EU) farms will not be subject to modulation," says the report.

Unlike the current voluntary arrangement, whereby modulated money stays within a member state, the commission wants to be able to redirect the money saved according to various criteria. "This will allow some redistribution from intensive cereal and livestock producing countries to poorer and more extensive/mountainous countries."

But, to increase the appeal of modulation, the commission also plans to broaden the range of uses to which the money may be put, and to increase the percentage of EU funding for agri-environmental schemes.

Dr Fischler has also confirmed his plans to set a maximum ceiling on the amount any one farm can receive at k300,000 (£193,500), though any money saved will be available for rural development within the same member state.

As for the individual commodity regimes, the paper calls for a further 5% cut in cereal intervention prices, (as originally planned under Agenda 2000), taking total cuts since 1999 to 20%. This would be compensated. Dr Fischler also plans to eliminate intervention for rye and convert beef headage premiums into area payments.

The paper released this week is a discussion document only. The next step will be for formal proposals to be issued in the autumn, with final decisions taken by farm ministers next March. These are likely to dilute what is currently on the table. &#42

Changes to support mechanisms

Decoupling

&#8226 Single income payment per farm, based on past arable and livestock receipts, paid as area aid.

&#8226 Payments dependent on meeting environmental, food safety and animal welfare conditions.

&#8226 Rights to premiums can be transferred in whole or in part with the farm.

&#8226 Member state flexibility to set individual, regional or national aid rates.

Modulation

&#8226 All direct payments to be reduced compulsorily in all member states by 3%/year from 2004, until 20% is reached in 2010.

&#8226 All farms allowed up to k5000/year (£3225/year) in aid before cuts apply.

&#8226 Farms employing more than two workers allowed another k3000/worker (£1935/worker) before cuts apply.

&#8226 Modulation expected to raise k550m/year (£355m/year) for Brussels.

&#8226 Modulated money will be redistributed by Brussels into rural development, on the basis of farmed area, agricultural employment and/or social need.

&#8226 These funds may be used to top-up existing rural development schemes.

&#8226 The list of ways in which modulated money can be spent will be broadened to include food quality and animal welfare.

&#8226 The EU share of funding for agri-environment measures to increase to 85% in Objective 1 areas and 60% elsewhere.

Capping

&#8226 Payments to individual farms (after modulation) capped at k300,000 (£193,500), with the money saved redirected to rural development within the member state.

Other changes

&#8226 Farm audit on units receiving over k5000/year (£3225/year) in aid, to check equipment and practices meet environmental and safety standards.

&#8226 Compulsory 10-year non-rotational set-aside on arable land at 10%. No industrial crops.

Changes to market regimes

Combinable crops

&#8226 Further 5% cut in cereal/oilseed intervention price to k95.35/t (£61.50/t).

&#8226 Increase in area aid from k63/t to k66/t (from £40.65/t to £42.58/t x reference yield) to compensate.

&#8226 Monthly increments to support prices scrapped.

&#8226 Abolition of intervention for rye.

&#8226 Stand alone protein supplement of k55.6/ha (£36/ha).

&#8226 Special aid for biofuels of k45/ha (£29/ha).

Beef

&#8226 Headage payments replaced by single area payment, based on past entitlements.

&#8226 Tougher conditions for live cattle to get export subsidies.

Dairy

&#8226 Four options for 2008-2015, (after Agenda 2000 changes of 15% price cut and 1.5% quota increase from 2005/2006 to 2007/2008):

1. No further changes.

2. 3% quota increase, 15% butter price cut, 5% SMP price cut.

3. Two tier quota market.

4. Abolition of quota, 25% price cut.