SFPs to be cut by 5%, warns Brussels
Brussels is planning to cut single farm payments by just under 5% in 2013, to ensure overall CAP spending stays within new thresholds.
Known as “financial discipline”, the concept was established in 2003 as part of the Fischler reforms, to ensure that the ceiling for the so-called “first pillar” of the CAP is respected.
It has never been triggered before. But cuts are now necessary because of the agreement reached by heads of state in February to rein in the EU budget.
A proposal just tabled by the commission foresees a reduction in single farm payments of 4.98% in 2013 – equivalent to an overall cut of €1.47bn from the Pillar 1 budget of €44.1bn.
“This proposal relates to applications for direct payments in 2013, to be submitted by farmers in May and usually paid out in December,” said a spokesman.
The plan has been criticised by EU farmers body Copa-Cogeca, which said the cut had not been planned for and risked jeopardising important investment decisions already made by farmers for 2013.
“It comes as a complete shock. With market prices barely covering production costs and market volatility on the rise, it is the last thing farmers and co-operatives need,” said secretary-general Pekka Pesonen. “This latest move threatens growth and jobs in EU rural areas.”
But the commission has insisted that the 5% cut is only provisional. For a start, the budget cuts agreed by heads of state in February still have to be agreed by the European parliament.
The commission is also due to update its spending forecasts for 2014 in the autumn, which could lead it to change the rate of financial discipline again.
Richard King, head of research at the Andersons Centre, suggested producers should budget for cuts of up to 10% in this year’s SFPs. “That includes a good margin for safety,” he said. “If it is less, then that will be a nice surprise when SFPs get paid out in December.”
He also advised producers to keep a close eye on exchange rates. Last year’s SFPs were converted from euros to sterling at a rate of about 79p, he said. Since then sterling had weakened, reaching 87p in mid-March – a better rate for conversion.
But with fresh troubles in the eurozone, in particular the Cypriot banking crisis, sterling was heading the other way again, dropping below 85p.
The rate for converting SFPs from euros to sterling will not be fixed until 30 September, but some farmers were considering locking into the exchange rate now, said Mr King.