Cap reform proposals about much more than divvying out the money

In the debate over who gets what from the Cap, little light has been shed on the direction of the policy

With about €1.3 billion up for grabs annually in direct support payments from the European Union, it is no surprise that a heated debate is raging between farmers about who gets what from the Common Agricultural Policy (Cap) and who might win or lose under the detailed reform proposals of European commissioner Dacian Ciolos.

Visit any mart or gathering of farmers and the chat is about what a neighbour is getting via the “cheque in the post” and whether or not he or she should be getting it.

This potentially explosive situation has been on a slow burner since 2005, but has ignited fully as we approach decision time for the Cap.

By the end of June, a reformed EU agriculture policy is expected to emerge from a tough and complex negotiation process between the European Parliament and the agriculture council of farm ministers.

If farmers are divided, so too are the farm organisations as they struggle to satisfy the conflicting demands of their members – witness the increasing unrest.

The reform proposals are about much more than divvying out the money. MEPs, and I am one of those directly involved in negotiating an agreement in the European Parliament, are lobbied by those who want to stop the process completely and those who cannot wait to see the European Commission proposals implemented fully and immediately.

Ireland is not alone: farmers in France, Italy, Spain, and Portugal all have a similar debate because they rank among the member states which continue to link payments to farmers to a historic level of payment some 10 years ago. That, in turn, was based on what farmers actually produced in the past.

In these [other] countries too, those who have high payments are fearful of losing out, while those on low or no payments are counting the days to when their situation will improve.

The European Commission wants to scrap this system and link payments to land, with all land receiving the same flat rate payment per hectare.

Major development

In a major policy development, the European Commission is proposing to link 30 per cent of the money in the Cap budget to the delivery of environmental goods – so called “greening” measures. It is this linking of a significant part of the Cap budget to environmental public goods that has saved the Cap budget from deep cuts.

Around the European Commission table, there was, and probably still is, a strong appetite for reducing payments to farmers and redirecting the money elsewhere. That threat has been reduced by the promise that agriculture will deliver not just food but also more for the environment.

The reform proposals are about re-directing support payments to land management in a way that addresses concerns about climate change and biodiversity.

Protection of permanent pasture, crop diversification and provision of ecological focus areas (habitats for wildlife) are part of the new demands on farmers.

They are designed to ensure that agriculture provides more habitats for wildlife, birds, bees and micro-organisms and to protect and improve soils by insisting on crop rotation of sorts and limiting carbon emissions by protecting high carbon soils from ploughing.

Yet these central planks of the policy – hotly debated in other member states – rarely feature in discussions about the reforms in Ireland, perhaps because Ireland is already “green”.

Status quo

The measures do signify the first step in reorienting the Cap away from past payments and towards paying farmers for the kind of things for which the marketplace does not pay them but which the public wants and agriculture needs for long-term sustainability.

Some argue for maintenance of the status quo but there is no political support in Europe for the current historic-based payment regime, so change is on the way.

Farmers with high value entitlements will inevitably see reductions in their payments, while those on little or no support payments will get more money.

This redistribution, called “convergence” in EU speak, is coming. What is at issue is the timeframe and the equation used to bring it about.

Later this month – on January 23rd and 24th – the European Parliament’s committee on agriculture and rural development will vote on a series of compromise amendments to the European Commission’s proposal.

These include allowing individual countries to decide the pace of convergence, and retaining some differences in the level of payments between farmers.

Cap allocation

But first there is the small detail of how much money will actually be allocated to the Cap. Currently it takes 40 per cent of the overall EU budget. The Cypriot presidency, just ended, spoke of the inevitability of cuts to the budget.

At the November meeting of the European Council of heads of state and governments, cuts to the Cap budget were on the table and they remain there, despite intense efforts to make the case for holding the budget.

A decision on the figures is expected in early February.

Linking payments to land is not without its problems. Unless there is a system to limit the size of a farm in respect of which payments can be claimed or the actual level of payments (capping in EU speak), large landowners will continue to get large payments.

Farmers who rely on leasing land will see payments leak away to landowners in rental prices and efforts to pay public money under the Cap to active farmers will be thwarted.

Germany and England have already moved away from historic linked payments to a flat rate regional payment. Regions and farmers who lost money in the transition – which began in 2003 – have adjusted and, in Germany, exchequer support for biogas eased the pain somewhat.

In Ireland, it is the high cost livestock sector which is under the greatest threat from the new system. In 2011, direct payments from the EU agriculture budget represented 73 per cent of farm incomes in Ireland. On livestock farms, these payments represent an even higher proportion of farm incomes.

In France, where huge emphasis is placed on livestock production to maintain farming in remote and difficult regions, there is little appetite to reduce the level of support payments to a flat rate system favoured by the European Commission.

Fairness

If there is a reduced pot of money for direct payments and rural development, there has to be a focus on fairness and results. There will inevitably be an impact at farm level and there will be a significant impact in the input supply sectors.

We are about to witness a significant new era for agriculture. At its worst, it will be a bitter and divisive era about winners and losers; at best an era of renewed focus on production efficiencies delivering high quality food in an even more environmentally sustainable way. Returns to farmers from the marketplace will have to adjust to this new era.

But will they, and will the possibility of EU legislation on fair play in the food supply chain, help to deliver better returns to the producers of food? With an average farm income in Ireland at €24,461 in 2011, getting the balance right will be vital.

* Maireád McGuinness is an MEP