Brussels, 28/06/2013 (Agence Europe) - On Wednesday 26 June, the Commission, Council and Parliament reached a political agreement (at first reading) on the reform of the common agriculture policy (CAP). The four regulations (direct payments, rural development, cross-cutting regulation and single common market organisation) have still to be approved formally by the Council and the European Parliament (EP) in the form of a first-reading agreement, once the texts have been finalised in all languages.
A number of issues will be resolved at a later date, in the framework of the negotiations on the multiannual financial framework (MAFF) for 2014-2020: transfer of funds between direct payments (first pillar) and rural development (second pillar), the allocation of national envelopes for direct payments and rural development, co-funding rates and the issue of upper limits on and degressivity of payments.
A number of issues related to the decisions of the February European summit on the financial framework 2014-2020 of the EU “remain open”, but will be “finalised” once there is an agreement in place on this, said Portuguese Socialist Luis Manuel Capoulas Santos, rapporteur on direct payments. The February summit felt that the upper limit on aid should be optional, whilst the MEPs want it to be obligatory. The Council is moving towards “obligatory degressivity”, which could take the form of a reduction, by 5% for example, of amounts above €150,000, with the money this saves being transferred into rural development. Instead of applying this degressivity, the member states which most oppose it, led by Germany, could as an alternative use the “redistributive payment” for the first hectares.
The Council is also to set in place the option to transfer up to 15% of the direct payments envelope (first pillar) into the second (rural development), without any co-funding. Member states in which direct support is below the EU average could transfer up to 25% from the second pillar into the first.
The main elements of the new CAP are:
Direct payments
The system of direct payments under the CAP will gradually move away from a system under which the distribution of funds by member state, and by farmer within the member state, is based on historic references. This transition will take the form of a convergence of payments, not just between member states but also within each member state. All payments will continue to be subject to compliance with certain environmental rules and others (eco-conditionality regarding the cross-cutting regulation).
The basic payment scheme (BPS). Member states will earmark 70% of the national envelope reserved for direct payments to the new basic payment regime. The single area payment scheme (SAPS), a simpler regime based on a fixed rate, will be extended until 2020 (the new member states apply this).
Internal convergence. The member states which still allocate funds on the basis of historic references must move across to more similar levels of payments, in which funds are allocated per hectare. Member states may choose from among a number of options to achieve this type of convergence: adopt a national approach or a regional approach (on the basis of administrative or agronomic criteria), apply a fixed regional/national payment by 2019, or ensure that all farmers who receive less than 90% of the regional/national average payment see a gradual increase - together with the additional guarantee that each farmer achieves a minimum payment of 60% of the national/regional average by 2019. The money made available to the farmers receiving more than the regional/national average will be adjusted proportionately and member states will have the option to limit losses to 30%.
Member states are also entitled to use a redistribution payment for the first certain number of hectares (allowing them to take 30% of their national envelope and redistribute it to farmers for their first 30 hectares). This option will have a considerable redistribution effect. The member states also have the option of applying a maximum payment per hectare.
Young farmers. A supplementary payment of 25% to young farmers (under the age of 40) starting out in the profession will be granted on top of the basic payment for the first five years of business. This measure will enjoy a maximum funding of 2% out of the national envelope and will be obligatory for all member states.
Scheme for small farmers. This scheme, on the other hand, will be optional. Any farmer applying for aid may opt to join the small farmers' regime and receive an annual payment laid down by the member state of between €500 and €1,250, irrespective of the size of holding. Farmers under this scheme will have to meet less stringent requirements in terms of conditionality and will not be obliged to make their practices more environmentally friendly. The total cost of the scheme for small farmers may not account for more than 10% of the national envelope (unless a member state decides to ensure that small farmers are given what they would be granted if this regime were not applied).
The coupled support option. In order to mitigate any undesirable effects of internal convergence for specific sectors in certain regions, the member states may decide to grant limited amounts of “coupled” payments, in other words payments linked to production. Such payments will be limited to 8% of the national envelope if the member state currently provides coupled support or, if the current level of coupled support is above 5%, up to a maximum of 13%. The Commission has a certain level of freedom to approve a higher rate if justified.
Areas with natural constraints/less-favoured areas. The member states (or regions) may choose to grant an additional payment for areas with natural constraints (as defined under the rural development rules) to a maximum level equivalent to 5% of the national envelope. This practice is optional.
Greening. In addition to the basic payment/SAPS, each holding will receive a payment per hectare in return for compliance with certain agricultural practices beneficial to the climate and the environment. The member states will earmark 30% of their national envelope for payment of these measures, which are obligatory and failure to abide by the greening requirements will bring about sanctions going beyond the level of the payment earmarked for greening. In other words, once a transitional period is up, repeat offenders will also lose up to 125% of their greening payment. Three basic measures have been laid down: 1) keeping permanent grassland; 2) diversification of crops (farmers must grow at least two crops if the surface area of his or her arable land is above 10 hectares and at least three crops if this surface area is more than 30 hectares; the main crop may occupy up to a maximum of 75% of the arable land and the two main crops together at least 95% of the arable land); 3) maintaining surface area of ecological interest of at least 5% of the surface area of arable land (this figure will be increased to 7% from 2019 for holdings of more than 15 hectares, not including permanent grassland), to be made up of field boundaries, hedges, trees, set-aside, specific topographic features, biotopes, buffer strips or woodland.
Greening equivalency. In order to avoid penalising those who already take account of environmental and sustainability issues, the agreement provides for a “greening equivalency” system, whereby environmentally beneficial practices already in place are considered equivalent to the three basic measures. Organic farmers will not be subject to any additional requirements. For all others, the agri-environmental regimes may include measures deemed equivalent. The new regulation contains a list of these equivalent measures. In order to avoid any “double funding” of these measures, payments made under the rural development programmes must take account of the base greening requirements.
Financial discipline. It has been agreed that a threshold of €2000 will be applied to any subsequent reduction of annual direct payments under financial discipline (namely when estimates of payment requirements come in above the budget available for the first pillar). In other words, the reduction will not apply to the first €2000 of the direct payments for each farmer. This will also be used to feed into the market crisis reserve.
Active farmers. A new negative list has been set in place specifying professional activities which should be excluded from benefiting from direct payments (airports, railways, water distribution companies, real estate companies and permanent sports and leisure facilities). This list will be obligatory for the member states, unless the companies in question are able to demonstrate that they genuinely carry out an agricultural activity. Member states will be able to add other activities to this negative list.
Market management
The existing public intervention and private storage aid systems have been revised to be more reactive and more efficient (technical adjustments for beef meat and dairy products). For the dairy sector, these changes come on top of the dairy package of 2012, which is incorporated into the regulation, and which shore up the farmers' negotiating powers.
Furthermore, a new safeguard clause has been brought in for all sectors, to allow the Commission to take emergency measures to respond to general market disturbances. These measures will be paid for out of a crisis reserve funded by the annual reductions in direct payments. Funds not used for these crisis measures will be paid back to the farmers the following year.
In the event of serious crises on the market, the Commission may also allow producer organisations or inter-professional organisations, in respect of specific guarantees, collectively to take certain temporary measures (withdrawal from the market or storage by private operators, for example) in order to stabilise the sector in question.
Milk quotas will expire in 2015, and sugar quotas will expire on 30 September 2017. In order to offer greater security, the framework provisions governing agreements between sugar companies and sugar producers will be kept in place. As regards the period following the expiry of the quotas, white sugar will still be eligible for private storage aid. Most of the developing countries will continue to enjoy unlimited access to the Union market, free of duty.
For wine, the planting rights system will end in 2015. It will be replaced by a system of authorisations for new plantings as of 2016, together with a production limit of 1% a year.
The programme in favour of consumption of fruit in schools and the programme for the consumption of milk in schools will be extended, and the annual budget allocated to the programme for fruits in schools rises from €90 to €150 million a year.
In order to strengthen farmers' negotiating position within the food chain, the Commission would like the various sectors to become better organised, with limited derogations from European competition law. The rules for the recognition of producer organisations (POs) and inter-professional organisations now cover all sectors and increase the options for setting up these organisations.
Additionally, farmers will have the option to negotiate contracts for the supply of olive oil and beef meat, cereals and certain major crops collectively, subject to certain conditions and guarantees. The Commission will publish guidelines on issues potentially linked to competition law.
Rural development
Six priorities have been agreed: support for the transfer of knowledge and innovation; shoring up the competitiveness of all types of agriculture and sustainable forestry management; promoting the organisation and management of risks in the food chain; restoring, protecting and strengthening ecosystems; promoting an efficient use of resources and moving to a low-carbon economy; and social inclusion, reducing poverty and economic development in rural areas.
At least 30% of EU funds must be earmarked for environmental protection measures (water, soil, biodiversity, etc, but also organic production, forestry and less-favoured areas) and measures to fight climate change; a minimum of 5% of the funds must be allocated to the LEADER approach. Measures co-funded by the European Agricultural Fund for Rural Development (EAFRD) must be focused on the following themes: innovation; agricultural advisory services; restructuring and modernising farms; young farmers (up to €70,000 of subsidies for start-up activities); small farms (start-up aid of a maximum of €15,000); risk management instrument (insurance and mutualisation fund - harvest and weather conditions, animal disease - under which cover will be extended to the stabilisation of income, with the possibility of obtaining assistance from a mutualisation fund to cover up to 70% of losses in the event of a 30% drop in income); support to create producer groups and organisations; payments in favour of agri-environmental or climate measures; organic farming; forestry; mountainous areas (aid increased from €250 to €450 per hectare); support for technological, environmental and commercial cooperation; non-agricultural activities (subsidies for the creation and development of micro and small enterprises); basic services and village renovation.
Areas with specific limitations: the new definition of areas with natural limitations on the basis of eight biophysical criteria (soil quality, climate, gradient, etc) has been postponed until 2018, with a margin of 10% for the member states.
Insurance and mutualisation funds for risk management: aid to set up mutualisation funds for producers wishing to protect themselves against market fluctuations, at a level of €0.65 for every euro spent by the farmer. Aid in favour of harvest insurance in the event that the drop in income is greater than 30% of the average annual income of the farmer in the event of natural disasters, unfavourable climate phenomena, disease or parasitic infection (up to a maximum of 70% of losses).
Advisory service on economic development issues for small farmers (annual payment of €500 to €1250) and restructuring subsidies for regions with many small farms.
FUNDING AND MANAGEMENT OF CAP
Eco-conditionality. The current obligations have been kept in place as they stand, but the framework directive on water and the directive on the sustainable use of pesticides will be incorporated into the system once they have been correctly applied in all member states and the obligations upon farmers have been clearly defined.
Agricultural advisory service. Inclusion of framework directives on water and on sustainable use of pesticides in the obligatory elements of agricultural advice to farmers, so that farmers can be kept abreast of these requirements in order to bring them into the eco-conditionality regime.
Harmonisation of payment dates. From 2018 onwards, the direct payments will be paid in early December, with the option to grant an advance of 50% from 16 October. For the second pillar, no date has been laid down, but all payments must be made by 30 June of the following year.
Publication of names or business names of beneficiaries of the CAP (no names for small farmers receiving less than €1250).
Number of payment agencies. The number of payment agencies in each member state may be kept at its current level, but must not increase. (LC/transl.fl)