Revising EU Farm Policy

Direct EU payments to any one farm should be capped at €300,000 while 30% of national direct payment budgets should be conditional upon environmental compliance, according European Parliament Agriculture Committee MEPs.

Furthermore, Member States - and not the EU - should decide who is entitled to receive EU-funded direct farm payments. Some entities - such as transport, real estate companies and airports, should be excluded altogether unless they can prove that their agricultural activities form a significant part of their overall economic activities.

These are some of the Agriculture Committee’s key positions on EU Common Agricultural Policy (CAP) reform. The Committee’s February 2013 vote now paves the way for negotiations between Parliament and EU member states, with a view to having CAP reform in place by next year.

Context

The Common Agricultural Policy (CAP) aims at ensuring adequate, stable and efficient production of high-quality food, and defines how EU agricultural funding is distributed. It is due to be reformed by the end of 2013, as set out in the Commission’s 2010 Communication on "The CAP towards 2020".

In October 2011, the Commission followed up with a set of legal proposals designed to make the CAP more effective, competitive and sustainable. The approval of the different regulations and implementing acts is expected by the end of 2013.

The recent Agriculture Committee vote on the original Commission proposal is therefore a crucial stepping stone to achieving this target.

Agriculture Committee Position

While broadly in agreement with the Commission’s original proposals, the Agriculture Committee has made some important amendments.

Direct Payments

Direct payments provide farmers with a safety net in the form of a basic income support, decoupled from production, to stabilise their income. They also help to provide basic public goods delivered through sustainable farming.

The Agriculture Committee greatly simplifies the Commission's original proposal when it comes to direct payments.

The Committee stated that the entity entitled to receive EU-funded direct payments should be decided by member states and not by the EU. Some entities - transport and real estate companies, airports and sports clubs - should automatically be excluded unless they can prove that their agricultural activities form a significant part of their overall economic activities. It should also be up to member states to extend the list of excluded entities.

On direct payments, the Agriculture Committee also agreed:
• To cap direct payments to any one farm at €300,000
• Payments to those receiving between €250,000 and €300,000 to be reduced by 70%
• Payments to those receiving between €200,000 and €250,000 to be reduced by 40%
• Payments to farms receiving between €150,000 and €200,000 to be reduced by 20%
• As of 2019, payments received by all farmers in any given member state to be based on uniform unit value. Where payments are reduced, 2019 level not to be more than 30% below that of 2014
 
Other amendments, such as seeking to reduce payments to bigger farms even more, or calling for capping to be completely rejected, failed to win the support of a majority in Committee.

Environment Protection

The Committee agreed that new environmental rules for farmers should be more flexible and linked to the size of the holding. While the three key measures proposed by the Commission – crop diversification, maintaining existing permanent grassland and permanent pasture and ecological focus areas – are agreed to, MEPs want to see certain exceptions made to reflect geographical conditions and size of holding.

Farmers certified under national or regional environmental certification schemes would be exempt from mandatory greening measures, on condition that these practices have an impact at least equivalent to that which the mandatory greening measures would have.

The Committee also backed the Commission to make 30% of the national budget for direct payments conditional upon compliance with greening measures. Farmers who fail to comply would lose the "greening" funds, but should not face further reductions in their remaining direct payments, MEPs decided.

At least 25% of the total spending earmarked for rural development programmes would have to be reserved for agri-environmental and climate measures and support for organic farming.

Allocating EU Funds

Member states distributing direct payments on the basis of the Single Payment Scheme (SPS) may decide, by 1 August 2013, to maintain the payment entitlements allocated to them in accordance with the SPS rules.

MEPs also say that member states operating Single Area Payment schemes (Cyprus, Bulgaria, Romania, Hungary, Slovakia, Czech Republic, Poland, Lithuania, Latvia and Estonia) should be able to keep these schemes as a transitional system until the end of 2020 if they so wish. Under the Commission's original proposal, both types of scheme were to expire by the end of 2013.

Helping Young Farmers

The Committee approved an additional 25% payment for young farmers (under 40 years old), but for a maximum of 100 hectares (rather than an average-sized holding). Member states will have to use 2% of their national budgets to fund the support scheme for young farmers, and not up to 2%, as proposed by Commission.

Member states will be free to decide whether to set up a support scheme for small farmers. If so, then farmers entitled to less than €1,500 in direct payments must be automatically included in the scheme, says the Committee, thus scrapping the Commission proposal to oblige small farmers to apply to join the scheme.

Financial Stability Issues

A majority of MEPs backed plans to create an income stabilisation tool, to take the form of financial contributions to mutual funds or to buy insurance to compensate farmers or provide them with direct payments to cover the insurance against the risk of a severe drop in income. MEPs also called on the Commission to carry out a mid-term review of the risk management tools and table a legislative proposal, if necessary, to improve their implementation.

EU competition rules for the agricultural sector should be clarified to improve the functioning of the single market and strengthen farmers' position in the food supply chain, says the Committee. To boost farmers' bargaining power to get fair prices for their products, farmers' organisations should be allowed to negotiate, on behalf of their members, input supply contracts and delivery of agricultural products and foodstuffs to processors or distributors, without falling foul of competition law.

To improve the working of the market for products registered under a protected designation of origin (PDO) or protected geographical indication (PGI) and to improve their quality, the Committee inserted a provision enabling member states to establish a supply management system, provided that it in no way harms competition or free movement of goods. Such measures must not allow price fixing, said MEPs.

Quotas

To ensure that the expiry of milk quotas does not lead to a serious crisis in the milk sector like that seen in 2009, MEPs suggest granting aid for at least three months to milk producers who voluntarily cut their production by at least 5%. They also introduced provisions on collective negotiations, contractual relations and supply management for cheese sector, as adopted by the Parliament in February 2012.

The Committee rejected Commission plans to phase out sugar quotas by the end of September 2015 and suggested maintaining the system until the end of 2019-2020. It also voted to prolong the existing system of wine planting rights, originally scheduled to expire on 1 January 2016, until 2030.

When serious market disturbances caused by health concerns lead to sudden drops in demand and thus to significant falls in market prices, the EU should be able to respond with a new 100% EU-financed mechanism, says the Committee.

Red Tape

The checks and sanctions used to enforce the "cross-compliance" (i.e. paying farmers to conform to basic environmental, food safety and animal welfare standards) must be proportionate and tailored to the level of risk, says the committee. Member states should focus on claims involving the highest risk and could reduce the number of on-the-spot checks where the error rate is at an acceptable level.

MEPs also somewhat relaxed cross-compliance rules, so as to avoid imposing sanctions on farmers for failing to comply with differently-enforced rules for implementing the water and sustainable use of pesticides directives.

The Committee rejected a Commission proposal to make public the names and addresses of those in receipt of direct payments and or money from rural development programmes, including the amounts received and the measures that these payments would cover.

Next Steps

Before starting formal negotiations with the Council, the whole Parliament must vote in plenary on the outcome of the Agriculture Committee vote.

If negotiations between Parliament and Council then take longer than expected, the Commission must come up with a legislative proposal to find a provisional solution until the agreement on a new CAP is reached. However, all institutions remain committed to meeting the deadline of 1 January 2014 to have the new EU farm policy up and running.