Less likelihood of cuts in Single Farm Payment

The Irish Farmers’ Journal reports that the value of the Single Farm Payment (SFP) is not likely to be greatly eroded by “financial discipline” cuts in order to accommodate the payments to new Member States within the European Union. This is because more buoyant farm prices mean that there will be huge cuts in the cost of traditional market support measures, such as intervention and export subsidies, leaving sufficient money in the CAP budget to fund the SFP. Agra Europe forecasts that the cost of traditional support measures will fall by half by 2013, and that budget-related cuts in the SFP of no more than 2% will be necessary by 2013 to stay within the CAP budget ceiling. Of course, the real value of these payments continually falls with inflation, and may also be reduced by further compulsory modulation. Nonetheless, the pro-cyclical effect of the Single Farm Payment is stark. When farm prices and thus farm incomes are high, farmers can expect even higher SFP payments than when farm prices and incomes are low!

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