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Production effects of moving to flatter structure of direct payments

What might be the production, consumption and trade effects of the Commission’s proposals to redistribute direct payments by moving to a flat(ter) structure of direct payments across the Member States, and to redistribute payments within Member States by moving from the historic basis of farm payments (in the majority of Member States which operate this system) to a regional flat rate system?

A silly question, some might respond, for are not the EU’s direct payments decoupled (leaving aside the continued existence of a share of coupled payments) and thus not meant to have an effect on farm production? If a direct payment is truly decoupled, then moving payments from one farm to another, or from one country to another, will affect relative incomes but not output.… Read the rest

What is the likely cost of greening Pillar 1?

The Commission’s proposals for the design of direct payments after 2013 include a greening component which, according to the draft legislative proposal (yet to be released on 12 October next and thus subject to change) will be mandatory for farmers in receipt of the basic income payment – thus becoming what I called in an earlier post a form of super-cross-conditionality.

In the impact assessment to be released with the legislative proposal the Commission has made some estimates of the cost of implementing these green measures. In this post, I examine these costs using information in the draft version of the impact assessment (Annex 12 Impact of Scenarios on the Distribution of Direct Payments and Farm Income).… Read the rest

How decoupled is the Single Farm Payment?

Three of my Irish colleagues at the Teagasc Rural Economy Research Centre have conducted an interesting simulation to estimate the extent to which farmers treat the Single Farm Payment (SFP) as coupled or decoupled. Using the EU-wide partial equilibrium simulation model AGMEMOD, Peter Howley, Kevin Hanrahan and Trevor Donnellan project Irish production in the cattle and cereals sectors (these were the sectors with the most important payments in the pre-SFP era before 2005) under two assumptions: first, that farmers treat the SFP as fully coupled, and second, that they treat the payment as fully decoupled.

They then compare the levels of production that are projected under the alternative assumptions of full and zero coupling with actual observed output values in Ireland over the period 2005-08.… Read the rest

Court of Auditors’ report on cross compliance is damning

It’s no wonder that the Commission suppressed the Court of Auditors report on cross compliance for as long as it could – the report is damning and undermines the Commission’s case for the legitimacy of EU farm subsidies.

Speaking in 2005, Agriculture Commissioner Mariann Fischer Boel explained how she sees cross compliance in relation nearly 40 billion euros of public expenditure on payments to farmers:

“I would emphasise that decoupled payments are not “money for nothing”. To get the cheque in the post, a farmer has to respect a demanding range of standards related to the environment and animal welfare. We call this system “cross-compliance”.”

Read the rest

Court of Auditors' report on cross compliance is damning

It’s no wonder that the Commission suppressed the Court of Auditors report on cross compliance for as long as it could – the report is damning and undermines the Commission’s case for the legitimacy of EU farm subsidies.
Speaking in 2005, Agriculture Commissioner Mariann Fischer Boel explained how she sees cross compliance in relation nearly 40 billion euros of public expenditure on payments to farmers:

“I would emphasise that decoupled payments are not “money for nothing”. To get the cheque in the post, a farmer has to respect a demanding range of standards related to the environment and animal welfare. We call this system “cross-compliance”.”

Read the rest

The great targeting debate

Czech agriculture minister Petr Gandalovic made an curious statement at the informal Agriculture Council meeting held earlier this week in the French Alps. Mr Gandalovic, who will assume the chairmanship of the Council under the Czech EU Presidency in the first half of 2009, told his colleagues:

“The more specific you make the policy, the more room you give to bureaucrats who make the decisions. Non-targeted payments give more power to farmers.”

In case it’s not clear, Mr Gandalovic was making the case against targeted payments. In doing so, perhaps inadvertently, he touched on a question that goes to the very heart of the debate about the future of the CAP: the extent to which the CAP’s 54 billion euros of annual public expenditure should be targeted on clearly defined objectives and measurable outcomes.… Read the rest

Podcast: Latest on health check negotiations with Roger Waite

Roger Waite, editor of Agra Facts, talks about how the Commission’s health check proposals have gone down in recent meetings of the Agriculture Council. Debate has been focused on the extent to which EU farm subsidies will be further decoupled from production levels. We look ahead to the French presidency which begins tomorrow and discuss the role of NGOs in the debate over the future of the CAP in both health check and EU budget review. … Read the rest

Limited administrative burden of the Single Farm Payment

Economists have long been interested in the costs associated with policies transferring income support to farmers. These costs include not only the resource costs associated with distorting production and consumption choices away from the market optimum (assuming that market prices fully reflect the social value placed on resources and outputs), but also the transactions costs of administering and monitoring the policy, indirect costs associated with distortions in other markets (for example, if tax revenue has to be raised to pay for direct payments or export subsidies), as well as rent-seeking costs.… Read the rest

New market develops in farm subsidies

Given that milk quota has been actively traded in the UK, producing so-called ‘sofa milkers’, it should come as no surprise that Single Farm Payments are now being bought and sold. Agricultural brokers WebbPaton did fifteen deals in one day recently. The market has been described as ‘ferocious’ with rights to subsidies ‘flying off the shelf’. There’s an element of risk, but an investor could receive one-third of the original investment back each year.… Read the rest

Investors buying up farm subsidies

The past week has seen a series of revelations in the media about the way that decoupled farm subsidies are operating in Scotland. It has become evident that farm subsidy entitlements are being sold by farmers and that investors – who may never have set foot on a farm – are buying up entitlements to claim the new Single Farm Payment, which accounts for the bulk of the European Union’s £48.5 billion Common Agricultural Policy.… Read the rest