The Irish Department of Agriculture, Food and the Marine’s consultation on how to implement the new Direct Payments Regulation in Ireland closed last Friday. Ireland is an interesting case study in moving from the historic payment model because of its predominantly grassland-based agriculture and the high dependence of Irish farm incomes on direct payments (the single farm payment alone contributes 50% of Irish farm income). There are significant differences across farms in both the value of payment entitlements per hectare as well as in stocking densities per hectare (the best measure of the intensity of land use in grassland farming), which has given rise to a lively debate on how direct payments should be distributed in future.
In my previous post I discussed some of the difficulties in comparing the money set aside for the CAP in the 2014-2020 Multiannual Financial Framework (MFF) and in the current 2007-2013 MFF. Among the issues highlighted were the counterfactual baseline to be used, whether to compare period-to-period or end-year to end-year figures, and the importance of adjusting the current MFF figures to ensure like-with-like comparisons with the next MFF period.
The European Parliament secretariat’s Note European Council Conclusions on the Multiannual Financial Framework 2014-2020 and the CAP also contains a detailed breakdown of Pillar 1 direct payment envelopes by member state for the two MFF periods, allowing us to see which countries are winners and losers under the decisions taken by the European Council.
One little-emphasised feature of the current negotiations on CAP reform is that the rules for eligibility for payments under the new basic payment scheme (and thus also the other proposed layers of Pillar 1 direct payments such as the green payment, young farmer’s payment, area of natural constraints payment and redistributive payment where these are adopted) are in a state of flux. New amendments and modifications continue to be introduced at successive stages of the negotiation process. This uncertainty is reflected in the market for Single Farm Payment (SFP) entitlements and the prices farmers are willing to pay for entitlements where they become available.
I recently had an exchange on Twitter with Martin Crowe, an Irish dairy farmer and agri-consultant, over the apparent stagnation in Irish agricultural output over the past 20 years (follow on @xAlan_Matthews and @martincrowe). I attributed this, in part, to the role that direct payments play in Irish farm incomes. I argued that “If 70% of your income is coming as a cheque in post there is less incentive to innovate to grow the remaining 30%” (direct payments make up around 70% of Irish farm income in an average year). Martin tweeted back that the “70% gives the security and confidence to try and improve the 30%”.
In January I prepared a spreadsheet setting out the amendments to the Commission’s proposed direct payments regulation which took account of the COMAGRI rapporteur’s amendments May 2012, the Council’s position as summarised in the Cyprus Presidency document December 2012 and the COMAGRI compromise amendments Jan 2013.
Some readers found this useful so I have now updated the spreadsheet to take account of the COMAGRI proposal for a negotiating mandate in February 2013 (that is, after COMAGRI voted on the compromise and other amendments), the mandate following the European Parliament plenary vote in March 2013, and the successive versions of the regulation prepared by the Irish Presidency for the March 2013 Agricultural Council meeting.
Ever since direct payments were introduced into the CAP, their unequal distribution has attracted unfavourable attention. The Commission’s 1991 paper The Development and Future of the CAP criticised the distribution of price support, noting that “80% of the support provided by FEOGA is devoted to 20% of farms which account also for the greater part of the land used in agriculture”. Yet the proportions remain exactly the same in both the EU-15 and EU-12 today, according to the Commission’s latest figures for the claim year 2009 (financial year 2010) (see diagram).
Even for those who argue that the specific nature of farming justifies a permanent system of direct payments support, the unequal distribution of support is hard to justify.
The Commission’s proposal October 2011
The COMAGRI rapporteur’s amendments May 2012
The Council’s position as summarised in the Cyprus Presidency document December 2012
The COMAGRI compromise amendments Jan 2013
I have only had the time to construct this table for the direct payments regulation so far.
In addition, a number of the other EP committees have prepared draft opinions on the proposals – see the Environment Committee here, but also the Development Committee, the Budget Committee and the Regional Development Committee.
EU expenditure on Agriculture and Rural Development makes up a high share of total EU expenditure. The share was – according to official information – 41 per cent of total EU expenditure in 2011 and amounted to €55.269 billion. The position ‘Direct Payments’ was the most important budget outlay during the present Financial Framework with €39.771 billion in 2011; it made up a share of 72 per cent of the total expenditure on Agriculture and Rural Development.
This budget item came into existence in 1993 as the Council of Agricultural Ministers had decided in 1992 to reduce the intervention prices for grain by about 33 per cent and to also reduce the support price for oilseeds.
The demand from the new member states for greater convergence in the value of the direct payment per entitlement (or eligible hectare) in the current CAP negotiations means that redistribution is now firmly on the reform agenda. But it also makes reaching agreement much more difficult.