Updating the base period for SPS entitlements

One of the more significant changes proposed by the Commission in its draft legislative proposal on direct payments is to eliminate those existing entitlements to support which farmers have built up in the past. The basic payment scheme will replace the Single Payment Scheme and the Single Area Payment Scheme as from 2014. The new scheme will operate on the basis of payment entitlements allocated at national or regional level to all farmers according to their eligible hectares in the first year of application.

The proposal to allocate new entitlements on the basis of land farmed in 2014 has provoked a massive protest in Ireland (see, for example, this Irish Examiner story). It is alleged that, in an attempt to build up their claim to entitlements in 2014, farmers are taking back land which is currently leased out, thus creating massive disruption in the land rental market and discriminating against those farmers who are actively farming the land.

It might seem hard to understand why a farmer who had decided to rent out land and thus exit farming himself would now wish to re-enter farming (given that to retain the entitlement the landowner must continue farming in the future). One reason might be that land rents failed to fully reflect the value of the single farm payment, at least in Ireland.

For example, in the Irish Examiner story quoted above, the farmer leasing land was paying on average €100 per acre or €240 per hectare. Because the value of entitlements is based on historic payments in Ireland, the exact value of the single payment on those leased hectares cannot be known with certainty. However, on average the value of an entitlement in Ireland is around €270 per hectare of eligible area. So this suggests that existing land rents might not fully capture the value of the entitlement payment, although it must also be remembered that the entitlement holder also must bear the cross-compliance costs. In the case of the farmer in the Irish Examiner story, it seems that he was outbid by another farmer prepared to offer a higher rent.

Whether driven by rational considerations or simply fuelled by uncertainty about how the new system might work in practice, there is at least anecdotal evidence that the choice of 2014 as the new base year is proving disruptive. The Irish Minister for Agriculture Simon Coveney is quoted as calling it “nonsensical” and there is a high-powered lobbying effort underway to link the entitlements in some way to 2011 when the Commission’s proposals are published on 12 October next.

One potential solution floated in the Irish farming press this week was a proposal that, to qualify for payments in 2014, an applicant must have received some payment in 2011. This might mitigate but it would not eliminate pressures to get hold of land before 2014. More significantly, it would retain the link to the historic basis of payments which it is the Commission’s intention to remove.

The Irish Minister claims support from other countries in his lobbying efforts, but it would be interesting to know if these fears of a ‘land grab’ between now and 2014 are shared in other Member States.

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