Farm Ireland
Independent.ie

Saturday 17 February 2018

French 'front-loading' proposal gaining momentum in Europe

Darragh McCullough

Darragh McCullough

It was originally billed as a French solution to a French problem. But the concept of front loading payments for the 'first acres' that a farmer claims for the single farm payment (SFP) is gaining serious momentum in the CAP reform debate in the EU's Council of Ministers.

The idea is that the first 10-40ha of land being farmed would get preferential access to direct payments.

This idea first gained traction in France where there is a belief that too much of the country's SFP is going to very large grain producers at the expense of the rest of French farmers.

Any proposal that French negotiators are keen on tends to gain momentum in CAP reform discussions. So it surprised few that official documents presented by the Irish presidency at last week's EU farm ministers' meeting contained references to a front-loaded payment.

The paper did not go as far as suggesting any figure regarding where the cut off for this type of payment might be, but discussions here in Ireland have centred on the idea of front-loading the first 20ha.

The attraction of this proposal from the commission's point of view is that it secures much of what Commissioner Dacien Ciolos first set out to achieve through his flattening of payments.

Mr Ciolos' proposal caps the maximum payment per hectare at the national average, €264 in Ireland's case.

By front-loading the first, say, 20ha, it effectively limits the payments above this amount by virtue of the fact that there would only be a certain amount of money left to go around after everybody receives their initial amount.

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How would it work in Ireland?

Since this idea emerged, many farmers have asked if there would be enough money in Ireland's €1.2bn direct payment allocation to be able to carry out such a scheme.

If we take a scenario where a fixed payment of €400/ha is paid to every farmer for their first 20ha, this is how the money adds up:

nThere are just over 55,000 SFP applicants farming under 20ha. The average amount that they farm is approximately 12ha. It would cost €275m to pay all these farmers €400/ha on their land.

nThe remaining 74,000 farmers all farm more than 20ha. They would receive €592m for their first 20ha.

nThe total SFP pot will be approximately €1.2bn after deductions and young farmer top ups. To pay every farmer for their first 20ha will cost just over €867m, leaving €333m to distribute on the hectares above the 20ha limit. Our calculations suggest that this would equate to about 2.5m hectares. If you divide the €333m by this amount, it leaves the payment on the remaining acres at €130/ha.

This result won't please those with large SFPs. The 125ha (308ac) farmer with a SFP of €50,000 a year and entitlements worth €400/ha stands to lose over €29,000, while the 50ha (123ac) operator with similar value entitlements would stand to lose nearly €9,000 or 40pc of his payment.

This is the Achilles heel here. Asking typical sized full-time farmers to surrender 40pc of their payment is not going to get anywhere fast.

However, the simplicity of the idea has great appeal for the vast majority of farmers who receive less than €15,000 a year. This accounts for over 105,000 or 80pc of all SFP applicants, most of whom would stand to gain from a greater distribution of the subsidy payments.

For example, a farmer with low entitlements of €100/ha on 25ha currently receives just €2,500 per year. If a front-loaded model was adopted, the same farmer would see their payment increase threefold to over €8,650. Equally, a farmer claiming 50ha at €100/ha would get a lift of €6,900.

One of the other strengths of this idea is that it prevents a scenario where a farmer working a very extensive farm of say 300ha on very marginal (eg, mountainous) land get a massive boost in payments under a switch to a straight flat-rate system as originally proposed by Commissioner Ciolos.

If this farmer was on an SFP of €100/ha, he would have seen his payment increase by nearly €40,000 under Ciolos' proposal. Under the front-loaded system, the increase in payment is dampened to €14,400, or a 50pc increase.

One of the criticisms being levelled at the idea is that it would encourage farmers to simply split their SFP up among family members in order to shelter larger payments from big cuts. However, proponents of the system say that this issue could be avoided by using reference year data.

Political pressures in the ongoing debate may well water down the front-loading concept outlined above but there can be no doubt that the principles will be on the table when negotiators get down to brass tacks over the coming weeks.

Alternatives

While front loading will be too blunt an intrument to be implemented as outlined here, it could pe part of a larger move towards a general minimum payment per hectare.

Sources close to the negotiations have suggested that this may be the key to securing agreement, rather than getting bogged down in what the maximum payment that any farmer should get, either for their entire operation or per hectare.

The logic here is that the maximum payments will be automatically limited if a new minimum is imposed.

The other idea that is circulating at the moment is a proposal to have different payment bands based on the type of land that is being farmed.

With a lower rate for more marginal land, it would prevent land-owners of large tracts of mountainous land securing huge increases in payments as payments are flattened.

However, this will be seen as regionalisation by the back-door here, something that will get very little support in Ireland.

Crunch week

The next seven days will see a lot of positions crystalise among the key opinion leaders within the Irish agricultural community.

The IFA's executive council met at the weekend, while Ireland West MEP, Marian Harkin, hosted a number of meetings in Sligo on Sunday night.

Next weekend, Fianna Fail's Éamon Ó Cuív hosts his own CAP conference just before the visit to Dublin by Commissioner Ciolos early next week.

That leaves our Minister for Agriculture, Simon Coveney, with the job of finding common ground between all the various positions, not only within Ireland but also throughout the EU.

Hopefully, he will be able to craft a compromise proposal that will secure the blessing of the three key EU bodies involved in this process – the Commission, the member states and the EU Parliament.

Irish Independent