Farm Ireland

Thursday 22 March 2018

Member States to be given greater role in next Common Agricultural Policy

Everything you need to know about the Future of the CAP

Phil Hogan
Phil Hogan
Ciaran Moran

Ciaran Moran

Allowing Member States greater responsibilities to choose how and where to invest their CAP funding in order to meet ambitious common goals on environment, climate change and sustainability is the flagship initiative.

These are the cornerstone ideas of the Communication adopted today by the European Commission on "The Future of Food and Farming", outlining the ways to ensure that the oldest EU common policy remains future-proof.

Allowing Member States greater responsibilities to choose how and where to invest their CAP funding in order to meet ambitious common goals on environment, climate change and sustainability is the flagship initiative.

While keeping the current two pillar structure, the simpler, more flexible approach will set out the detailed actions to reach these objectives agreed at EU level.

Each EU country would then develop their own strategic plan – approved by the Commission – setting out how they intend to meet the objectives.

Rather than on compliance, the attention will be paid more on monitoring progress and ensuring funding is focused on concrete results.

Source: EU
Source: EU

Moving from a one-size-fits-all to a tailor-made approach means the policy and its real-life implications will be closer to those who implement it on the ground.

Support for farmers will continue through the system of direct payments.

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The Communication does neither pre-empt the outcome of the debate on the future of the EU finances, nor the content of its proposal for the next Multiannual Financial Framework (MFF).

Without being exhaustive, it explores some possibilities to ensure a fair and better targeted support of farmers' income.

Climate change and pressures on natural resources will continue affecting farming and food production. The future CAP should reflect higher ambition as regards resource efficiency, environmental care and climate action.

Other proposals include:

  • Encouraging the use of modern technologies to support farmers on the ground and provide greater market transparency and certainty
  • Greater attention to encourage young people to take up farming, to be coordinated with Member States' own powers in such areas as land taxation, planning and skills development
  • Address citizens' concerns regarding sustainable agricultural production, including health, nutrition, food waste and animal welfare
  • Seek coherent action among its policies in line with its global dimension, notably on trade, migration and sustainable development
  • Creating an EU-level platform on risk management on how best to help farmers cope with the uncertainty of climate, market volatility and other risks

The relevant legislative proposals giving effect to the goals outlined in the Communication will be tabled by the Commission before the summer 2018, following the MFF proposal.

Phil Hogan, Commissioner for Agriculture and Rural Development said today's Communication ensures that the Common Agricultural Policy will deliver on new and emerging objectives such as fostering a smart and resilient agricultural sector, bolstering environmental care and climate action and strengthening the social-economic fabric of rural areas.

"It also marks a significant step change in the implementation of the CAP. Instead of the current system, a new implementation system will be introduced, giving MS/regions a much greater degree of subsidiarity," he said.

Funding Concerns

Responding to today’s address from Agriculture Commissioner Phil Hogan on the Future of Food and Farming, IFA President Joe Healy said he was concerned about a reference in the paper that the EU Budget will have to do more to meet new challenges and that the CAP will have to be looked at in this context. “Commissioner Hogan cannot allow the CAP Budget to be raided; any new EU initiatives must be funded by new money,” he said.

Healy said an increased budget is essential for the future CAP to be effective and to ensure a supply of safe, sustainably produced food for European consumers.

“If we don’t have farmers, we don’t have food. Low farm income in many sectors remains the most significant challenge to the sustainability of farming enterprises across the EU, and in attracting new entrants into farming.

"The CAP post-2020 must deliver a fair standard of living for farmers, with an overall improvement in income levels. In addition, Europe must show solidarity with farmers over Brexit by making up the shortfall in the CAP Budget arising from the departure of the UK from the EU”.

The IFA President welcomed Commissioner Hogan’s strong commitment to future direct payments under the CAP post-2020. He said “The Commissioner has consistently made it very clear that direct payments will be the main CAP instrument to support farm incomes”.

CAP post 2020: Everything you need to know

Are the two pillars (direct payments/market measures and rural development) remaining in place?

The two pillars are two complementary facets of the CAP, which should remain in place. They structure the CAP around two essential broad types of intervention. The first pillar supports farmers on an annual basis in the form of direct payments and market measures, which are subject to compliance with basic rules and environmental objectives.

The second pillar is a multiannual and flexible investment tool, more adapted to the local realities of each Member State, in particular to help support longer term projects.

Will the future CAP be fairer and will that smaller and medium-sized farms will get the support they need?

In 2015, the first year of implementation of the last CAP reform, 20% of farmers received around 80% of direct payments. This raises understandable concerns of economic efficiency and social equity in the public debate.

In fact, this reflects the concentration of land and the nature of the support, which is largely area-based. Furthermore, more than half of its beneficiaries are very small farms and most of the payments (72% in 2015) go to medium-size professional (family) farms (from 5 to 250 ha) who manage most of the EU agricultural land (71%) hence are the main responsible for the delivery of public goods and environmental benefits.

Still, the Commission is committed to explore ways to further target direct payments more effectively and ensure a fair and better targeted support of farmers' income across the EU, as evoked in the Reflection paper on the future of EU finances. The following non-exhaustive list of possibilities should be further explored:

  • A compulsory capping of direct payments taking into account labour to avoid negative effects on jobs;
  • Degressive payments could be introduced as well, as a way of reducing the support for larger farms;
  • Enhanced focus on a redistributive payment in order to be able to provide support in a targeted manner e.g. to small-medium sized farms;
  • Ensure support to genuine farmers, focussing on those who are actively farming in order to earn a living.

Will farmers be treated equally across the EU?

At the same time as the CAP is ensuring that support is targeted to genuine farmers, focussing on those who are actively farming in order to earn their living, it also needs to play its role in following the principles of "Equality between its Members, big or small, East or West, North or South", which were recalled by President Juncker in his State of the Union address of 2017.

In this sense, it should reduce differences between Member States in CAP support. Even if the wide diversity of relative costs of labour and land as well as the different agronomic potentials across the EU should be acknowledged, all EU farmers face similar challenges with regard to market volatility, the environment and the climate.

How will the future CAP support farmers in protecting the environment?

As a foundation, farmers receiving income support from the CAP will have to apply various environment- and climate-friendly practices. Member States will determine the detail of these - in line with the need to meet EU-level objectives but also taking into account national, regional and local circumstances. The system will draw on strengths currently observed in the CAP but will involve fewer and less complex rules in EU legislation.

Eco-friendly action which goes beyond this foundational level of good practice will be supported through schemes which are voluntary for farmers - at a relatively basic level, and above that more advanced schemes. Once again, Member States will be responsible for designing the schemes, in such a way as to meet EU objectives translated into national, regional and local terms.

The CAP will also place strong emphasis on unlocking the potential of research, innovation, training and the use of advice to improve care for the environment and climate, including through greater resource efficiency.

How can the Commission encourage the setting-up of young farmers and generation renewal in the sector?

Generational renewal should become a priority in a new policy framework, but Member States are in the best position to stimulate generational renewal using their powers on land regulation, taxation, inheritance law or territorial planning. The CAP should give flexibility to Member States to develop tailor made schemes that reflect the specific needs of their young farmers.

The CAP strategic plans could include support for skills development, knowledge, innovation, business development and investment support. The CAP should also help mitigate this risk in the first years after launching a farming business by providing an EU-wide system of support to the first installation. Access to financial instruments to support farm investments and working capital should be facilitated and better adapted to the investment needs and higher risk profiles of new entrants. Support to the new generation of farmers could be combined with the appropriate incentives to facilitate the exit of the older generation and the transfer of knowledge among generations as well as to increase land mobility and facilitate succession planning.

How will the future CAP be simpler for farmers and administrations in Member States?

Who wants to measure their hedges because “Brussels said so”? Why would an Italian farmer face the same environmental requirements as a Finnish farmer though they farm in very different conditions?

The future CAP will have common objectives and a set of measures to achieve the said objectives. From this common set of measures, Member States, either at national or regional level, will be able to pick their preferred panel of options to achieve the goals set at EU level.

Moving from a one-size-fits-all to a tailor-made approach means that the EU requirements will be reduced to a strict minimum. The actual needs on the ground will be assessed and fed by Member States into a CAP strategic plan approved at EU level. We are aiming at establishing a pact of trust with our rural areas, with our farmers.

The strengthening of farm advisory services for farmers and the full implementation of geospatial aid applications will also of course further support the simplification of aid applications and the implementation of investment measures.

How will this new approach function in practice?

The Union should set the basic policy parameters based on the objectives of the CAP, fulfilling the  EU Treaty obligations but also the already agreed objectives and targets on for instance the environment, climate change (COP 21), and a number of sustainable development goals.

Each Member State should establish a "CAP strategic plan", which would cover interventions in both pillar I and pillar II. This plan will tailor CAP interventions to maximise their contribution to EU objectives taking better into account local conditions and needs, against such objectives and targets. At the same time, Member States would also have a greater say in designing the compliance and control framework applicable to beneficiaries (including controls and penalties).

These strategic plans would be prepared not in isolation but in the framework of a structured process and the Commission would assess and approve such plans. This would maximise the contribution of the CAP towards the EU priorities and objectives and the achievement of Member States' climate and energy targets. It would also enhance the EU added value and preserve a functioning agricultural internal market.

While Member States should bear greater responsibility and be more accountable as to how they meet the objectives and achieve agreed targets, the new approach will continue to ensure a level playing field, preserving the common nature and the two pillars of the policy.

When facing volatility and market crisis, what kind of support can the farmers expect from the future CAP?

Be it sanitary or phytosanitary crises, climate change-related events or market volatility, farmers face high risks and pressure on incomes. The Commission has always and will always stand by farmers, as evidenced by the two latest solidarity packages each worth €500 million, but the higher frequency of risks calls more a more systematic approach.

The farming sector needs an adequate framework for risk management, which combines EU-level support with Member States' national tools and private sector instruments.

For example, the possibility to set up a sector-specific income stabilisation tool, with lower loss thresholds to trigger compensation, is expected to make it more attractive for both farmers and administrations. At the same time, a careful assessment needs to be carried out as to whether new tools or types of support should be introduced. In this context, cooperation among farmers and along the food chain should be fostered, including mutualisation and integrated services, for risk sharing purposes.

What will the EU-level platform on risk management entail?

The limited awareness of farmers and other stakeholders of the available tools and their relative lack of experience in implementing them has been one of the main barriers to the uptake of risk management instruments in the last few years.

The EU-level platform on risk management will be a platform for all actors involved, from farmers and public authorities to research institutes and private sector players (ex. insurance companies) to share knowledge and exchange best practices.

The Commission will be involved, as appropriate, as a facilitator and will develop the platform on a dedicated website.

Under the platform, expert groups, working panels, seminars and events will be organised around specific risk management topics, e.g. loss calculation using index-based systems. Moreover, the platform will offer the possibility to gather together private or public initiatives on risk management at local level, and relevant work in other policy fields, e.g. climate change adaptation, agro-meteorology, etc.

Why should the CAP stimulate investments and how can financial instruments support farmers?

A flexible CAP investment tool is essential to support competitiveness, innovation, climate change adaptation and mitigation and ultimately the sustainability of agriculture and rural areas.Modernising a farm, setting up new technologies, renovating irrigation systems are all actions that require a lot of frontload money and are substantial financial efforts that farmers cannot be expected to do all on their own. The public funds available for grants are not sufficient to address the growing investment needs of the sector. Rough estimations show that the market gap for financing agriculture is between €1.6 and €4.1 billion for short-term loans, and between €5.5 and €14.8 billion for long-term loans.

Financial instruments, such as loans, guarantees and equity funds, can ease access to finance for those farmers (e.g. small holders, new entrants, etc.) or agri-food producers, who find it difficult to obtain the necessary funds to either enter the business or develop it. By bringing together EU and private funding, they shall have a multiplier effect, i.e. increased investment volumes (leverage).

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