CAP Reform 2003

Land deals get CAP payments

By Eric Donald

12 July 2003: Farmers who acquire land in 2003 or 2004 could access the new payment entitlements generated by that land.

This is among important details that have emerged in final texts of the Luxembourg deal this week.

The details concern the status of entitlements on farms transferred, sold or leased in the reference period 2000 to 2002, and up to the end of 2004.

Previously it was understood that where farms were sold, the entitlements of the previous owner would revert to a national reserve and that the new owner would not necessarily get priority access to them.

This latest text indicates that where there is a change in legal status, the new farmer will have the same access to the entitlements under the same conditions as the original farmer managing the holding. There are also important details emerging on beef coupling options. It's believed that the extensification scheme for beef would be retained if a country chooses to keep the suckler cow premium coupled, or if they take the option of paying 75% of the special beef premium.

Choosing either of these coupling options would tie a larger sum of money to production than originally envisaged and retain more of the red tape involved in meeting the requirements of extensification.

Given that the Commission have been pushing European farmers towards more extensive beef production for years, they will be keen to ensure that this continues in the future, even if countries decided not to fully decouple.

In relation to the suckler cow scheme, the 40% dry heifer rule would also continue in the coupled scenario. This was originally introduced as part of a mini CAP reform, but it was only seen as a transitionary measure.

It now appears that the Commission are keen to ensure that these production control measures remain in place, if countries decide to couple the suckler scheme. This is a further disadvantage to this partial decoupling option.

Meanwhile, formal approval of the CAP reform deal is unlikely to take place at this months meeting of agricultural Ministers on the 21 of July. The legal texts have just been published and will be discussed for a day and half by senior department of agriculture officials from the member states next week. But given the complexity of the changes, they are unlikely to be in a position to have this work completed in time for the July council.

With no Agricultural council meeting in August, approval of the formal legal texts of the reform deal will not happen before the WTO ministerial meeting in Cancun in September.

It will also mean that the Irish government are unlikely to agree on which decoupling options are best for Ireland until the reform deal has been fully ratified in Brussels. The current uncertainty in relation to the future of certain production quotas, and its implications for future entitlements on land sold or leased, will continue over the next two months.

Radical payment changes

By Paul Mooney

July 05 2003: Irish farming will change radically in just 18 months time as a result of the new CAP deal agreed on 26 June 2003. From January 2005, most if not all of the current livestock and arable schemes will be scrapped and replaced by a new single farm payment triggered by payments in the reference years 2000 to 2002.

The consequences are dramatic and some take effect at once:

• quotas for suckler and ewe premia are set to fast become worthless as they will be scrapped from January 2005 when these schemes are decoupled, as is expected.
• the value of milk quota will fall because of price cuts and because the new dairy premium will be untied from quotas by 2008 at latest.
• the value of young male cattle will start falling immediately unless extra funding is agreed for transitional arrangements. Otherwise animals born from May 2003 will never qualify for 21 months special beef premium - under full decoupling the schemes will be gone before they are old enough.
• the new single payments are in place until 2013 - the longest such commitment yet given to Irish farmers.

It has also emerged that there are significant strings attached to the partial decoupling options in last week's deal, including the key option of retaining a slaughter premium.

Funding for this or any partially decoupled scheme will not be ringfenced for Irish farming and any money not claimed by Irish livestock farmers - eg if cattle numbers for slaughter fall - would be kept by Brussels. It would not be possible to increase the unit value of the slaughter premium to use up all funds, it now appears.

Full decoupling is the only way to guarantee that Ireland holds onto all of its present €860m of beef supports. It would also allow dairy farmers - hardest hit in the deal - receive any decoupled beef payments they built up in the reference years and now concentrate on milk efficiency.

To avoid double payments of aid the EU will not allow exported cattle collect slaughter premium in one member state unless they were eligible to collect it anyway in the country of origin. This, according to senior Department officials, is a reason for full decoupling. They were speaking during a special briefing this week for the Farmers Journal.

Critical talks now lie ahead between Minister for Agriculture Joe Walsh and the farm organisations on implementation of the deal. Decisions made this year on decoupling options will be permanent - the signals from Brussels are that no change of mind will be allowed down the road. The Department has committed itself to making decisions by October next.

Among the decisions at the discretion of the Department are setting any minimum stocking rate under decoupling.

Full decoupling from 2005 in NI?

By James Campbell

There will be major decoupling of farm support payments from actual production in Northern Ireland from 2005 onwards.

Details of how this will operate are unlikely to be clarified until the end of 2003.

The NI Department of Agriculture and Rural Development will not automatically decouple future farm support in the same way as the authorities in other regions of the UK or Ireland. But a close eye will be kept on the lines being adopted in those other areas as the NI Department consults with interested parties throughout the remainder of 2003, with the intention to announce clear decisions by the end of this year.

Those consultations begin with a meeting of the NI Rural Stakeholders Forum on 8 July and will include a major conference probably in September. Minister Ian Pearson has stated his intention to fully involve farming industry representatives in planning the implementation of the new support regime which is likely to begin in 2005.

According to senior Department officials, the Minister favours full decoupling of future support in NI, including dairy compensation if that is possible. However, there are several question marks around that option, including the reference year on which it would be based. Guidance on this is expected from the EU within the next few weeks.

Apart from milk, the UFU is understood to favour a decoupled support system and there seems to be very little enthusiasm for retaining any coupled support. The same view is emerging from the Irish Farmers' Association in Dublin, with the exception of milk and the possible exception of the beef slaughter premium.

The decoupled support in NI could be in the form of single farm payments similar to those currently being discussed in the Republic of Ireland.

Or there could be a flat rate payment per hectare of land across the whole of NI, possibly different flat rates for lowland and Less Favoured Areas.

This latter approach is currently not favoured by the majority of the Ulster Farmers' Union Council but it has some support and is seen by DARD as the most easily administered method of decoupling.

If a flat rate system is to be adopted, there will be pressure to include all compensation entitlements, including future dairy compensation, into the overall pot of money to be divided out over the total hectarage in NI.

The more likely scenario (on current thinking) is that each farmer will have his own level of decoupled payment per hectare (along the lines of the system proposed in the Republic).

This will be based on that farmer's average annual livestock premia and arable aid payments received during the base years of 2000,2001, and 2002 (all calculated at 2002 rates of payment) and his/her average number of hectares registered under the Integrated Administration and Control System (IACS) during those three years. A farmer who has an entitlement of £200 per hectare (for example) on 35 hectares would receive £7000 provided that he/she maintains 35 hectares in good agricultural and environmental condition.

If he/she maintains a smaller area in future the single farm payment would be reduced accordingly (by £200/ha in this example).

The farmer will still have to indicate on an IACS form the land which he is farming. If the farmer moves to a larger area, he/she could acquire entitlements for the extra area by lease or by purchase. This would presumably involve brokers as in the current exchange of quotas throughout the UK and could become complicated as differing entitlements are acquired at different rates per hectare.

Despite its complications, this latter system is likely to be favoured initially as it should result in the decoupled support to farmers in 2005 being closest to their current level of support through the premia system. However, DARD officials say that if farmers' representatives are prepared to opt for a flat rate system, the Minister will probably be happy to go for that system in NI.

Debate over these options could be hot and heavy during the next few months.