The vote to accept the general thrust of the CAP proposals launched in June last year by European Commissioner for Agriculture Phil Hogan are the beginning of the serious debate rather than the conclusion.

The reality is that the strategic plan was approved in the EU Parliament’s agriculture committee with a host of amendments, many of which are wishful thinking that will be negotiated away when the serious talking begins in 2020.

Slow process

Finalising a CAP deal is a slow process that cannot be completed before the EU budget for the next seven years, known as the multiannual financial framework, is sorted out.

That will not be achieved before the autumn at the earliest but unless there is a serious change of mood there will be no avoiding the 5% budget cut that the Commissioner factored into his proposals.

The big issue for Irish farmers is the continued move to area-based or flat-rate payments. Before 2005, the CAP supported production but thereafter sought to remove production-based subsidy in favour of land-based subsidy.

The big issue for Irish farmers is the continued move to area-based or flat-rate payments

The EU was under pressure at the World Trade Organisation (WTO) for subsidising agricultural production to the detriment of developing countries.

For the CAP between 2021 and 2027, the Commissioner was proposing a move to having 75% of payments made on land as opposed to production, but the agriculture committee wants to move further to a 100% land-based payment by 2027.

Flat rate versus historical

Critics of the combined system have a point in highlighting that it makes little sense having a CAP payment calculated on what farmers were doing in 2002.

Yet the reality is that when farmers comply with EU production and welfare rules, beef and to a lesser extent sheep meat production isn’t viable in Ireland.

There is an option of allocating up to 10% of the national payment, which in Ireland’s case is about €1.2bn annually, to production as a coupled payment.

In the current CAP, this option wasn’t exercised in Ireland, which meant that Irish beef producers were among the few in the EU who didn’t benefit from direct support related to their farm output.

The problem with further flattening of the payment is that it creates winners and losers. The losers will continue to be the farmers who had built up a large entitlement based on their farm output in the reference year of 2002.

The winners will be farmers and landowners who had a lower output per hectare farmed in the reference year, and the more payments converge towards a land-based flat rate per hectare, the more they gain.

Compromise

There is an argument for making support payments based on land farmed in an environmentally sensitive way and maintaining the countryside.

However, to do this, money is taken from farmers who were historically the most productive and creating the most value by providing the raw material for the processing industry in rural Ireland.

A balance could be struck in the convergence debate by creation of a coupled payment for the most vulnerable sectors of beef and sheep which would offset the impact of convergence for farmers focused on output.