CAP models show small BPS increases for many but drastic cuts for others

Small farmers currently receiving the minimum per-hectare BPS payment are set to see their payments rise by as much as 40% in 2023, Department of Agriculture modelling has revealed. However, this will be at the expense of fellow farmers.

A farmer on 40ha (100 acres) with entitlements currently worth €473 could lose €4,400 in 2023 alone.

The Department figures, seen by the Irish Farmers Journal, illustrate how CAP reform proposals will affect payments.

The 37-page document contains a number of models setting out how various types of farmer will be affected by the proposals, depending on the size of their holdings and the level of their current entitlements.

New terminology

The complexity of the proposals can be seen in the two-page glossary of terms relating to CAP payments. Many of these, such as BISS and CRISS, are new. Here are the most important terms and their meaning

It is the successor to the Basic Payment Scheme (BPS).

The bottom line: all farmers are losing 25% of their old BPS value (including the greening payment) to eco schemes.

The minimum entitlement value, currently €160/ha, will be reduced to €120/ha. That is before the other changes affect entitlement values.

It is the formal name for the concept of 'front-loading', where a proportion of direct payment funds is taken and paid out as a top-up on a set number of hectares.

As the Department puts it, CRISS “aims to ensure a redistribution of support from larger to smaller or medium-sized farmers by providing a redistributive payment per eligible hectare”.

All CRISS changes will happen in 2023, the first year of the new system.

The bottom line: CRISS payments are being modelled at 5% (the minimum) of the overall direct payment fund (€59m) and at 10% (the maximum - €119m).

The modelling looks at paying this out in three different ways - on the first 10ha at €52/ha, on the first 20ha at €29/ha and on the first 30ha at €22/ha if the 5% CRISS option is chosen. If 10% of funds are used for CRISS, those figures will be 10ha at €103/ha, 20ha at €58/ha or 30ha at €44/ha.

Already a feature of the Ciolos reforms introduced in 2016, this mechanism “aims to bring payment values towards a national average value".

The bottom line: convergence will take place between a minimum of 85% and a maximum of 100%. Convergence will take place in stages over the first four years of the next CAP 2023-2026.

This is the EU’s term for capping of payments, where the total payments cannot exceed a set level.

The bottom line: payments will be capped at somewhere between €60,000 and €100,000. There may be an allowance for wages paid to family or outside labour on larger farms.

Described as a "voluntary annual scheme or schemes for the climate, environment, animal welfare and microbial resistance”.

The bottom line: one quarter (25%) of the direct payment fund is being transferred into the eco schemes fund. This amounts to €300m every year, making eco schemes the most significant change to the new CAP.

In this document, the Department is making an assumption that this money will be paid out on all eligible land on a flat rate, with all farmers applying for and qualifying for payment. This equates to a payment of €64/ha.

The Department modelled a number of farms, using some variables and making some assumptions. It says that these models are not what will happen, but what might happen.

As there are so many variables, modelling won’t answer all the questions farmers have. Indeed, there may be more questions than ever as farmers digest this new information.

However, it is the clearest view of the probable shape of Pillar I payments from 2023 on.

Scenario one

This table examines the situation for someone with small payments on a small farm. It takes the case of a 5ha farmer, whose current entitlements are the minimum €160/ha (column 1).

That gives a total payment of €800 per annum - simply €160x5 (column 2).

The new proposed unit value of entitlements will be hit by the 25% going to the eco schemes, so will be €120/ha (column 3).

This gives a payment level of €600, or in the second scenario underneath where more is taken for the front loading CRISS payment, it will be €117/ha, with a total payment of €585.

The eco scheme payment is added in next, at €64/ha, using the assumptions explained earlier. This gives an additional €320 (column 5).

The CRISS payment is then added in. It will either be €22/ha at the 5% level, giving a total of €110, or if CRISS is set at 10%, will be €44/ha, adding 220 to the payment (column 6).

The overall payment for 2023 will then total €1,030 if CRISS is at 5% or €1,125 if CRISS is at the higher 10% (column 7).

This gives an overall increase for this farmer of €230, or if CRISS is higher, an extra €325 will accrue for 2023. This equates to a 28.75% increase at the lower CRISS rate or a 41% increase at the higher CRISS rate (column 8).

Note - convergence will increase the €120 payment in each of the years from 2023 to 2026. This will be in addition to the CRISS payment.

Scenario 2

This looks at a farmer with 20ha and entitlements worth €261, the current average payment. This farmer is below the 35ha average size holding of BPS recipients.

Looking at the table, the overall gain is negligible, at only €60 with 5% CRISS, a 1% payment increase. The higher CRISS leads to a better outcome, but the €240 extra is still only a 5% payment rise.

Scenario 3

Here, we have a larger-than-average holding with 40ha and low entitlements, again currently worth the minimum €160/ha.

The effect of CRISS and eco schemes will be to increase the payment by €1,620 (25%) or, if CRISS is at the higher rate, by €2,160, a whopping 34% increase.

Scenario 4

Looking at another farm of the same size, but currently with high-value entitlements worth €473/ha, a very different picture is revealed.

The payment level falls by €3,500 with CRISS at 5% and by €4,400 if CRISS is set at 10%. These are payment losses of 18% and 23% respectively.

Things to note

Two things to note when looking at those last two scenarios. The first is that the second farm still has higher payment levels, at €14,520, overall compared with €8,560 at the higher CRISS level.

The gap between payment levels to these farms has been narrowed from €12,520 to €5,960, but a gap remains.

The second thing to bear in mind is that these figures do not take convergence into account. That process will significantly reduce the gap between payment levels to these two farms, and indeed all farms.

The Department modelling indicates that convergence at 85%, which is the minimum, will result in a further €12.9m being redistributed each year from 2023 for four years.

The maximum model, which is effectively full flattening of entitlement values, would see €23.6m redistributed each year.

Health warning

The assumptions made around eco schemes in particular should be regarded as liable to change.

A flat-rate payment to every hectare is extremely unlikely, as that would imply that all hectares will qualify, not just for payment, but for the same rate of payment. This is highly unlikely.

In addition, it should be remembered that some eco scheme measures will require a spend on the farmer's part, it won't just be "money in", as was the case for most farmers with the current greening payment.

Nonetheless, these figures are the clearest indication yet of the effect of the Irish Government's CAP proposals on payment levels on farms.