CAP reform 101

Published 22 August 13

While full details of the deal on the future of the Common Agriculture Policy (CAP) are yet to emerge, the key areas for the dairy sector are becoming clearer says AHDB DairyCo senior analyst Richard Veit.

Structure

The CAP will keep its basic structure of a two-pillar system. Pillar 1, which deals with direct payments, will be used to provide income support for farmers – mainly through the new Basic Payment Scheme (currently the SPS) – as well as support for EU-wide market management measures for some sectors.

Pillar 2, used for rural development, will be used to fund agri-environmental programmes, such as the Entry Level Stewardship Scheme (ELS) in England or Rural Stewardship Scheme (RSS) in Scotland. It will also fund activities to improve competitiveness, such as knowledge transfer and skills development.

 cap reform

Greening

30% of direct payments will be conditional on farmers undertaking greening measures. Some farmers (including organic producers and those in agri-environment or similar schemes) will be exempt from some or all of these requirements as they are considered to already be delivering greening equivalency. It is understood a menu of options may be available but for those not exempt, the following will apply:

  • Crop diversification: On farms with 10-30ha arable, farmers will need to cultivate at least two crops, with no crop covering more than 75% of the land (winter and spring versions of a single crop will count as two different cropping types). On farms with more than 30ha of arable, farmers will need to cultivate at least three crops, with the principal crop not covering more than 75% of arable land and the two main crops together accounting for less than 95%. It is understood that farms with more than 75% of area fallow, under leguminous crops or grass (permanent or temporary), are likely to be exempt from the crop diversification requirements. 
  • Ecological Focus Areas (EFA): For farms with more than 15ha (excluding land in temporary leguminous or permanent pasture, or lying fallow), at least 5% of the arable area must be used for maintaining an Ecological Focus Area. This could rise to 7% following an impact assessment in 2017. EFAs are to include field margins, hedges, trees, fallow land, landscape features and buffer strips.
  • Permanent grassland: The proportion of permanent grassland within the total agricultural area must not decrease by more than 5% at a national or regional level, based on 2015 figures. Details have not emerged on how this will be managed at a farm level in the UK.

Farmers who do not comply with the greening measures will be likely to lose their 30% greening payment as well as face an additional penalty.

Market management

Safeguard clauses for all sectors will enable the EU to take emergency measures to respond to market disturbances. These measures will be funded from a Crisis Reserve funded from within Pillar 1.

The existing system of public intervention and private storage aid has been maintained. These measures enable the Commission to make short term interventions in some markets, including dairy, to support prices when they are very low.

To improve farmers’ negotiating position in the food chain, Producer Organisations (POs) will be allowed in all sectors.

Additional dairy management tools (such as the ability to grant aid to milk producers who voluntarily cut their production in the event of a severe crisis) may be discussed at a conference in late September.

Initial reactions

On a whole, the agreement reached has come under attack from both agricultural and environmental lobbyists. Farming unions from across the EU have expressed concern over the added burden of environmental reforms. Concerns have also been raised on issues relating to relative competitiveness from some aspects of the reforms, such as inter-pillar transfers, which would impact direct support payments to farmers. Environmentalists such as the WWF, on the other hand, have expressed their disappointment with the watered-down results for environmental reform.

In the next DairyLeader we will look at the implications of these changes on our industry and on-farm. Until then additional details referring to aspects such as reducing payments to larger farms, top-ups for young farmers and shifting funds between pillars, are available here. Details will be updated when more information becomes available.