Are The EU’s CAP Payments Fair?

Are The EU’s CAP Payments Fair?

Payments through the EU’s Common Agricultural Policy (CAP) supplement income for farmers, but are they fairly distributed?

Farming can be a precarious way to make a living. Farmers are often at the mercy of volatile markets and bad weather. Established in 1957, the Common Agricultural Policy (CAP) is regarded as a cornerstone of agriculture. It’s designed to sustain food production across member states, ensure products are of good quality, healthy and safe, and that farmers have a fair standard of living.

Today, the policy accounts for 38% of the EU’s budget, with €408.31bn set to have been spent in the period from 2014 – 2020. More than 70% (€308.72bn) of this will have gone on direct payments for farmers, with the rest allocated for improving the environment and the countryside. The biggest direct payment is the Basic Payment Scheme (BPS), which replaced the Single Payment Scheme in 2015 and, essentially, tops up farmers’ income.

With this year’s BPS deadline (15 May) nearing for Irish farmers, we take a look at the scheme and whether it’s as effective as it could be.

How are Irish farmers faring?

The BPS is worth €1.2bn to Ireland’s 130,000-plus farmers. The average farmer is 57 and has 32.5 hectares (80 acres) of land, according to the agriculture and food development authority Teagasc. In 2015, the average farm would have earned €26,303 while the average basic payment for 2015 was €9,102. It’s reported that farmers spends most of their income within a 35km (21-mile) radius of their business, boosting the local economy.

But this doesn’t tell the whole story. Not all farmers have that amount of money to show for the early hours and hard graft put in, and this is partly because of the way the BPS is set up, says David Fitzpatrick, a dairy farmer from County Tipperary.

In 2015, €1.8bn in EU direct payments, including BPS, were handed out, but nearly half of these subsidies went to just 12% of the farmers. While three in five of all farmers received less than €10,000, 4% received over €50,000, totalling 15% of all payments, figures from the European Commission show.

“There is a huge disparity. The scheme is weighted in favour of those who own more land,” says Fitzpatrick, referring to the fact that BPS subsidies are handed out per hectare rather than according to the amount of food coming off it.

“In order to receive payment there needs be a commitment to good farming practices and respecting a number of standards, but this doesn’t mean there will always be produce coming off all the land being claimed for, or that the maximum is being yielded. The system keeps people on land but doesn’t necessarily encourage them to produce.”

“Young farmers are the lifeblood of the industry. It’s essential that they’re given the resources and support that enable them to fulfil their business goals”
Seán Finan, 2015 – 2017 president, Macra na Feirme

Alan Matthews, professor emeritus of European Agricultural Policy at Trinity College Dublin and founder of CAP Reform, a blog that brings together the work and thoughts of researchers and analysts, says that academic studies show that some farmers may be using the BPS as an excuse for a quiet life and to not have to test their efficiency.

Fitzpatrick agrees, but believes that the BPS in its current form can still support farms of all sizes during hard times. Last year saw both a milk price drop that wiped an estimated €800m off the value of the dairy industry and a 4.8% increase in production to meet a similar increase in demand. He says it might not have been possible for the industry to have met demand without financial provision.

What needs to change?

Even though CAP payments have a ceiling of €150,000, there are calls for this to be reduced to €100,000. Minister for agriculture Michael Creed is committed to lowering it before 2020 or in time for the next iteration of the policy that will cover the 2021 – 2027 period. The current limit was put in place with the aim of making the system more equitable between rich and poor farmers, but further reduction could safeguard payments for smaller farms. What’s more, it could incentivise young people to see farming as a career choice.

European Commission research shows that fewer than 7% of Irish farmers are under 35, while more than 25% are older than 64. Ensuring that the next generations are employed in the agri-food sector – it already employs 300,000, according to the Irish Farmers’ Association – will be key to stimulating future economic growth.

The Young Farmers’ Scheme was established alongside the BPS in 2015 and acts as an extra top-up; recipients, who have to be under 40, are awarded a sum per hectare, up to 50 hectares, that is broadly equivalent to 25% of the national average basic payment, and it can be claimed for five years. But more still needs to be done, such as abolishing the five-year rule altogether, says Seán Finan, the 2015 – 2017 president of Macra na Feirme, one of the country’s oldest farm organisations for young people. Finan led on a policy paper for youth farming post-2020 that was published in March.

“Young farmers are the lifeblood of the industry. It’s essential that they’re given the resources and support that enable them to fulfil their business goals. They’d much prefer it if the market returned a decent margin above production cost for their produce instead of receiving payments, but unfortunately this isn’t the case at the moment,” he says.

Finan and Macra also believe that direct payments shouldn’t be seen simply as an asset or entitlement, but a means to better agricultural business. A change in mindset would most likely lead to higher efficiency and output.

Any future discussions should not overlook smallholders either, says Suzie Cahn, co-owner of organic farm Carraig Dulra, where she runs workshops teaching farming methods.

“Experts will generally look to large, mainstream, mechanised farms for their perspective when debating the issue or adapting policies. There are many small-scale farms producing food, fibre and fuel, and contributing to rural regeneration without support, but they are pretty much invisible in the policy area and Irish media.”

While the majority of smallholders may not be able to claim payments due to their size, the grassroots movement is full of environmentally conscious young people who could sow the seeds of innovation for the future of the whole industry. They have fresh ideas and could bring knowledge of green technology and R&D from the classroom to the field.

 

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