The European Commission unveiled its blueprint for streamlining and
further modernising the European Union's Common Agricultural Policy (CAP).
The so-called 'Health Check' of the CAP, presented by Agriculture
Commissioner Mariann Fischer Boel, will build on the approach which began
with the 2003 reforms, improve the way the policy operates based on the
experience gathered since 2003 and make it fit for the new challenges and
opportunities in an EU of 27 Member States in 2007.
The CAP determines, amongst many other things, the amount of subsidies
European farmers receive for biofuel feedstock production and how much land
will be set-aside.

CAP reform is one of the major causes for political dispute amongst EU
member states that are large recipients of farm aid (France, Spain,
Germany), and those that aren't. Likewise, given that support has mainly
benefited large farmers, their smaller collegues have been advocating a
review of the policy.

The previous reforms have modernised the CAP, but the Health Check
represents the opportunity to take the policy review further. It will ask
three main questions:

1. how to make the direct aid system more effective and simpler
2. how to make market support instruments, originally conceived for
a
Community of Six, relevant in the world we live in now
3. and how to confront new challenges, from climate change, to
biofuels,
water management and the protection of biodiversity

Today's communication is designed to kick off a wide-ranging six-month
consultation. Next spring, the Commission will return with legislative
proposals, which it hopes will be adopted by agriculture ministers by the
end of 2008 and could come into effect immediately. During 2007 and 2008 the
Commission will develop its approach to the budgetary review 2008/2009.

The Health Check constitutes a preparatory action within this
framework, without prejudging the outcome of this review. It fine-tunes the
2003 reforms and contributes to the discussion on future priorities in the
field of agriculture.

Does the fact that we are conducting a Health Check imply that the
patient is sick? Certainly not: but it's quite normal for perfectly healthy
people to visit their doctor to see whether they need to do anything
different to ensure they stay in good shape. In the same way, we need to
look at whether we need to adjust the CAP for an EU of 27 and a rapidly
changing world. The changes I propose will make a real difference for
farmers, consumers and taxpayers. - Mariann Fischer Boel, Commissioner for
Agriculture and Rural Development

A key reform measure is to simplify the Single Payment Scheme which
was introduced in 2003, with the aim to replace the subsidies linked to the
amount of food a farmer produced, a change described as "decoupling". The
Commission now suggests further measures for simplication of the payment
system:


a.. moving away from payments based on historical receipts towards
a "flatter rate" system
a.. increasing the rate of "decoupling" in those countries which
opted in a number of farm sectors to maintain the link between subsidy and
production, although coupled support may still play a role in regions where
production is small-scale but of particular economic or environmental
importance.
a.. gradually reducing the support level as overall payments to big
farmers increase, starting from a level of, for example, ?100,000 per year.
This would have to differentiate between multiple-owner farms with many
workers and single-owner farms with just a few.
a.. increasing the amount of land a farmer has to own before he
qualifies for EU support from the current level of 0.3 hectares.
a.. reviewing the Cross Compliance standards which farmers are
obliged to respect to receive their support from Brussels. This could mean
stripping out unnecessary obligations, but also adding new ones to deal with
new challenges like improving water management and mitigating climate
change.

Concretely, the direct payment received by farmers would be capped
according to the amount of aid they receive, in the following way:


a.. up to 100,000 euros - unaffected
a.. 100-200,000 euros -10% cap
a.. 200-300,000 euros - 25% cap
a.. above 300,000 euros - 45% cap

Such a system would naturally target the larger landowners and the
commissioner says it would have to differentiate between multiple-owner
farms with many workers and single-owner farms with just a few. At the other
end of the scale, a minimum level of payments could be set before aid kicks
in, although the commissioner says it would not affect "real farmers" (as
opposed to mere landowners).Another major goal of the reform effort is to
adjust market support instruments to make them relevant for an EU of 27 in
our modern day and age. The Communication asks critical questions:


a.. should intervention revert to its original purpose as a real
safety net ? particularly as market prices today are in such good shape?
a.. could intervention for most cereals be set at zero while
maintaining intervention for a single cereal (bread-making wheat)?
a.. should set-aside not be abolished, while finding new ways of
preserving the environmental benefits it has brought?
a.. milk quotas are already programmed to disappear in 2015, but
should there not be a gradual increase in quotas between now and then to
allow a 'soft landing' for the sector? This must look at possible measures
to help dairy farmers in those regions of the EU ? like mountain areas ?
which depend heavily on dairy production.

Agriculture Commissioner Fischer-Boel recently announced her intention
to submit to the Commission a proposal to set at 0% the obligatory set-aside
rate for autumn 2007 and spring 2008 sowings, in response to the
increasingly tight situation on the cereals market, which is a development
related to biofuels production.

New challenges

Finally, the Commission wants reform so that European agriculture can
responding to new challenges. These include: managing risk, fighting climate
change, managing water more effectively, making the most of the
opportunities offered by bioenergy and preserving biodiversity.

Climate change and water management objectives could be met through
Cross Compliance, There should be incentives to improve action in these
areas but this will cost money, the communication says. The best way to
finance the necessary new measures is through Rural Development policy.

The communication therefor proposes increasing the rate of
'modulation', i.e. the reduction of direct payments to all farms receiving
more than ?5,000 per year and the transfer of the money into the Rural
Development budget. This would be increased gradually from 5 percent now to
13 percent in 2013.

Finally, the Commission states that it must also be examined whether
the energy crop premium is still necessary given new incentives for biofuel
production such as the compulsory bioenergy targets and high prices.

Fischer Boel recently announced that she will proppose a scale back of
the special aid scheme aimed at developing Europe's energy crop sector,
after it emerged that farmers have already massively shifted production
towards biofuels, overshooting a two million hectare target. The amount of
land for which farmers up to now received a subsidy of ?45 per hectare
(US$26/acre) in exchange for planting energy crops (such as rapeseed or
sugar beet that can be processed into biofuels for cars or biomass for
heating or electricity) will thus be reduced after the scheme proved too
popular.

[biopact.com]