Focus on the reforms of the EU’s common agricultural policy


Focus on the reforms of the EU’s common agricultural policy

12 October 2021

AHDB’s new policy analysis examines the development of the CAP and how it compares to the UK’s agricultural strategy.

In June 2021, the EU reached an agreement on the reform of the new Common Agricultural Policy (CAP) which will be rolled out from 2023.

Under the provisionally approved new CAP, EU member states will design their own national strategic plans, based on the EU’s goals for social, environmental and economic sustainability of agriculture. The EU describes this new CAP as “fairer, greener and more flexible” and an essential element in achieving the EU’s farm-to-fork strategy, in addition to the objectives of the EU’s Green Deal. But how does this compare with British politics?

A key reform of the new CAP is the introduction of an income redistribution support mechanism, which aims to better manage the income of small and medium-sized farms. Under this mechanism, EU countries will have to ensure that at least 10% of their direct payment envelope is distributed among these farms. In addition, Member States will be required to reduce the gap between the levels of payments that farmers receive within a single country, as part of the EU’s goal of converging income support, both at within individual countries and between EU states. Young farmers (up to 40) can also expect at least 3% of the direct payments budget per country under this proposal.

A clear difference between the CAP reform and the Agricultural Transition Plan is England’s abandonment of direct payments, known as the Basic Payment Scheme (BPS), replacing them with a new set of environmental programs, including the Sustainable Agriculture Incentive, over the next seven years.

EU member states are required to post more ambitious climate and environmental elements in their strategic plans, in addition to adhering to more stringent environmental requirements set by the EU. These include good agricultural and environmental conditions (GAEC), including soil protection and biodiversity measures. The two policies highlight an evolution towards agricultural practices that are more respectful of the environment. However, the EU will continue to apply a subsidy-based approach, while England will phase out direct income support payments as farmers opt for environmental programs.

Similar to the Environmental Land Management Programs (ELMS) in England, the EU plans to roll out various green programs under the new CAP. These are voluntary programs available to farmers, promoting practices that respect the climate and the environment and improvements in animal welfare. At least 25% of the direct payments budget of the Member States will be allocated to these schemes. Second, the EU will devote a greater proportion of payments to rural development. An additional 5% (35% in total) will be devoted to interventions related to climate, environment, biodiversity and animal welfare under the so-called second pillar of the CAP. These include agri-environmental management commitments and greater flexibility in payments to areas of natural constraints. These will be similar in nature to the rural stewardship and historic ELS / HLS agreements.

Of course, a key difference between the two policies is that EU eco-schemes remain available to farmers as a voluntary addition to direct payments, albeit at a higher percentage of the total budget, while ELMS will be the future of all payments in England.

Meanwhile, EU farmers will have to adhere to more ambitious basic requirements than previous greening rules under direct payments. This includes the Good Agricultural and Environmental Conditions (GAEC). What are the voluntary eco-programs and other agricultural practices included in the individual plans of the Member States. This perhaps highlights the higher environmental expectations of English policy in comparison, with farmers depending on these schemes if they wish to receive payments.

Under a ‘flexible’ approach, another key area of ​​reform is that EU countries will be able to shape the rules and funding allocations according to their specific needs by designing their own strategic plans. of the CAP. These will be built on nine common EU objectives. This includes the possibility for each nation to decide what constitutes an ‘active farmer’ on the basis of EU law, and therefore to receive payments from the CAP. Overall, the total CAP budget remains comparable to previous years at € 387 billion. A key contrast to English agricultural policy is that there is no longer any amount of money earmarked for English farmers. Instead, the budget will be decided among other national activities.

What are the potential impacts of the CAP reform?

According to the Joint Research Center (JRC), the EU’s CAP reform proposal, in addition to the EU’s farm-to-fork and biodiversity strategies, could lead to changes in prices, production, environment and trade position of the EU.

It should be noted that this report is the result of a modeling exercise (CAPRI model) which does not produce precise projections, and must therefore be applied with caution. It does, however, shed some light on what we might expect in the long term if these proposals were to be implemented.

From an economic point of view, the JRC model suggests that we could see EU production decline, due to yield declines associated with increased organic farming and reduced pesticides. These changes in production may influence the EU’s long-term trade position, as the net export position of cereals, pork and poultry is expected to decline, while the trade deficit for oilseeds, fruits and vegetables, and beef and ovine is expected. widen. At the same time, producer prices could increase, especially for livestock products.

Overall, reactions to the deal have been mixed, with some organizations suggesting that the reformed policy will pose an unprecedented challenge for the EU farming community. It remains to be seen how the new CAP is implemented and how this future policy will interact with the UK. This full assessment will only be possible once the agreement has been translated into legal texts and secondary law.

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