European policy consultants
Rural development and renewable energy

SCA confirms Council negotiating position on CAP reform

The Special Committee on Agriculture formally confirmed the Council's negotiating position on the four draft CAP reform regulations.

This formal confirmation reflects the agreement on a General Approach reached after intensive negotiations led by the Irish Presidency in the Council
("Agriculture and Fisheries") at its session on 18 and 19 March, and marks an important step
towards ministers' goal of reaching a political agreement with the European Parliament by the end of June.

The main elements of the Council position, which will serve as the Presidency's mandate for
negotiations with the Parliament, are based on the compromise texts prepared by the Presidency on each of the CAP reform proposals:

Financial discipline:

The financial discipline mechanism, introduced by the 2003 CAP reform, aims to ensure that the level of direct support is adjusted whenever forecasts indicate that the CAP budget will be exceeded in a given financial year. In line with the European Council conclusions to maintain this mechanism (paragraph 66), the Council has set the level at which any reductions of direct support would apply to farmers who receive more than EUR 2000 of direct support.

Capping of direct support to large farms:

In line with the European Council conclusions ( paragraph 65), the Council position allows Member States wishing to do so to reduce the amount of direct support allocated to those farmers who receive more than EUR 150 000 per year.

Flexibility between pillars:

Also in line with the European Council conclusions (paragraphs 68 and 69), the Council has provided for increased flexibility in the transfer of funds between the two CAP pillars. Member States may transfer up to 15% of their direct support envelopes under pillar 1 to their rural development envelopes under pillar 2, or vice versa. In addition, Member States whose direct support level is below 90% of the EU average may transfer an additional 10% of their pillar 2
rural development envelopes to their pillar 1 direct support envelopes.

The Council also takes the view that these percentages may vary per calendar year and that Member States should be allowed to review their transfer decision.

As regards the redistribution of direct support between Member States (external convergence), the Council has still to confirm the exact figures for Member States' national envelopes so as to reflect the European Council conclusions on the MFF (paragraph 64).

Transition to the new basic payment scheme:

The Commission proposal provides for the introduction of a new Basic Payment Scheme to replace the current Single Payment Scheme (SPS) and the Single Area Payment Scheme (SAPS).

The Council has made a large number of amendments designed to ensure the smooth transition to the new basic payment scheme, both for Member States applying the SPS and for those applying the SAPS.

For Member States applying the SAPS the Council considers they should be able to continue with this scheme until 2020, with the option to grant transitional national aid in the period 2015 to 2020.

Two important new elements introduced by the Council are:

– the option for Member States to grant a top-up payment on the first hectares of each farm
(the so-called 'redistributive payment'), in order to take account of the greater labour
intensity on smaller farms and economies of scale on larger farms The maximum number
of hectares eligible for this top-up would be either 30 hectares or a number of hectares
corresponding to the average farm size in the member state concerned;

– the possibility for Member States to use more than 3% of their direct support envelope for
funding their national reserve, in order to take account of ongoing land re-structuring and
to promote bringing uncultivated land back into agricultural production.

The Council position provides for increased flexibility on internal convergence, particularly by
allowing Member States to reach only partial convergence by 2019 (rather than full convergence to a flat rate system, as proposed by the Commission - and as has already happened in England).

Those Member States aiming for partial convergence would be allowed to apply the mechanism for 'external convergence' (reducing the gap between direct payment levels between Member States) and to establish minimum and maximum limits to the value of payment entitlements in relation to their national or regional values.

In addition, those Member States would be allowed to apply internal convergence to the greening payment (see below) by fixing this payment as a percentage of the farmer's individual payment rather than as a percentage of the national or regional flat-rate payment.

Member States aiming for full convergence would also have further flexibility by being able to limit their first convergence step to 10% (rather than 40%, as proposed by the Commission).

The Commission proposal provides for the greening of direct support by making 30% of direct support to farmers subject to the respect of agricultural practices beneficial for the environment and climate.

The European Council conclusions on the MFF (paragraph 67) confirm the 30% greening
objective, whilst avoiding unnecessary administrative burden and with a clearly defined flexibility
for Member States relating to the choice of equivalent greening measures. They also stipulate that the requirement to have an agricultural focus area (EFA) on each farm should be implemented in ways that do not require the land in question to be taken out of production and that avoids unjustified losses in the income of farmers.

In line with these conclusions, the Council has made a significant number of adjustments to the
greening provisions, which aim in particular to:
– adjust the scope of 'equivalent practices' (practices which yield an equivalent or higher benefit for the climate and the environment compared to the greening practices proposed by the Commission);
– provide for the progressive application of the requirement to provide for crop diversification on each farm, with a number of exemptions to that requirement;
– adjust the requirement to keep a minimum ratio of permanent grassland in relation to the
total agricultural area;
– allow for the graduated application of the requirement to have an Ecological Focus Area
(EFA) on each farm (starting at a 5% rate with the possibility to bring this up to 7% as
appropriate and subject to an evaluation report from the Commission), along with certain
adjustments to the scope of eligible EFA and a number of exemptions.

The Council position offers Member States increased possibilities to grant voluntary coupled
support in sensitive sectors or regions. As a general rule, Member States may in future grant up to 7% of their direct support envelopes in the form of coupled support (compared to the current rate of 5%).

In addition, Member States fulfilling specific conditions may bring this rate up to 12% (compared to the current 10%). The Council did not make any changes to the sectors eligible for coupled support as proposed by the Commission.

The small farmers scheme proposed by the Commission provides for a flat-rate payment to farmers who do not receive more than EUR 1000 of direct support. This scheme aims to bring about a significant reduction in the administrative burden on both farmers and national authorities.

The Council considers that Member States should be free to decide if they want to introduce this
scheme or not. The Council position also includes a simplified method for calculating the flat-rate amount due to each farmer.

The young farmers scheme proposed by the Commission aims to promote generation renewal in the farming sector by providing for a top-up payment for farmers below the age of 41 who are setting up or taking over an agricultural holding for the first time.

The Council considers that Member States should be able to choose how to target young farmers and should have the option to apply this scheme or not.

The Council also introduces a number of adjustments to simplify the calculation of the payments.

Market intervention and specific provisions on individual sectors

On the market management instruments of public intervention and private storage, as well as the individual aid schemes, the 'General Approach' agrred by the Council stays close to the substance of the Commission proposal.

However adjustments have been made by Council so that prices and quantitative limitations are fixed by Council in line with Article 43(3) TFEU.

In addition :
– in the fruit and vegetables sector, the Council extends the financing of operational aid
programmes beyond producer organisations to associations of producer organisations;
– in the wine sector, the Council has reflected the outcome of the High Level Group on vine
planting rights by introducing an authorisation system for wine producers wishing to plant
or replant vines for the production of all categories of wine. This system would apply to all
wine-producing Member States for 6 years (1 January 2019 to 31 December 2024) with a
mid-term review.
– on aid in the apiculture sector the Council clarifies the list of the eligible measures as well
as the possibility for Member States to top up the EU contribution.
– on sugar, the Council extends the existing quota regime until the end of the 2016/2017
marketing year.
– on hops the Council retains the existing provisions on aid to producer organisations and on
certification and imports.
– on milk the Council adopts the milk package agreed upon by the European Parliament
and the Council which entered into force at the end of 2012 (Regulation 261/2012 on contractual relations in the milk and milk products sector).

The Council's general approach would better define the crisis situations where the Commission
would need to take exceptional measures to deal with significant disturbances in the market while ensuring that the Commission's possibilities of action remain flexible and effective.

Furthermore the Council extends the scope of the measures which can be taken in order to take account of serious market disturbances directly attributed to a loss in consumer confidence, due to public or plant health risks, in any of the agricultural products listed in Annex I to the Treaty.

The Council's General approach would reject the Commission's proposal for a general marketing standard for all agricultural products. It would distinguishe between obligatory rules on marketing standards and optional reserved terms.

To reflect the status quo, the Council would provide for the possibility of specific marketing standards for various sectors and/or products, such as fruit and vegetables; processed fruit and vegetables; eggs and poultry meat; and hops.

The country of origin indication remains compulsory for products of the fruit and vegetables
sector which are intended to be sold fresh to the consumer.

The Council adjusts the Commission proposal to give Member States the possibility (but not a
requirement) to recognise, on request, producer organisations and their associations.

However, in line with current rules recognition of producer organisations remains mandatory for:
– the fruit and vegetables sector,
– the olive oil and table olives sector,
– the silkworm sector, and
– the hops sector.

The Council also adjusts the Commission proposal to allow Member States the option of extending the rules on producer organisation (and financial contributions) to non-members,
except in the case of producers in the milk and milk products sector.

This means that in agricultural sectors other than dairy, producer organisations may request their member states to extend the application of some rules clearly identified in the Single CMO regulation to producers who are not members, and to require them to pay financial contributions.

The main new elements proposed by the Commission in the draft Rural Development Regulation and considered essential by the Council are the reform of payments for Areas with Natural Constraints, the introduction of Risk management measures and the simplification of the
programming process.

Areas with natural constraints (ANCs):
The Council has given its support to the reform in relation to ANCs, confirming that the new 'bio-physical criteria' provide an objective and transparent method for delimiting such areas in the entire EU territory.

However, Council recognised that in view of the different conditions in each Member State, flexibility would be essential for the implementation of the system. Therefore the period for
degressive phasing out payments has been amended to start only when the new delimitation is
completed which would be in 2016 at the latest.

Greater flexibility has also been provided regarding areas which were eligible during the current
programming period. In those areas, Member States may apply a combination of two bio-physical criteria at a lower threshold for the delimitation of the areas.

Risk management:

The Council has also given its support to the introduction of Risk Management measures regarding crop, animal and plant insurance, mutual funds for animal and plant diseases and environmental incidents, and an income stabilisation tool in the form of mutual funds.

However, the Council took the view that in order to be effective, the measures must cover all the main risks which farmers face, including therefore adverse climatic events, pest infestations and losses caused by wild animals.

Moreover, the text has been amended to allow and encourage the use of indexes and modern technology in order to gather the necessary data concerning the production levels and losses
of each farmer.

Throughout the reform of the CAP, Member States have insisted on the need for simplification in
all areas, and in particular for Rural Development the programming process.

The Preparatory bodies of the Council have reviewed and amended the relevant provisions on numerous occasions, simplifying the procedures and clarifying the requirements in order to allow efficient and targeted implementation of the measures.

Particular emphasis has been placed on the SWOT analysis, as it would permit each Member State to define which priorities are most relevant to its agriculture and rural areas and focus support on the related measures.