Cap reform options must be carefully considered

The production of milk, beef, lamb, and crops on Irish farms make an essential and valuable contribution to the Irish economy, not just in regional rural areas, but nationally for the country.

Anything that potentially jeopardises the level of production from farms has to be examined and scrutinised carefully, to try and predict its impact.

There has been much discussion and debate over the last three years about the reform of the Common Agricultural Policy, since the EU commissioner Dacian Ciolos first put forward his reform proposals. Ciolos’s proposals involved paying every farmer the same flat rate Single Farm Payment per hectare.

That debate has intensified during the Irish presidency of the EU agricultural ministers during the first six months of this year.

Much of it has centred, unsurprisingly on the impact on individual’s Single Farm Payments.

In March, Agriculture Minister Simon Coveney was successful in getting an alternative, more flexible convergence model, known as the Irish “approximation” model, considered in the negotiations.

But it’s important from a national perspective to consider the amount of production that is generated by farms that would lose significantly under the two payment models being proposed by the commission on the one hand, and the Irish approximation model. This involves a more gradual shift from the historical payment model which is presently in operation in this country.

A recent paper by Teagasc considers the impact of reforming the current SFP scheme. Using Teagasc National Farm Survey data, which represents 90% of farm output, the impact of the two payment models is examined.

Under the flattening scenario, about 40% of gross output is generated by farms that would lose 10% of their income or more. Under the approximation model this proportion of output decreases to 11%.

It can therefore be concluded that if production is at risk due to losses in income, then the amount of production at risk is far lower under the approximation model than under the flattening model.

In general, the approximation model pushes the majority of gross output into the centre of the group of individuals who neither lose nor gain more than 10% of their SFP. In all, 81% of gross output is generated by farms losing or gaining less than 10% of their income under the approximation model compared to just 43% under flattening.

Relative to the flattening model, the approximation model reduces the quantity of monies being redistributed among farmers, and as such it represents a lower risk of Irish farm gate output declining as a result of reforming the Cap.

It is important to note that the Cap negotiations are ongoing and it is hoped that an agreement will be reached before the end of the Irish Presidency at the end of the month. The two payment models referred to here, represent the ends of the spectrum in terms of reform, and the final agreement is likely to involve a model that falls somewhere between these two.

* Prof Gerry Boyle is director of Teagasc