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Common Agricultural Policy 2014-2020: Direct payments - A reference note

20-12-2016

This document aims to explain the principles and rules of the direct payments system in the context of the Common Agricultural Policy (CAP) for 2014-2020. Indeed, direct payments are the backbone of the CAP and they take the largest share of the CAP budget, more than 70 % of the €408.31 billion budget or about €42 billion each year. In Europe, more than 7.3 million farmers are beneficiaries of direct payments, and they manage more than 170 million hectares of agricultural land. In terms of farm income ...

This document aims to explain the principles and rules of the direct payments system in the context of the Common Agricultural Policy (CAP) for 2014-2020. Indeed, direct payments are the backbone of the CAP and they take the largest share of the CAP budget, more than 70 % of the €408.31 billion budget or about €42 billion each year. In Europe, more than 7.3 million farmers are beneficiaries of direct payments, and they manage more than 170 million hectares of agricultural land. In terms of farm income, direct payments represent, at the EU level, more than 25 % of the gross value added of EU agriculture and in some Member States more than 50 %.

Common Agricultural Policy and revision of the 2014-2020 MFF

30-11-2016

The EU's 2014-2020 Multiannual Financial Framework provides medium-term expenditure predictability in support of investment in Europe's priorities. The Commission presented its mid-term review/revision of the multiannual EU budget (2014-2020) on 14 September 2016 in Strasbourg. Without increasing spending limits, the package as presented is intended to free up an additional €6.3 billion in financing by 2020. These resources will be used mainly to foster job creation, investment and economic growth ...

The EU's 2014-2020 Multiannual Financial Framework provides medium-term expenditure predictability in support of investment in Europe's priorities. The Commission presented its mid-term review/revision of the multiannual EU budget (2014-2020) on 14 September 2016 in Strasbourg. Without increasing spending limits, the package as presented is intended to free up an additional €6.3 billion in financing by 2020. These resources will be used mainly to foster job creation, investment and economic growth and to address the migration crisis. In this context, the Commission presented a legal proposal (omnibus regulation) that contains changes to the basic EU Financial Regulation and to the main EU funding regulations. The omnibus proposal touches, inter alia, on all four of the basic regulations governing the Common Agriculture Policy. These cover Direct Payments, Rural Development, Common Market Organisation and the ‘Horizontal’ Regulation, covering issues such as funding and controls. The changes that are proposed aim at fine-tuning some elements of the current CAP, as described in this briefing, and making life easier for both farmers and national authorities. Looking ahead, the proposed revision of the 2014-2020 Multiannual Financial Frame-work will prepare the ground for a subsequent MFF proposal in support of EU priorities for the post-2020 period. This could be presented by the end of 2017. With the omnibus regulation proposal, it appears unlikely that a major restructuring of the basic architecture of the CAP will take place in the current programming period. More substantial legal proposals for a post-2020 CAP could be presented in 2018, in line with the post-2020 MFF communication. Such a scenario would enable the European Parliament, as co-legislator, to negotiate the implications of the current CAP revision, and a more substantial post-2020 reform for the CAP in parallel.

Renewable energy in EU agriculture

23-11-2016

The agricultural sector accounts for almost 10 % of greenhouse gas emissions in the European Union, mainly for food production and transport. In recent years, European farmers have made efforts to significantly reduce this environmental footprint by increasing their consumption and production of renewable energy, which is derived from natural resources that are naturally replenished. While there is enormous potential for the production of renewable energy on farms due to the availability of wind, ...

The agricultural sector accounts for almost 10 % of greenhouse gas emissions in the European Union, mainly for food production and transport. In recent years, European farmers have made efforts to significantly reduce this environmental footprint by increasing their consumption and production of renewable energy, which is derived from natural resources that are naturally replenished. While there is enormous potential for the production of renewable energy on farms due to the availability of wind, sunlight, biomass and agricultural waste, important barriers and challenges still remain.

New income stabilisation tools and price volatility in agricultural markets

24-10-2016

Farmers are often confronted with substantial changes in the prices they receive for the sale of their agricultural products, which causes financial uncertainty about their incomes. Commonly referred to as 'price volatility', this phenomenon is more evident in agriculture than in other economic sectors due to a variety of economic, natural and political factors. Data provided by the United Nations Food and Agriculture Organisation suggest that global price volatility has been on the increase since ...

Farmers are often confronted with substantial changes in the prices they receive for the sale of their agricultural products, which causes financial uncertainty about their incomes. Commonly referred to as 'price volatility', this phenomenon is more evident in agriculture than in other economic sectors due to a variety of economic, natural and political factors. Data provided by the United Nations Food and Agriculture Organisation suggest that global price volatility has been on the increase since 2005 and is likely to remain a major concern for farmers in the coming decades. The Common Agricultural Policy for the 2014–2020 period is mainly aimed at compensating farmers for the negative effects of price volatility and at tackling income volatility, rather than directly addressing price volatility itself. Indeed, market interventions have been reduced and now play the limited role of safety net measures which are only activated when prices drop below certain levels. The main policy instrument involves direct payments which provide a stable form of income for farmers regardless of market conditions. Additionally, Member States have the possibility to support three risk management tools (insurance schemes, mutual funds and an Income Stabilisation Tool) through their rural development programmes. In the framework of the Multiannual Financial Framework review, on 14 September 2016, the Commission proposed some changes to the Income Stabilisation Tool. The European Parliament has been working actively on the issue of price volatility in agricultural markets, notably by organising a hearing and launching an own-initiative report on the subject. Looking to the future, direct payments, which reduce income volatility by providing a stable form of revenue for farmers, will probably still play a role in the CAP after 2020, but a political shift towards the further development of risk management tools could be at the core of the debate on the future of European agricultural policy. This briefing updates ‘Price volatility in agricultural markets’ published in July 2016.

The crisis in the agricultural sector

20-09-2016

Recent trends in agricultural commodity prices have been a subject of concern to policy-makers at both EU and national levels. The current common agricultural policy (CAP), for the period 2014 to 2020, represents one of the most market-oriented forms of European agricultural policy since its establishment. This has involved a shift away from price support to direct income support and rural development. However, running parallel with these changes, an analysis of price changes in the main agricultural ...

Recent trends in agricultural commodity prices have been a subject of concern to policy-makers at both EU and national levels. The current common agricultural policy (CAP), for the period 2014 to 2020, represents one of the most market-oriented forms of European agricultural policy since its establishment. This has involved a shift away from price support to direct income support and rural development. However, running parallel with these changes, an analysis of price changes in the main agricultural sectors covering dairy, beef, pig meat, cereals, sugar, and fruit and vegetables shows a significant downward trend. In response, on top of the first €500 million support package presented in September 2015 and other measures, the Commission recently announced a new package of measures worth €500 million from EU funds to alleviate the crisis in the European agricultural sector, especially in the dairy sector. The latter includes incentives to reduce milk production, conditional adjustment aid and other technical adjustments, which also include advance direct payments and extensions to the period for public intervention and private storage for skimmed milk powder. A taskforce on agricultural markets has also been established and is expected to report later this year. According to the latest Commission short-term outlook for 2016-2017, dairy, meat, and cereal prices are set to remain low, due to ample supply, slow global growth, depreciation in competing currencies and ever-falling energy prices. It remains to be seen whether the package of measures will be effective. Any such assessment will help future policy considerations, including the most appropriate choice of policy instruments. Looking to the future, to overcome the cyclical and structural crisis, it will be essential to select and identify the most effective measures, or combination of measures, to promote the growth of the agricultural sector.

Access to credit and financial instruments in agriculture

13-09-2016

Agriculture is a strategic economic and societal sector for the European Union (EU): the agri-food sector adds an estimated €420 billion in value per year and provides more than 47 million jobs in the European agro-food sector (roughly equivalent to 7% of the workforce, making it a key employment sector). Additionally, it helps to manage more than 50% of EU territory and is the fourth-largest export sector in the EU economy. In the global context, the EU agri-food sector has huge potential to perform ...

Agriculture is a strategic economic and societal sector for the European Union (EU): the agri-food sector adds an estimated €420 billion in value per year and provides more than 47 million jobs in the European agro-food sector (roughly equivalent to 7% of the workforce, making it a key employment sector). Additionally, it helps to manage more than 50% of EU territory and is the fourth-largest export sector in the EU economy. In the global context, the EU agri-food sector has huge potential to perform even better in the future. According to the European Commission, EU agricultural policies should be designed to maximise their potential to boost growth, jobs and the overall development of European rural areas. For most EU small and medium-sized enterprises (SMEs), access to credit is a restraining factor. In particular, most EU farmers do not find it easy to get credit at the best rates. Banks regard potential loans to farmers and many other, especially smaller, rural businesses, as risky. Meeting the conditions to unlock sources of finance consequently becomes more difficult. Without further investment, however, it would be difficult to cope with future challenges, such as food security, climate change and competitiveness and the chances of economic growth in the agricultural sector would be slim. The European institutions intend to promote a series of economic and financial support measures, in particular financial instruments funded via the EU or national budgets, to allow farmers to invest, with the support of credit institutions, thereby promoting sustainable growth within the EU's agricultural sector.

Agriculture in the EU-Canada Comprehensive Economic and Trade Agreement (CETA)

26-07-2016

The Comprehensive Economic and Trade Agreement (CETA) is a preferential trade and investment agreement, negotiated between the European Union (EU) and Canada but not yet in force, which aims at increasing the bilateral flow of goods, services and investments. CETA includes several elements which are directly related to agriculture, notably tariff cuts, tariff rate quotas and Geographical Indications, while the sections on subsidies, rules of origin and sanitary and phytosanitary rules also have implications ...

The Comprehensive Economic and Trade Agreement (CETA) is a preferential trade and investment agreement, negotiated between the European Union (EU) and Canada but not yet in force, which aims at increasing the bilateral flow of goods, services and investments. CETA includes several elements which are directly related to agriculture, notably tariff cuts, tariff rate quotas and Geographical Indications, while the sections on subsidies, rules of origin and sanitary and phytosanitary rules also have implications for the sector.

Common Agricultural Policy – Pillar I

13-07-2016

The Common Agricultural Policy (CAP) concerns the pooling of European Union resources spent on agriculture and aimed at protecting the viable production of food, the sustainable management of natural resources and to support rural vitality. It consists of two pillars, the first includes direct payments (i.e. annual payments to farmers to help stabilise farm revenues in the face of volatile market prices and weather conditions) and market measures (to tackle specific market situations and to support ...

The Common Agricultural Policy (CAP) concerns the pooling of European Union resources spent on agriculture and aimed at protecting the viable production of food, the sustainable management of natural resources and to support rural vitality. It consists of two pillars, the first includes direct payments (i.e. annual payments to farmers to help stabilise farm revenues in the face of volatile market prices and weather conditions) and market measures (to tackle specific market situations and to support trade promotion). The second pillar concerns rural development policy. Nearly 38% of the EU budget is spent on the CAP; for the Multiannual Financial Framework 2014-2020 the CAP amounts to €408.31 billion, of which €308.72 billion is allocated to the first pillar.

Price volatility in agricultural markets: Risk management and other tools

07-07-2016

Farmers are often confronted with substantial changes in the prices they receive for the sale of their agricultural products, which causes financial uncertainty about their incomes. Commonly referred to as 'price volatility', this phenomenon is more evident in agriculture than in other economic sectors due to a variety of economic, natural and political factors. Data provided by the United Nations Food and Agriculture Organisation suggest that global price volatility has been on the increase since ...

Farmers are often confronted with substantial changes in the prices they receive for the sale of their agricultural products, which causes financial uncertainty about their incomes. Commonly referred to as 'price volatility', this phenomenon is more evident in agriculture than in other economic sectors due to a variety of economic, natural and political factors. Data provided by the United Nations Food and Agriculture Organisation suggest that global price volatility has been on the increase since 2005 and is likely to remain a major concern for farmers in the coming decades. The Common Agricultural Policy (CAP) for the 2014–2020 period is mainly aimed at compensating farmers for the negative effects of price volatility and at tackling income volatility, rather than directly addressing price volatility itself. Indeed, market interventions have been reduced and now play the limited role of safety net measures which are only activated when prices drop below certain levels. The main policy instrument involves direct payments which provide a stable form of income for farmers regardless of market conditions. Additionally, Member States have the possibility to support three risk management tools (insurance schemes, mutual funds and an Income Stabilisation Tool) through their rural development programmes. The European Parliament has been working actively on the issue of price volatility in agricultural markets, notably by organising a hearing and launching an own-initiative report on the subject. It will also play a crucial role in determining the next CAP framework. Looking to the future, direct payments, which reduce income volatility by providing a stable form of revenue for farmers, will probably still play a role in the CAP after 2020, but a political shift towards the further development of risk management tools, especially the Income Stabilisation Tool, could be at the core of the debate on the future of the European agricultural policy. Please click here for the full publication in PDF format

Measures to address the crisis in the dairy sector

23-05-2016

The milk crisis in the EU has persisted since 2015. In light of the situation facing the dairy sector and recognising that the outlook for milk prices is not encouraging, Parliament has requested the Commission and the Council to provide an update in plenary on measures to address the situation.

The milk crisis in the EU has persisted since 2015. In light of the situation facing the dairy sector and recognising that the outlook for milk prices is not encouraging, Parliament has requested the Commission and the Council to provide an update in plenary on measures to address the situation.

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