Three things that are set to change your farm's CAP entitlements

What will my entitlements be worth in the next CAP?

That’s a question that no one yet has the answer to, but there are a number of factors that will affect them.

Three of the biggest factors are convergence, the proportion of direct payments to be allocated to eco schemes and whether Ireland will introduce a front-loaded scheme to support smaller farmers.

In the short term, Irish farmers don’t yet know whether convergence of entitlement values will remain paused in 2022 or whether convergence will resume.

Speaking to Macra na Feirme members on a CAP webinar on Thursday, Ted Massey from the Department of Agriculture outlined some of the issues at play over the coming months.

The outcome of the ongoing trilogue negotiations between the European Commission, European Parliament and European Council will dictate how each Irish farmer’s entitlements change between now and the end of the next CAP.

Today, all entitlements in Ireland have a value of at least 60% of the national average.

The Commission proposed that all entitlements should be at least 75% of the national average by the end of the proposed CAP period, 2026.

The European Council was also in favour of reaching at least 75% of the national average by 2026.

The European Parliament wanted to go further and faster, proposing 100% convergence, so that all farmers would have the same flat rate entitlement value by the end of 2026. To get there, it wanted 75% convergence by the end of 2024.

“You can clearly see how that will impact on entitlements for those who have entitlements above the national average. They will contribute to convergence. For those who are below, they will gain,” Ted Masey told Macra members on Thursday night.

“Roughly speaking, the numbers of farmers that fall into each category are very similar, but convergence is a very divisive issue,” said Massey.

Irish farmers who have been contributing to convergence since 2015 feel they have contributed too much, he pointed out, “whereas those that are gaining from convergence often feel they're not gaining enough, or they're not gaining fast enough”.

In the next CAP, the Basic Payment Scheme and Greening are to be combined into the Basic Income Support for Sustainability (BISS).

From this, each country must ring fence money for an eco scheme. Ireland must introduce an eco scheme, but it will be voluntary for farmers to choose to participate.

The Council wants 20% of the Pillar 1 (direct payments) budget to be devoted to the eco scheme. The Parliament wants at least 30%.

If farmers choose not to participate in the eco scheme, they won't be maximising the value of their direct payments

“There’s a 50% difference between those two figures and a key part of the trilogue discussions will be some compromise on one or both sides to bridge that gap.

“We don't know where the final figure will be, but it’s clear that a significant proportion of the Pillar 1 budget will be [allocated to the eco scheme],” said Massey.

“And if farmers choose not to participate in the eco scheme, they won't be maximising the value of their direct payments,” he warned.

Explaining more about the eco scheme, Massey said: “The Commission has been very clear on this.

"The eco scheme is to be paid based on a flat rate per acre scheme per hectare. The payment for the eco scheme will not be linked to the farmers’ entitlement values.”

Eco scheme winners and losers

He quoted a hypothetical example of how two different farmers would be affected if the decision is made to allocate 20% of the Pillar 1 payment to the eco scheme in the next CAP.

Farmer A has a €400/ha entitlement in Pillar 1.

If 20% of his Pillar 1 payment is allocated to the eco scheme, he will contribute €80/ha to the eco scheme fund.

Farmer B, who has a €150/ha entitlement, will contribute 20% or €30/ha to the eco scheme fund.

However, the eco scheme fund will only pay out at a fixed rate, irrespective of the farmers’ entitlement values.

If this fixed rate was to be set at €55/ha, for example, Farmer A has contributed more than he will gain back by taking part in the eco scheme. Farmer B will gain more by taking part than he contributed.

“The person whose entitlements are above the national average [entitlement value] will be contributing more, simply because it's based on a percentage,” explained Massey.

“And those that are below the national average will have the opportunity maybe to actually increase their payment through participation in the eco scheme, as well as the possibility of convergence, also increasing our payment per unit area,” he said.

Proposed for the next CAP, the Complimentary Redistributive Income Support for Sustainability (CRISS) is where payments are transferred from larger to smaller or medium-sized farmers.

The aim is to improve sustainability of those smaller farms. The money would be front-loaded on a certain acreage.

“The idea is that you would take money from capping [farmers’ direct payments] primarily, but possibly also through a cut in everybody's payment, and then you'd reallocate that back, based on a certain area of land, up to possibly the national average farm size,” explained Massey.

Farmers with above-average farm sizes would contribute more than they would receive.

“It's very important to look at how that would impact on overall farm sustainability,” the Department official warned.

“There are some who would say there's a risk it would create more unviable firms, while not necessarily creating any new viable firms."

The CRISS option was open to Ireland in the current CAP, but Ireland chose not to use it.

Two of the three decision makers - the Commission and the Parliament - have said CRISS should be mandatory in the next CAP, but the Council said that should be optional.

“So we'll have to see what that one ends up, but, again, depending on the outcome of the trilogue process and whether it's mandatory or optional and how much money is allocated to it, that will again impact on the value of entitlements,” he said, adding that this would also affect the money available for farmers’ direct payment.

Now known as the Basic Payment Scheme (BPS), in the next CAP this will be known as the Basic Income Support for Sustainability (BISS).

Will there be a new reference year?

Convergence and the eco scheme allocation will have a direct impact on the payment entitlement unit values, Massey reiterated.

“We can't yet say what people's entitlements will be worth, but what we can say is entitlement values are going to change and that's something that I think anybody thinking of leasing entitlements, or possibly even buying entitlements, should carefully consider,” he said.

“What I can say with certainty though is there are no provisions within the regulations for new reference years.

"So whatever entitlements people have at the end of the current CAP period, they will be brought forward into the new CAP programme, albeit possibly with a different value.”