Once-off direct payment for dairy farmers

A €500m aid package to help Irish and other EU farmers who have been hit by falling market prices was announced this week in Brussels amid tear gas and water cannon.

The package was drawn up by EU Commissioner for Agriculture Phil Hogan and presented to a special meeting of EU farm ministers, called to discuss the market crisis.

After five hours of debate, the ministers accepted the outline proposals which, in addition to funding, include reforms aimed at helping farmers. There are three main strands:

A new but once-off direct payment to help farmers’ cashflows and incomes.

Stabilising EU markets.

Addressing a number of supply chain issues.

First indications are that Commissioner Hogan and his team want the €500m to be divided up as approximately €400m utilised for the direct payment and the remaining €100m mainly used to stabilise markets. That would be done by existing mechanisms such as Aids to Private Storage.

However, many details of the package have yet to be worked out and agreed. They will be next discussed by ministers at an informal farm council scheduled for next Tuesday, which Phil Hogan will attend.

In advance of Monday’s meeting, a queue of EU farm ministers had met with Commissioner Hogan and his team and lobbied for various changes. Not all were met – for example, no increase in intervention price has been proposed. The Commission argues that a higher intervention price would lead to a new “skim mountain”, resulting in pressure for a return of milk quotas.

Also on Monday, Commissioner Hogan agreed that member states could give a 70% advance payment of 2015 Basic Payment Scheme and greening payments from 16 October and an 85% advance payment on Rural Development Programme schemes.

New arrangements

New arrangements will have to be drawn up for the special direct payment to dairy farmers. Each member state will be allocated its share of the €400m funding in a so-called national envelope to divide up according to its own circumstances. Also:

It is not yet apparent how the share of each member state will be calculated. It could be based on factors such as total milk production in a state or loss of sales from the Russian embargo.

The Commission has proposed that most of the funding go to dairy farmers. Put bluntly, a far bigger funding page would be needed if other farmers were to receive payment. Nonetheless, some member states might propose to channel some of their funding envelope to other farmers, eg pigs or vegetables.

Given the pressure on farm incomes, the Commission wants the payment given out quickly. It is suggested that the payment would have to be made by 16 October, the end of the EU financial year.

Markets €100m

The second strand of the Commission package is stabilising EU markets and opening new ones. This will include:

A private storage scheme for dairy products.

Private storage scheme for pigmeat.

Additional funding for the promotion of dairy products and pigmeat.

The new promotion policy will make it easier to access funding, Commissioner Hogan has promised.

First estimates are that the €100m funding will break down as €70 for private storage schemes, €20m for promotion of dairy products and €10m for pigmeat promotion.

Reforms

The third part of the package will address the functioning of the supply chain. It will include a new high-level EU group to focus on specific issues including credit for farmers, futures markets for agricultural products and the vulnerable position of farmers in the supply chain.

The report on the milk package originally foreseen for 2018 will be brought forward to 2016.