As the intricacies of the workings of the new Common Agricultural Policy (CAP) become better understood, their consequences are becoming increasingly challenging.

For individuals farming their own land and owning their own entitlements, the consequences are broadly calculable. They are also calculable for more complex farming businesses but the consequences may not be fully understood.

The tillage sector is among the worst affected by these changes because farm size must be big to carry the ever-increasing costs of mechanisation.

Because of this, many tillage farms operate on rented land and generally with entitlements leased too. And with more leases now in place, many of these will still be operating when the support regime changes.

Further deductions

The new CAP seeks to move closer to equalising the value of all entitlements so further deductions will apply to current entitlements. The greater the entitlement value and the more non-owned land that is farmed, the bigger the loss will be in direct support.

This is on top of the sizeable deductions that have already taken place over the past two decades in an era of increasing production costs.

It seems possible that these changes will produce another generation of forgotten farmers: commercial farmers who were incentivised to expand in recent decades.

These farmers, who leased in land and entitlements to help make a viable business, are now being heavily penalised for doing what was asked of them.

Threat to commercial tillage operations

It is possible that some of these bigger commercial tillage operations will be destroyed by the erosion in entitlement values on land they have farmed for decades. There is now a real fear that many of these farm businesses will be broken up because the encashment value of an entitlement will be influenced by who claims it.

One of the big deductions (25%) comes off to fund the eco-scheme, but some farmers may not qualify. Either way, these options require both work and investment by the operator, so eco-scheme payments should stay with the actual farmer.

This might have happened for greening in the current CAP but it could not because tillage farmers were the only ones who had to do things to comply.

Eco-schemes

As well as convergence applying on the new Basic Income Support for Sustainability (BISS) payments, there will be deductions for the eco-schemes, Complementary Redistributive Income Support for Sustainability (CRISS) or front loading, and for the Young Farmers Scheme.

A separate deduction will then apply once the BISS is calculated to fund the national reserve. While CRISS will give farmers an additional payment for the first 30ha, this will only be paid once the paper value of all other leased-in entitlements is reduced.

Indeed, estimating the payment from leased-in entitlements will be extremely difficult for farmer and landowner.

This is important because many leases specify in the agreement that the entitlement value be returned to the landowner as part of the arrangement, but who will deem what is fair? Will this just be another job for consultants and Teagasc advisers?

Many older rental agreements have stood the test of time with the users doing their best to work within the system of the day to protect entitlement values for their owners. This has helped maintain relationships. Could this new system be about to challenge these relationships?

Lack of stability

The substantial changes in CAP policy direction between successive regimes is difficult to manage in commercial farming. The five-year CAP policy duration provides very little stability for the future direction of agricultural support.

This poses problems for financial institutions as well as farmers. Fundamental policy changes should be visible well in advance and introduced gradually over a decade or more (within the lifespan of a lease) to minimise commercial disruption.

It is important that Minister for Agriculture Charlie McConalogue does all he can to help accommodate this transition in order to avoid another tranche of forgotten farmers, young and old. After all, leased-in entitlements are mainly in transition from the farmer back to the lessor (tax free) using officially backed policies.

Policy should now provide adequate flexibility to at least allow current leases to expire before imposing new administrative regimes.