Farmers opposed to the CAP reform proposals announced yesterday by Commissioner Fischler must show how continuation of the present support system is justified, writes Alan Matthews
The Irish political and farm establishments have given Commissioner Franz Fischler's CAP proposals a predictably hostile reception.
On many farms, direct payments make up the entire income from farming of the household. The basis on which these payments are made is clearly of great importance to farm families.
The proposals for reform announced yesterday are cleverly designed to minimise the potential for losers at farm level and, indeed, many farmers will benefit.
However, the regime which Mr Fischler is proposing is not without its problems and in a number of respects does not go far enough.
In the wake of a series of food scares and revelations of unsavoury farm practices, Mr Fischler has realised that public support for the continued payment of over €40 billion in agricultural budget support is waning.
As the reform document warns: "Agricultural policy expenditure must be justified by the products and services which society at large expects farmers and rural areas to provide."
Making payments merely to compensate farmers for past reductions in support prices is no longer a justifiable rationale.
Mr Fischler sets out to provide that rationale in terms of food quality, the preservation of the environment, cultural heritage or enhancing social balance and equity.
Whether there is a need to subsidise farmers to provide these services is matter of legitimate public debate, but at least these are defensible objectives.
Those opposed to his proposals must show how continuation of the present support system contributes to these goals.
Much of the attention in Ireland before the reforms were announced focused on the possible adverse consequences for beef producers.
In fact, the majority of beef farmers will probably gain from the proposals, although in any complex reform there will inevitably be some losers.
Beef farmers will benefit in at least four ways.
First, because there will be less beef produced across the EU, there should be a lift to beef prices.
Second, they will pay less for their raw material of calves, whose prices are currently bid up by the premium payments attached to male animals.
Third, many cattle farmers find that they lose money in keeping animals simply to qualify for premium payments. It will no longer be necessary to dissipate some of the payment receipts in this way.
Fourth, there will be a huge simplification of the support system, which will reduce compliance costs.
For those farmers with total payments over €5,000, modulation will reduce the value of these payments by 20 per cent over six years.
As the average payment under the schemes affected by the Fischler proposals is around €7,000, over half of Irish beef farmers are unlikely to be affected by modulation.
It is also likely that this threshold will be raised in the negotiations which are to follow.
Those farmers who lose from modulation will have the opportunity to recoup some of these payments by participating in the "second pillar" schemes, whose funding will be increased.
Some have expressed doubt that Ireland will be able to draw down its current share of these resources in competition with other member- states.
This negative view is not supported by the experience with, for example, the current agri-environment scheme, where Ireland captures a greatly disproportionate share of EU budget resources allocated to this scheme.
One group of potential losers from the proposals are suckler cow producers, who will see a drop in the value of their only output, namely, the calf.
These farmers have among the lowest incomes in Irish farming, but it is ironic to see their situation being paraded to defend the continuation of payments to some of the biggest names in the beef business, including factory owners.
The appropriate way to address their problem is to use some of the recycled modulation monies to increase less-favoured area payments or some other targeted intervention.
Current CAP policies will not secure a sustainable future for Irish agriculture.
Direct payments, which now account for 55 per cent of income from farming, will account for more than 70 per cent in a few more years.
However, these payments are fixed and their real value is declining over time.
Aggregate farm income in 2001 was no higher than it was when the reform programme began in 1993, even in nominal terms, and there is no prospect that this can change under the present regime.
Farmers' traditional way of responding to a price-cost squeeze was to expand the scale of production.
This is made hugely expensive under present policies because of the operation of milk quotas and the way land values have been outrageously inflated by existing payment schemes.
The commission proposals are not without their flaws. They fail to address the need to remove dairy quotas, which is the main sector where Irish farmers have a comparative advantage.
By opting to continue existing payments to individual farmers, rather than introducing a uniform payment per hectare, the commissioner hopes to buy political peace.
This will, however, institutionalise different per hectare payments on neighbouring farms which will be very difficult to rationalise.
Most important, retaining the link to land ensures that the value of payments remains capitalised into land prices and benefits property owners rather than working farmers.
But at least the proposals recognise that the CAP is in need of reform while safeguarding farmers' current incomes in the process.
They deserve a more considered reaction than that offered initially by farmers.
Alan Matthews is Jean Monnet professor of European agricultural policy at Trinity College, Dublin.