EU agricultural subsidies CAP
As EU farmland subsidies form part of the company results and thus may indirectly (into a lesser degree) influence the (development) of the land value; a short explanation is set out below:
The Common Agricultural Policy (CAP) forms the agricultural policy of the European Union and has been existing since the start of European Economic Community (EEC) in 1958.
It can generally be stated that agricultural subsidies for Central Europe will increase during the next 7 years at the expense of West-European subsidies which will therefore decrease.
The CAP sets out how the production, sales and processing of food crops are to be regulated within the EU. The principles for the policy are set by the European Committee. The Ministers of Agriculture and Fishery of all EU member states take the final decision in cooperation with the European Parliament.
The principles of the Communal Agricultural Policy (CAP) are:
- A communal market. This is an area without internal boundaries and with a joint external boundary in which factors of production can (goods, persons, services and capital) can move freely.
- Financial solidarity. All expenses made for the CAP have to be financed through the EU budget.
- Community preference. Agricultural products made in the EU have preference over products imported into the EU. This should protect crops cultivated within Europe against price fluctuations on the world market and low cost crops from third world countries.
The objective of the CAP as presented in Article 33(1) of the European Convention:
- Increasing the productivity of agriculture. This is to be achieved with technical development (equipment/ technology) and with an optimal use of the factors for production (in particular labour).
- Providing the agricultural community with a reasonable life standard, in particular by increasing the income of people involved in agricultural activities.
- Balanced developing of rural areas throughout the EU.
- Stabilising the market.
- Guaranteeing the availability of products for the consumer.
- Guaranteeing reasonable product prices of food supply and availability.
So-called market regulations have to be applied in order to achieve the objectives of the CAP.
These regulations concern market interventions, quotas, support regulations, marketing, production standards and the import/export with third world countries.
Financing of the CAP
The CAP is financed through the European Agricultural Guidance and Guarantee Fund (EAGGF) which was founded in 1962.
Since 1964 it has been divided into two sections:
- Section Guarantee (pillar 1). This section finances the expenses for the market regulations set out above. The direct payments to the farmer/lessee (not to the landowner) are also paid from this fund.
- Section Guidance (pillar 2). This is a structural fund with the objective of stimulating regional development and decreasing the economic differences between regions (National Program for Rural Development NPRD). It contributes to the agricultural reforms and the development of the countryside.
Recent subsidies per ha in Euro’s for Romania
The budget is determined annually by the EU Council and the European Parliament. A so-called Multi Year Financial Framework (MYFF) is used. This is a seven-year regulation of the annual budget. Within this financial framework the expenses for all points of attention and the maximum for payment and recorded credit is determined. The current financial framework runs from 2007 to 2013.
Financial framework 2014-2020
On 26 June 2013 a resolution was adopted for the coming financial framework 2014-2020. The total EU budget for this period is € 960 billion. 40% (€ 380 billion) of this is assigned to the CAP.
- Pillar 1: € 280 billion
- Pillar 2: € 80 billion
- Other (primarily export): € 20 billion.
Other fundamental changes
- The abolishment of quotas and other market regulations
- Larger emphasis on environmental aspects. Farmers can get a refund up to 30% of their expenses provided they practice responsible farming. For instance using production diversification and crop rotation
The operations models of CFC are based on a conservative expectation of 200 euro per hectare. In practice this will probably result in an average of 230 Euros per hectare.
During a meeting with farmers on 14.01.2014, Minister of Agriculture Daniel Constantin presented the estimated amounts for area payments during 2015-2020 (split by components: SAPS – Single Area Payment Scheme, Greening, Young farmers, TNA – Transitional National Aid)
SAPS: Single area payment scheme
BN: National budget
Fega: European Agricultural Guarantee Fund
Degressivity: Practice to promote sales, whereby the price decreased in proportion to increasing the quantity purchased
Brown: Mountain – less favoured area
Pink: Significantly less favoured area
Yellow: Area less favoured due to specific natural conditions
White: Area not considered less favoured
2016 Calendar of calls for agri/rural development projects (EU funds)
Romanian Minister of Agriculture Achim Irimescu announced the timetable with the approximateperiods when potential beneficiaries of EU funds could start submitting projects. Responding to the growing anxiousness of future beneficiaries, the Minister mentioned that the Romanian authorities would rapidly make the necessary changes in the applicant’s guides for each of the measures to be launched (resulted also from the recent vast public consultations) and would launch the first measures already in February.
– Sub-measure 1.1 Support for vocational training and skills acquisition actions
– Sub-measure 2.1 “Advisory services” (for implementing business plans)
– Sub-measure 4.1 “Investment in agricultural holdings”
– Sub-measure 4.1a “Investment in fruit-growing holdings”
– Sub-measure 4.2 “Investments for processing/marketing of agricultural products ” + “De minimis scheme”
– Sub-measure 4.2a “Investments in processing/marketing of products in fruit-growing sector”
– Sub-measure 4.3 “Investments in infrastructure related to development, modernization of and adaptation of agriculture and forestry”
– Sub-measure 6.1 “Business start-up aid for young farmers”
– Sub-measure 7.2 “Investments in the creation and upgrade of small-scale infrastructure”
– Sub-measure 6.5 “small farmers scheme” (payments for small farmers who permanently transfer their holding to another farmer)
A general description of these measures can be found in the National Rural Development Programme 2014-2020 on http://www.madr.ro/en/ (English version). The applicant guides for the launched measures will be published on: www.madr.ro and www.afir.info (in Romanian only).