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European Commission's farm aid package - the key questions

The European Commission’s aid package, announced on Monday on a day of protest in Brussels, fell short of delivering the relief the EU’s farmers demanded. Alistair Driver looks at whether there could be more
6,000 farmers from across Europe marched in Brussels on Monday
6,000 farmers from across Europe marched in Brussels on Monday

Further meetings are taking place in Brussels today to flesh out some of the detail of the aid package announced by the European Commission on Monday.


After an extraordinary meeting with EU Agriculture Ministers on Monday afternoon, the European Commission came up with a package of measures that went only part of the way to addressing the concerns of EU’s farmers.


Earlier that day, 6,000 farmers from across Europe had descended on Brussels to make their voices heard - and demand action to resolve their plight.


Here we look at some of questions that still need to be answered.

Dairy aid

The headline announcement was the provision of a €500m (£362m) ‘targeted aid’ package for dairy producers.


It will be drawn from the €810m (£587m) superlevy draw from member states which exceeded the final round of dairy quotas.


It is understood around €100m will be used for Private Storage Aid, the remainder, €400m to be divided among dairy farmers.


How will the money be divided across the EU?


The Commission is yet to finalise how the money will be distributed. There are three potential options for distribution:

  • Production in the 2014/15 quota year
  • Export markets lost as a result of the Russian trade ban
  • Milk price decrease from August 2014 to August 2015, based on percentage loss in average milk price or similar.

The Commission has said there would be ‘particular regard to member states and farmers most affected by market developments’, suggesting the second or third option, which is unlikely to favour the UK.


Farming Minister George Eustice told the EFRA Committee the UK figure could be ‘in the region of €40m (£29m), based on the distribution of a similar, but smaller crisis fund in 2009.


He stressed it was ‘too early to tell’ the precise amount but this should become clearer within the next week.


How will the money be distributed to UK farmers?


It will be up to member states to decide how to distribute the money to farmers.


Mr Eustice said there would a trade-off between the simplicity of a hardship fund paid to each dairy farmer and targeting the money at those who most needed it.


“If you wanted it brutally simple you would pay a hardship fund to each dairy, as we did in 2009, but we have got a wide variance in the fortunes of dairy farmers,” he said.


It is already beginning to look like a thorny political issue. Defra Secretary Liz Truss was questioned by MPs from Wales and Northern Ireland about how much their struggling dairy farmers could expect from the Brussels fund. Would Northern Ireland be made a ‘special case’, she was asked.


She replied: “The details of the €500 million scheme have yet to be decided, but I am clear that it has to go to immediate help for farmers.


“We know that many farmers are struggling to pay bills and have serious cash-flow issues, so as well as long-term measures such as getting a futures market for dairy to give more confidence and promoting exports, we need to help with cash flow, which I am clear is a real issue in Northern Ireland.”

Early BPS payments

The Commission has changed the rules slightly to allow member states to make partial BPS payments worth 70 per cent (rather than 50 per cent), from October 16, ahead of the December payment window.


It has proposed something similar on agri-environment payments, increasing the proportion of early payments permitted, again from October 16, from 75 per to 85 per cent.


Will this help the UK?


But it will mean little to the UK unless further concessions are made. Mrs Truss, following NFU lobbying, asked the Commission on Monday to relax inspection rules so the UK would not risk huge EU fines by going for early payments.


Currently English BPS and agri-environment scheme payments are stuck in a cross-checking process required under EU rules. Every single claim has to be checked before a single payment is made, Mrs Truss said.


Given the complexity of the new CAP, she is calling on the Commission to ‘waive the disallowance risk’ currently standing in the way of bypassing some of these checks in order to bring BPS and agri-environment payments forward.


“What I want to be doing is bringing people forward to the beginning of that (December 1) BPS payment window.


“But we need a specific commitment from the Commission that Basic Payment Scheme checks can be relaxed in order to do that,” she said.


The Commission has hinted it will look at further ‘flexibility’ on BPS controls and this will be one of the big points of interest in the further discussions in Brussels, however.


Defra and the RPA have committed to the majority of farmers in England by the end of December and the vast majority by the end of January.


Asked in the Commons on Thursday, whether the Rural Payments Agency was capable of making payments early or on time, Mrs Truss said Defra was holding ‘regular discussions’ with RPA chief executive Mark Grimshaw ‘to ensure that we keep its commitment’.


The Commission had already extended the private storage aid and public intervention periods for butter and skimmed milk powder until next year, ahead of Monday’s protest and Ministerial meeting.


It further agreed to work on an enhanced scheme for SMP ‘focusing on higher aid levels as well as on ways to ensure that the product is stored for the appropriate time’.


It also announced proposed new private storage scheme for pigmeat.


Will the Commission’s actions make a meaningful difference?


But the UK farming unions and Dairy UK, which represents processors wanted it go further and raise the milk intervention price, which at, between 16 and 17ppl is too low to be a meaningful support mechanism.


“It is disappointing that the Commission won’t review the intervention price in the dairy sector because we feel it has a role to play.


“An increase in the price could help put a price floor in the market and boost confidence in the dairy sector. We will continue to press the Commission on this point,” he said.


Dairy UK chief executive Judith Bryans also expressed her disappointment. “Although we agree with and fully support a market-oriented industry, exceptional times call for exceptional measures.


“Increasing the intervention price would help stabilise the market and give the dairy industry a much-needed immediate relief.”


UK Ministers did not support the call to raise the intervention price.

Supply chain

Among the longer-term measures, the Commission is looking at addressing unfair trading in the EU supply chain, including learning from the UK’s introduction of a grocery code and adjudicator and similar steps in Spain.


Could this benefit the UK?


Mrs Truss said is pushing for the UK model to be adopted on an EU-wide basis.


“The Commission has recognised the leading role the UK has played in bringing greater fairness and transparency to our supply chain through the Groceries Code Adjudicator, and they are now looking at how a similar model could benefit the whole of Europe.”


She pointed many UK food companies operate across Europe. “I want better transparency across the supply chain across the EU,” she said.


Mr Raymond said; We believe there needs to be a fundamental culture change across the whole supply chain and we very much welcome the Commission’s steps to address this so far.


“However, we need to go much further if we are to offer British farmers the same protection they receive at home when they trade abroad.”

Financial measures

The Commission also outlined its intention to explore financial options to help bring stability to an industry struggling with extremes of a volatility.


For example, it will work with the European Investment Bank on financial instruments to help stabilise farm incomes.


A High Level Group will be established to look at issues like credit for farmers and the establishment of a futures market for dairy and other sectors.


Mrs Truss said: “The Commission has recognised that there are longer-term measures that should be taken to improve the sustainability of the dairy supply chain, and I welcome the announcement of a High Level group to look a futures market and other tools to spread the risk more evenly.”

Next steps

After today’s meeting, another is scheduled on Monday and the issues agreed this week will continue to be discussed in the week’s and months to come.


With unfortunate timing, Agriculture Commissioner Phil Hogan was admitted to hospital over the weekend for a routine and is expected to be out action for a few weeks.


His absence dampened the prospect of immediate radical action from the Commission. It is hoped his return will see more tangible beneficial measures taken.


The UK farming unions will continue to press to ensure the Commission’s response covers all sectors, not just dairy, struggling from the current market downturn.


NFU Scotland president Allan Bowie said: “Not only does the dairy-centric package fail to recognise that the current crisis is hitting all agricultural sectors but it is uncertain if the deal itself will even benefit Scottish dairy farmers – a lose, lose situation.”

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