Three main priorities are defined for the future CAP: viable/competitive food production, sustainable management of natural resources and climate action, and balanced territorial development. These underpin the specific proposals for Direct Payments, Market Management and Rural Development, all of which include some provisions for organic farming. Key elements of the proposals include:

A. Direct Payments (Pillar 1)

Basic Payment Scheme (up to 70% of available national DP funding ‘envelope’)

• This new scheme will replace the mix of Single Payment Schemes operating in different member states. This will involve a phased ending of payments based on historical receipts, to be replaced by flat rate area payments defined at national or regional level by 2019, with at least 40% of the change to be achieved in the first year.
• The BP Scheme will still be subject to cross-compliance as at present, with some simplications to the requirements (see below).
• The level of the Basic Payment in different member states will be adjusted by means of a complex formula so that those currently receiving less than 90% of the EU average will receive more, with the gap being closed by one third over a period of years. The Commission is aiming to achieve equal distribution of resources after 2020.
• The BPS will be capped for larger holdings (see below).

Greening top-up (30% of national DP funding ‘envelope’)

• In addition to the Basic Payment, each holding will receive a payment per hectare for respecting certain agricultural practices beneficial for the climate and the environment. The implementation of this scheme by Member States is compulsory, but it will not be subject to capping limits for larger holdings that apply to the basic payment.
• The 3 measures foreseen are:
  1. maintaining permanent pasture, although up to 5% of permanent pasture reference area may be converted to other uses;
  2. crop diversification (a farmer must cultivate at least 3 crops on his arable lnone accounting for more than 70% of the land, and the third at least 5% of the arable area);
  3. maintaining an “ecological focus area” of at least 7% of farmland (excluding permanent grassland) – i.e. field margins, hedges, trees, fallow land, landscape features, biotopes, buffer strips, afforested area.
• Organic producers will automatically qualify for the Greening Top-up with no additional requirements as they are shown to provide a clear ecological benefit.

Areas with natural constraints (up to 5% of national DP envelope)

• Member States (or regions) may (optionally) grant an additional payment for areas with natural constraints (as defined under Rural Development rules using new objective criteria for LFAs). This does not affect the LFA options available under Rural Development.

Young farmers (<40, up to 2% of national DP envelope):

• The Basic Payment to new entrant Young Farmers (those under 40) should be topped up by an additional 25% for the first 5 years, limited to a maximum of the average farm size in the member state.

Small farmers (up to 10% of national DP envelope):

• Any farmer claiming support in 2014 may decide by October 15, 2014 to participate in the Small Farmers Scheme and thereby receive an annual payment fixed by the Member State of between 500 € and 1 000 €, regardless of the farm’s size. (The figure will either be linked to the average payment per beneficiary, or the national average payment per hectare for 3 ha.) Participants will face less stringent cross-compliance requirements, and be exempt from greening. (Approximately one third of farms applying for CAP funding have an area of 3 ha or less – but this accounts for just 3% of the overall agricultural area in the EU-27.)

“Coupled” option (up to 5% of national DP envelope, or in some cases more):

• In order to address the potentially adverse effects of redistributing direct payments on a national basis and to take account of existing conditions, Member States will have the option of providing limited amounts of “coupled” payments, i.e. a payment linked to a specific product, e.g. beef.

Transferring funds between Pillars:

• Member States will have the possibility of transferring up to 10% of their national envelope for Direct Payments (1st Pillar) to their Rural Development envelope, and the Member States that get less than 90% of the EU average for direct payments now may transfer up to 5% of their Rural Development funds to their 1st Pillar national envelope.

Cross compliance:

• All Direct Payments will continue to be linked to baseline environmental, animal welfare and plant & animal health standards, but with a reduction in the number of Statutory Management Requirements (SMRs) from 18 to 13 and in the rules on Good Agricultural & Environmental Condition (GAEC) from 15 to 8. Water Framework and Sustainable Use of Pesticides Directives will eventually also be incorporated into cross-compliance rules.

Capping:

• The amount of support that any individual farm can receive from the Basic Payment Scheme will be limited to €300 000 per year, and the payment will be reduced by 70% for the part from €250 000-300 000; by 40% for the part from €200 000-250 000, and by 20% for the part from €150 000-200 000. However, in order to take employment into account, the holding can deduct the costs of salaries in the previous year (including taxes & social security contributions) before these reductions are applied. NB: The funds “saved” under this mechanism stay in the Member State concerned and are transferred to the Rural Development envelope, for use as innovation & investment by farmers, and European Innovation Partnership operational groups.
• The Greening top-up is not subject to capping.

Active farmers:

• The definition of active farmers will be tightened to exclude payments to applicants who have no real or tangible agricultural activity. The proposed definition states that payments would not be granted to applicants whose CAP direct payments are less than 5% of total receipts from all non-agricultural activities, or if their agricultural areas are mainly areas naturally kept in a state suitable for grazing or cultivation and they do not carry out the minimum activity required, as defined by Member States. There is a derogation for farmers who receive less than €5000 in direct payments the previous year.

Eligible hectares:

• 2014 will be a new reference year for land area entitlements, but there will be a link to beneficiaries of the direct payments system in 2011 in order to avoid speculation.

B. Market management mechanisms

• Safeguard clause and crisis reserve to be established to deal with particular problems in specific sectors when needed
• Ending of quotas – sugar quota to be abolished by September 2015, following abolition of milk quotas and wine planting rights.
• Private storage aids will be maintained and extended to include white sugar
• School Fruit and School Milk Schemes will be extended
• Compulsory written contracts for milk producers
• Further development of quality marketing standards (PGO etc., including organic)
• Support for promotion of specific products, including organic
• Strengthened bargaining power in the food chain – recognition of producer organisations and inter-branch organisations expanded to cover all sectors, with some rural development funding support. Organic remains a priority area for fruit and vegetable organisations.
• Aids for incorporating milk powder into animal feed and for silkworms will be abolished

C. Rural development (Pillar 2)

Rural development measures will continue to be part-funded (co-financed) Member States and by the EU through the European Agricultural Fund for Rural Development Fund (EAFRD), which will form part of a new Common Strategic Framework also applicable other European Funds for economic development. The distribution of RDP funding between MS will be modified to take account of ‘more objective criteria’ still to be fixed. The EU co-financing rates will be 85% in less developed regions, the outermost regions and the smaller Aegean islands, and 50% in other regions for most payments, but can be higher for innovation & knowledge transfer, cooperation, establishing producer groups, young farmer installation grants and LEADER projects.

Instead of 3 Axes linked to economic, environmental and social issues, with minimum spending requirements for each axis (plus the 4th LEADER Axis), the new programming period will have the 6 priorities listed below.

1. Fostering knowledge transfer and innovation;
2. Enhancing competitiveness;
3. Promoting food chain organisation & risk management;
4. Restoring, preserving & enhancing ecosystems;
5. Promoting resource efficiency & transition to a low carbon economy;
6. Promoting social inclusion, poverty reduction and economic development in rural areas.

Member States (MS) will need to meet targets for all six priority areas, with 5% of funds held back in a ‘Performance Reserve’ to ensure this. At least 25% of Member States’ Rural Development funding envelope must be allocated to issues related to land management and climate change measures, including organic farming. Sub-programmes with higher support rates may be developed to address the needs of young farmers, small farmers, mountain areas and short supply chains. Within this framework, MS RDPs will be based on a menu of measures including:Innovation:

• This key theme (and more specifically the planned European Innovation Partnership for Agricultural Productivity and Sustainability) will be served by different Rural Development measures such as “knowledge transfer” and “cooperation”; It is aimed at promoting resource efficiency, productivity, the low emission, climate-friendly and resilient development of agriculture, forestry and rural areas. This should be achieved through greater cooperation between agriculture and research in order to accelerate technological transfer to agricultural practice.

Knowledge transfer:

• Strengthened measures for Farm Advisory Services (also linked to Climate change mitigation and adaptation, to environmental challenges and to economic development and training).

Restructuring/Investment/Modernisation:

• Continuation of current grant schemes.

Young farmers:

• A combination of measures can include business start-up grants (up to €70,000), training and advisory services.

Small farmers:

• Business start-up aid up to €15,000 per small farm.

Risk management toolkit:

• Insurance and mutual funds for crop, weather and animal disease (currently available under Article 68 in the 1st Pillar) will be extended to include income stabilisation option, which would allow a pay out up to 70% of losses from a mutual fund if income drops by 30%; For every €1.00 a farmer puts in, the Rural Development funds would provide an additional €0.65.

Producer organisations/Associations of producer organisations:

• Support for setting-up organisations on the basis of a business plan and limited to groups defined as SMEs – support extended to all sectors, not only fruit and vegetables.

Agri-environmental and climate payments:

• Greater flexibility in contracts, joint contracts, linked to adequate training/information.

Organic farming:

• New separate measure for greater visibility, with similar funding conditions to agri-environment payments.

Areas facing natural and other specific constraints:

• New definitions of natural constraint areas (to replace LFAs) based on 8 bio-physical criteria; Member States retain flexibility to define up to 10% of their agricultural area for specific constraints to preserve or improve the environment.

Mountain areas:

• For mountain areas and farmland north of 62º N, aid amounts can be up to 300 €/ha (increased from 250 €/ha);

Cooperation:

• Expanded possibilities to support technological, environmental and commercial cooperation (e.g. pilot projects, joint environmental schemes, short supply chains, development of local markets);

Basic services and village renewal:

• Investments in broadband infrastructure and renewable energy can go beyond small-scale;

LEADER:

• Leader start-up kit to aid setting-up Leader groups and strategies; promoting flexibility for combining with other funds in local areas, i.e. rural-urban co-operation; Leader will be used as the common approach for community–led local development by all CSF Funds;