This document discusses suggestions for simplifying the Common Agricultural Policy (CAP). It proposes separating the CAP's objectives of providing a safety net for small farmers from promoting public interests like greening. The safety net could be integrated with countries' social security and tax systems through means-testing and an "active farmer" test. This would free up most of the budget to link payments for greening and sustainability to existing market initiatives and sustainability programs run by the agriculture industry. Large professional farms that are integrated into supply chains could have their public interest payments coupled to sustainability programs certified by auditors. This could reduce administrative burdens while incentivizing sustainability. The document advocates exploring these options further through increased data exchange between farmers, businesses, auditors

1. Simplification
of the CAP

2. Some suggestions for simplification –
a research agenda
Krijn Poppe, research manager and senior economist
LEI Wageningen UR September 2015

3. My guess on administrative burden over time
Environmental policy is not popular
Risk of big penalty
Greening not seen as very useful

4. One flat rate for EU-28 is not a solution:
 Does not reduce (perceived) administrative burden
 No relation with public interests
 Could be unfair and economically distortive:
● Yield common wheat in ton per ha (2010-2012)
● Germany: 7.0 <> Bulgaria 3.5
● Land values in Euro per ha (2009)
● Dk 25.900; Spain 10.500; Lithuania 1.000
● Labour cost in euro / hour, non-ag. industry
● France € 34.60 < > Hungary € 7.30
● And many large farms are in eastern Europe
 “Decoupled” is a legal WTO term, does not guarantee
that there are no economic effects !

5. Average share of CAP payments in Farm Net Value Added
For farms with a payment, 2009-2011 (source: FADN)

6. Share of decoupled CAP payments in Farm NVA
0
10
20
30
40
50
60
70
80
90
100
110Percentage
grootste bedr. kleinste bedr.
per farm in 2009-2011

7. Farming is very concentrated: 12 mln. farms but:
3 mln. produce 75%, 5 mln > 90%.
0
20
40
60
80
100
120
0 20 40 60 80 100 120
percentagestandaardoutput
percentage farms
France
Germany
UK
Spain
Italy
Poland
Sweden
0
10
20
30
40
50
60
70
80
90
0 5 10 15 20 25
percentagestandaardoutput
percentage farms
France
Poland
Romania

8. Could simplification be realised by
separating safety net (income support) from
(other) public interests, like greening?
 Safety net mainly for small farmers who are
uncompetitive and public interests on the bulk of the
production (= large farmers)
Simplification can then be realised by:
 By linking the safety net to the social security and
income tax systems of the countries ?
 By linking the payments for cross compliance, greening
and other environmental and animal welfare actions of
farmers to market initiatives ?

9. Safety net would cost about 14 bln. (1/3rd pillar I)
(simulated on FADN, so a bit more for all farms)
-20000
-10000
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
0.0 20.0 40.0 60.0 80.0 100.0
Familyincome
percentage farms
gezinsinkomen
minimum inkomen
Family income
Mimimum income
(safety net)

10. Linking to the social security / tax system
 Administrative system is in place
● If not: does it not become time that farmers are in
the tax and social security system (to be a CAP
beneficiary) ?
 ‘Means-testing’ and testing on ‘Active farmer’ becomes
an option
------------------------------------------------------------
 The rest of the budget is available for greening or other
public policies on the 3 – 5 million ‘professional’ farms.
 A multiplier can be reached by linking these payments to
existing sustainability programs of the industry.
● Where part of the costs of greening / sustainability
are paid by the marketing of the products

11. Professional farms are (ICT-) integrated in supply chains
Precision Farming/Advice Segment Cons. supportService ++
• Prescriptive farming
• Predictive maintenance
• Eco-systems of apps
• Regionally pooled big data
analysis for science and
advise (and risk mgt.)
• Personalized
advise by apps
• Online shops
• Integrated supply chains
• Feedback consumer-producer
• Measure, pay
sustainability
• Better T&T
• Paperless chain
• Store
replenishment
• Category
management
Sustainability HealthFood SafetyFood Security
LoyaltySMEs Cost priceGRIN Cope with retail
Transport
Input industries
Farmer Food processor Retail / consumerSoftware
Provider
Logistic
solution
providers
Transport+
Collaboration and Data Exchange become reality!

12. Sustainability programs
Dutch examples 2012
Company Sustainability report Sustainability program
Unilever yes
Unilever Sustainable Living Plan
(USLP)
Heineken yes
‘supplier code’, Brewing a Better
Future
Friesland-Campina CSR report Route2020
VION Food Group CSR in Annual report
Strategic plan “Balancing the
Future”
Nutreco ? Sustainability vision 2020
Wessanen ?
Supplier Quality Approval (SQA)
policy
Van Drie Group yes
Cosun yes

13. Coupling the CAP with sustainability
programs: can it be done?
 Develop criteria under which condition a sustainability
program qualifies (e.g greening criteria, cross compliance
aspects, auditing procedures by certification bodies)
 If a sustainability program qualifies, participating farmers
get a voucher that they can cash with a paying agency
 Potential effects:
● Incentive for food chain to work on sustainability in
stead of shifting environmental costs to society
● Reduction in administrative burden for farmers due
to integration of public and private demands
● Less administrative burden in governments due to
shift from public administration to commercial audits
with public audits at a higher level (the programs)

14. Take home messages
 Simplification is an issue – that is not solved by changing
some rules on catch crops or Ecological Focus Area
 One flat rate for EU-28 is not a solution for this problem
 It could make sense to separate the policy objectives to
reduce the administrative burden:
● Safety net >> integrate with social security / tax
● Sustainability (greening, cross compliance) >>
integrate with sustainability programs
 ICT platforms to exchange data between farmers, agri-
business, audit companies and paying agencies needed
 This is not done overnight – more exploration of these
options is needed

15. Thanks for your
attention
krijn.poppe@wur.nl
www.lei.wur.nl