European farmers are to be reimbursed €686 million following a decision by the European Commission to return money that was deducted from their direct payments during the 2021 budget year.

Irish farmers are set to receive in excess of €21 million, the Commission has confirmed.

During 2021, €879.8 million was deducted from direct payments under the Common Agricultural Policy (CAP) to finance the agricultural crisis reserve.

The money was also deducted to ensure that the overall ceiling of the European agricultural guarantee fund (EAGF) was not overrun, the Commission said.

However, the crisis reserve of €487.6 million was not used in 2021 and, together with some “additional appropriations” available for reimbursement, a “large share of the amounts deducted from direct payments this year will be reimbursed” according to the Commission.

What is the EAGF?
The EAGF helps Europe’s farmers to provide a secure supply of safe, healthy and affordable food. Through this, EU countries must offer:
1. A basic payment scheme for farmers;
2. Green direct payments (for sustainable farming methods);
3. A payment for young farmers.

These reimbursements commence from today (December 1, 2021).

Top five countries and amounts that will be reeimbursed

Agricultural crisis reserve

The concept of the agricultural crisis reserve and its reimbursement mechanism was agreed in the 2013 CAP reform and was applied for the first time in the 2014 budget year.

Under the new CAP, changes will be made to the existing income support system, with measures being taken to ensure a fairer distribution of financial support for farmers and workers across the EU.

Until 2023, current income support measures will continue, in line with the provisions of the CAP transitional regulation.

Why do farmers need support?

The Commission points to a number of reasons:

  • Agriculture is more dependent on the weather and climate than other sectors;
  • There is an inevitable time gap between consumer demand and farmers being able to increase supply as growing more wheat or producing more milk takes time and investment;
  • EU farmers are under pressure from increasing global trade in food products and trade liberalisation. Developments in global markets increase competition, but also create new opportunities for the European agri-food sector;
  • Globalisation and fluctuations in supply and demand have made agricultural market prices more volatile in recent years, adding to farmers’ concerns.
Image source: European Commission

These business uncertainties in agriculture justify the important role the public sector plays in ensuring a safety net for farmers’ income, it said.

The Commission says that income support benefits nearly 6.3 million farms throughout the EU, often representing an important share of agricultural income.

On average, over the last 10 years, income support represented nearly half of farmers’ income.