As part of the reform package presented by the European Commission, subsidies to large farms, which are currently receiving as much as over €100,000 per year under the EU Common Agricultural Policy (CAP), will be gradually reduced. The commission estimated just 5.6% of the EU’s farmers receive almost half of all the direct payments made under the CAP, which is the most expensive policy in the 27-nation bloc, accounting for more than 40% of the EU budget totaling €106 billion last year. The EU’s executive arm wants to re-allocate the money to rural development projects, especially in those Eastern European members whose small-sized farms can hardly compete with the big industrialized ones in Western Europe.

Under the proposals, the amount of land a farmer has to own before he qualifies for EU subsidies will be increased from the current level of 0.3 hectares (3000 square meters), a change designed to ensure that subsidies go to real farmers and the administrative cost should be no higher than the subsidy itself. “It has caused some problems in some member states to handle so many applications,” the EU Agriculture Commissioner Fischer Boel said, “If you have a goat in your backyard, you’re not a real farmer, so let’s get those pseudo-farmers out of the business and concentrate on real agriculture.”

Introduced 45 years ago, the EU’s CAP was at first aimed to ensure Europe’s food sufficiency and proper use of land. However, it has led to massive overproduction of certain commodities which drove down prices and left many farmers dependent on EU handouts. In the latest big reform of the CAP four years ago, the EU gradually decoupled the link between subsidy and production. Support for products is being progressively replaced by direct payments to farms, based principally on land scale. The commission said it wants to go forward with this reform.

However, the recent surging demand for crops, partly due to the growing use of biofuels, forced the commission to consider scraping the so-called set-aside rules, which require farmers to leave 10 % of their land fallow to avoid overproduction. The commission also suggested increasing milk quotas to allow a soft landing for the sector before the limits are scheduled to end in 2015. Following a six-month consultation on its proposals, the European Commission will come out with a legislative package, which it hopes will be adopted by EU agriculture ministers by the end of 2008 and could come into effect immediately. (