A basic allowance in addition to the payment entitlements

For some 60 years now, policy incentives and advice to Dutch farmers by farm owners and banks have been aimed at increasing scale. As a result, their companies have grown very strongly in size, number of animals and invested capital. Most farmers lagged behind in direct operating result. 

To this day, premiums and delivery conditions are based on size and numbers. More hectares means more payment entitlements. This puts the somewhat smaller farmer, who is just barely keeping his head above water, at a disadvantage. He receives a minimum supplement from the Common Agricultural Policy (CAP). The larger farmer easily gets double that, while he can produce cheaper anyway. This system is constantly under discussion. But how do you clean up all those ingrained government incentives to scale up?

Take the division of the cap pot thoroughly on the shovel. Reduce the payment entitlements in 10 years to a maximum allowance of €25.000 per company. Enter a conditional 'Basic Fee' at the same time as the start of the transition period. The conditions for the basic remuneration are a minimum size and a set of result obligations. The annual base fee is equal to the maximum allowance - €25.000 and is indexed annually. 

Farmers voluntarily participate in the conditions to receive the basic compensation. If they do not, they will receive the hectare allowance up to the maximum set.

What are the conditions?
As a farmer you work at least 10 hectares as a lower limit. This is necessary in order to have a certain degree of minimum company size in order to meet the conditions. Of those 10 hectares (most companies have more than 10 hectares in use), at least 5 hectares is permanent herb grassland.

Arable farmers choose a relevant crop that meets the same goals, namely capturing CO2 and promoting biodiversity. In addition, you plant and maintain at least 250 native trees and 1.000 native shrubs on your farm. This can be done, for example, through a forest, rows of trees, woodland or hedges. This also promotes biodiversity and the capture of CO2.  

You also ensure an excess water storage capacity of at least 2.500 m3. For example, by enlarging a ditch or constructing a pool. This temporary water storage can reduce the concentrations of substances in surface water and can possibly be used during dry periods. Finally, you do not use artificial fertilizers or chemical crop protection products on your company (with the exception of one location), which in turn benefits biodiversity, soil and surface water.

Stable foundation laid
This could be the set of conditions. This largely meets objectives in the field of biodiversity, water storage, emissions and runoff, CO2 storage and nitrogen fixation. The lower yield per hectare is met and a stable foundation is laid, which can also be used by smaller companies. Of course, the basic compensation can be extended with specific landscape packages such as botanical hay meadows, agroforestry, field margins or, for example, a postponed mowing date. 

Mind you, it remains voluntary. Those who do not participate are simply entitled to a hectare allowance up to the stipulated maximum. 

Opting for collective interest
Globally, about 30.000 farmers can participate with the current CAP funds. That is more than enough. Naturally, this system encounters resistance from farmers who want to continue with economies of scale and see the CAP as a welcome additional financing. I understand that, but I opt for the collective interest of offering more Dutch farmers a stable perspective. 

Social wishes change quickly and are often based on mood-building and gut feelings. The current CAP system distributes subsidies without relation to the farmer's income. It is under heavy attack and will continue to be adapted. What do you think, does the Basic Allowance offer together with the Northwestern European chain production what I wrote about earlier give us more perspective and stability as farmers?

This article is part of the content collaboration between Boerenbusiness en foodlog.

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