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«Der Open-Access-Publikationsserver der ZBW – Leibniz-Informationszentrum Wirtschaft The Open Access Publication Server of the ZBW – Leibniz ...»

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Prior to 2007 areas stocked with permanent cultures (fruit trees, vineyards) did not count towards the eligible area (BMELV, 2006, 73). In 2008 additional entitlements will be issued for these areas. However, these entitlements can be activated on any type of area and any type of entitlements can then be activated on these areas. Furthermore, till 2007 on areas cropped with non-permanent fruits, vegetables and starch potatoes, only SFP which are marked as "OGS" can be activated.

Some types of land do not currently count towards the eligible area. Rather, they belong to three different cases. The first deals with rough grazing areas, which are not included in the eligible

area, if:

• The dominant species in the sward are dwarf shrubs (e.g. Atlantic heath), since these areas do not meet the literal definition of grassland or arable land given in Commission Regulation 795/2004;

• They are in silvo-pastoral systems and the cover of the tree layer exceeds designated threshold values and the composition of the underbrush does not fulfil certain floristic criteria;

• The productivity of the stand is considered to be too low to allow the sensible utilisation of the area from an agronomic and agro-economic point of view (cf. BAYSTMLF, 2004).

The second group compromises areas whose primary use is not agriculture. These types include dykes, military training grounds and some nature conservancy areas. For instance, only twothirds of the grazed areas within Bavarian military training grounds are eligible for SFP. In these cases, the status of a specified plot depends on the details of the tenure or management contract and the interpretation manuals of the respective state the plot is located in (cf. BayStMLF, 2004).

The third group includes areas which are managed in way that strongly resemble agricultural practices, but which are managed by natural or legal entities that do not fulfil all preconditions of being a farmer in the sense of the respective legislations (e.g. a nature conservancy organisation which only conducts landscape management on a provisional basis).

According to BAYSTMLF (2004), the most essential preconditions are that the farm must:

• Aim for sustainability and do this from a long-term perspective;

• Aim to make a profit.

Furthermore, the farmer must:

• Manage the farm independently but may use the assistance of third parties;

• Bear the economic risk of the undertaking;

• Be in de facto and de jure control of the production assets.

The minimum size of a parcel of eligible area required to activate an entitlement, as well as for all other area based payments, is 0.3 ha according to EC-regulations. However according to the statutory regulations the federal states have the right to define a minimum size below

0.3 ha. Some federal stated opted for this and have set the minimum size to 0.1 ha. There is no upper limit for an eligible parcel.

To provide insight into the tradability of entitlements and the expected market value of an entitlement, one requires information about the scarceness of entitlements. On an overall level their scarcity is reflected in the ratio of the number of entitlements and eligible land, as well as the share of eligible land and the total utilised area of a country. Unfortunately an appraisal of the situation is not easy in Germany, where there are three sources from which the amount of utilised agricultural area can be extracted. They are the Agricultural Census (ASE), which comprises the Farm Structure Survey and the Census of Land Use, the Land Register and the Integrated Administration and Control System (IACS). The problem is that every statistic is Impact of the introduction of decoupled payments on functioning of the German land market 23 based on a different basic population, whereas an exact quantification of the differences is not possible. Based on the Land Register there are 18,932 million hectare of land in agricultural use. However, this figure seems to overestimate the eligible area, as small structures like barns, dung piles, ditches, hedges and small groves are also included. In contrast, the area in agricultural use reported in the Census of Land Use is 17,035 million ha. Here we assume an underestimation of the eligible area, as some areas which are eligible for activation are not included, for example some landscape components and the area which is used by farms smaller than 2 ha. For the land register from most regions, over 90 % of UAA is activated by a premium entitlement. However in urban agglomerations this figure is about 80 %, even when the UAA is adjusted by permanent crops and vineyards. On the level of administrative districts, this relationship is displayed in Figure 3. Another indicator of the scarcity of premium entitlements is the relationship of distributed entitlements and the actually activated entitlements. For 2005 this relationship is displayed in Table 2.

Table 2: Share of not activated entitlements in 2005

–  –  –

Figure 3: Relationship between number of premium entitlements and UAA Source: Own calculation.

6.2 National reserve entitlements The National Reserve is designed to create a financial scope for dealing with certain situations caused by the switch from the coupled to decoupled subsidy regimes and works as follows (BMELV, 2005a, pp. 49-50): According to Article 42 of Council Regulation (EC) No 1782/2003, Member States can channel additional payments from national reserve for sector specific issues, namely as (1) entitlements for commencing farmers, (2) entitlements for farmers in a special situation, and (3) entitlements for farmers in regions subject to restructuring and/or development programs. While national legislation regulates granting entitlements in the 1st and 3rd cases, the allocation of entitlements to farmers in special situations must be guaranteed in every Member State. Germany has opted to incorporate all 3 cases into the national legislation and to divert 1 % of direct payments into a national reserve. Entitlement received from national reserve funds will expire if they were not used during the next 5 years after allotment. The intention of the national reserve is to help those farmers who – due to particular circumstances – would otherwise be disadvantaged by the sole application of the Single Farm Payment Scheme. In addition, national reserve funds can be used to stimulate specific production forms such as organic farming.

In Germany, national reserve can be granted to the following categories:

(1) Case of hardship: Force majeure; participation in agricultural environmental programs;

(2) Farmers in a special situation: Investments (started before 15 May 2004); transfer of leased land (leased before 17 May 2005); re-conversion of production by abandonment of dairy farmers (by 15 May 2004 the latest); purchase or rent of a farm (by 15 may 2004 the latest); leasing of reference amounts of milk;

(3) New entrants (farmers who started an agricultural activity after 17 May 2005; closure date for applications is 2007).

In 2008, farmers managing fruit tree plantations and tree nurseries have a single possibility to claim entitlements from the national reserve. In this case, land that was used as agricultural land Impact of the introduction of decoupled payments on functioning of the German land market 25 on 15 May 2007 is eligible for entitlements. The closing date for applications is 15 May 2008.

For each hectare of eligible land, €50 can be granted. Adjusted for contribution to the national reserve, this payment amounts effectively to €49.50/ha Germany-wide until 2010. From 2010 to 2013 they will be scaled back annually – like all other direct payments – to the level of regionnally uniform payments (§6 Betriebsprämiendurchführungsgesetz). Allotment of entitlements does not depend on the minimum number of hectares being used, but they will be paid out only if the total value of entitlements exceeds €100. However, these entitlements, though being granted from the national reserve, will not be recorded as national reserve entitlements, and therefore they are not subject to obligations applied to national reserve entitlements. Given the number of fruit tree plantations and tree nurseries in Germany, the amount of payments that can be claimed is estimated at €4 million.

6.3 Cross compliance The most significant trait of the recent Common Agricultural Policy reform is the shift in its objectives towards environmentally-responsible agricultural practices. Therefore, all farmers claiming direct payments are subject to Cross Compliance. Cross Compliance (CC) includes a set of standards (BMELV, 2005a, pp. 85-89; BMELV, 2006a, pp. 53-62) that frame the preconditions for the receiving direct payments and some rural development payments from the European

Union. Cross Compliance comprises two components:

• Compliance with Good Agricultural and Environmental Conditions (GAEC);

• Compliance with Statutory management Requirements (SMRs).

While the SMRs are made up of 19 EC Regulations and Directives applied directly at the farm level, the minimum standards for maintenance of the land in good agricultural and environmental condition have to be defined by the Member States. The national laws should be consistent with the EU framework.

Selected standards of GAEC The main German Regulation related to the GAEC is the Direktzahlungen-Verpflichtungenverordnung (DirektZahlVerpflVO) of 4 November 2004 (BGBl. I S. 2778): Verordnung über die Grundsätze der Erhaltung landwirtschaftlicher Flächen in einem guten landwirtschaftlichen und ökologischen Zustand (in conjunction with Direktzahlungen-Verpflichtungengesetz (BGBl. I S. 1763, 1767) of 21. July 2004). It is based on EC Treaty, Article 249 and Council Regulation (EC) No 1782/2003, Article 4, and includes requirements for minimum soil protection (soil erosion, soil organic matter, soil structure) and minimum farmland management (landscape features, set-aside land). The Regulation is effective from 1 January 2005.

Statutory Management Requirements (SMRs) Statutory Management Requirements (SMRs), along with Good Agricultural and Environmental Conditions (GAEC), are the constitutive component of the Cross Compliance Regulations.

The SMRs must be implemented in the national legislation in accordance with 19 EU Regulations and Directives. Failure to comply with the resulting obligations may lead to reductions or complete loss of direct payments. Control mechanisms and sanctions related to non-compliance with SMRs are the same as for GAEC obligations.

Farmers’ compliance with AEGC and SMRs requirements is ensured by means of national legislation as well as physical and/or administrative inspections. Control bodies of sector or paying agencies carry out inspections and assess their results. Where necessary, they also decide and initiate sanctions.

Lioudmila Möller et al.

Farm Advisory System (FAS) The Council Regulation (EC) No 1782/2003 obliges Member States to establish, by 1 January 2007, farm advisory systems. Services and information provided by Farm Advisory System should help farmers to meet Cross Compliance requirements on SMRs and GAEC.

Given the numerous current requirements to be fulfilled by farmers, it is expected that the demand for advisory support will be high. Therefore sector agencies in each federal state facilitate advisory activities carried out by accredited private advisory services. Advisory services shall provide farmers with recommendations concerning obligations to be met, sanctions, removal of weak points and follow-up actions. Farm advisory tools that are currently set up in Germany are (1) booklets/brochures, (2) check lists, (3) newspaper/periodical news bulletins.

The advisory and monitoring systems for cross compliance measures are mostly built on the existing systems (agricultural, veterinary and nature conservation agencies of each federal state).

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