The agricultural support that accrues annually to European farmers amounts to around DKK 411 billion, which is 1/3 of the EU's total budget. Most of the support is given today as a kind of income support for farmers, in the form of an area support for the lands that farmers and capital funds own. However, due to the capitalization of the area aid in land prices and lease payments, it does not work as intended. 

Therefore, the direct support, which is paid per hectare of agricultural land, should be phased out at a pace that ensures the necessary transition without pulling the rug out from under the farmers' finances. 

The support must instead ensure the necessary green transformation of agriculture, so that agriculture meets climate requirements, the water framework directive and safeguarding biodiversity. The support must instead go to the efforts and cultivation methods on farms that ensure public goods such as clean water, air, biodiversity and a stable climate – goods that are not currently priced on the markets. 

The newest reform of the EU's Common Agricultural Policy, which sets the framework for how the large agricultural sums are paid out, comes into force from 2023, is a step in the right direction. The reform is driven by the objectives for 2030 in the EU's Green Deal and Farm-2-Fork strategy, for example 25% organic area, 50% fewer pesticides, 20% less fertiliser, increased biodiversity and 30% protected land. 

With the new reform, we are still miles away from a sustainable agricultural sector both in Denmark and in the EU as a whole. Far more of the funds in the agricultural support should therefore be used in the so-called Pillar 2 – i.e. as support for, for example, land acquisition and climate and environmental technology. At the same time, far more funds should be transferred from the direct hectare support to ambitious eco-schemes that reward sustainable cultivation methods. Last but not least, the EU's overall budget for agricultural support should be gradually reduced at a higher pace than is the case now. 

The story behind the 60-year-old support scheme 

Landbrugsstøtte has many years behind it and has changed character many times along the way. The whole scheme arose out of a desire to ensure the population enough food at affordable prices, while at the same time the farmers could get a reasonable income. The wish came true in 1962 under the EC, as the European Community was then called. The new agricultural policy was to promote the production of agricultural goods by means of minimum prices, subsidized purchases, export subsidies and duties on imported foodstuffs. And it worked. During the first decades, food production grew so much that by the mid-1970s the EC was more than self-sufficient in a wide range of foodstuffs such as milk, cereals, fruit and vegetables.  

But it was too much of a good thing. With the support, agriculture could produce large quantities of goods at fixed prices, even if it exceeded consumer needs. Therefore, the EC had to artificially keep demand up by e.g. to buy up the surplus and put it in stock. Great mounds of butter, mountains of meat, lakes of wine, fruit and vegetables arose, which were destroyed, while other agricultural goods were dumped at cheap prices elsewhere in the world.  

It all gave the European community a very bad reputation, and it cost dearly. Agricultural support peaked in 1985, when it filled as much as 70 percent of the EC's total budget. At the same time, there was massive pressure from the USA and the World Trade Organization WTO to stop the unequal competition from the dumped agricultural products. It was obvious that the system had to be fundamentally changed.  

The EU tried to suppress butter production by introducing milk quotas as early as 1984, but the real paradigm shift only came in 1992 with the so-called Mac-Sharry reform, which changed the support from going to the production of food to a support for the agricultural land you own. From then on, it was paid directly as an area subsidy to farmers, regardless of what and how much they produce on the land. It was given the character of a definite income support for the farmer. And that has also proven to be problematic.  

Since its establishment, it has been a goal of the common agricultural policy to ensure farmers an income on a par with wage earners in other sectors of society. Unfortunately, an area-based support scheme is unsuitable as income support. 

The problem is, as mentioned earlier, that the direct support from the EU to agriculture is capitalized in land prices. The price of land is set partly according to its cultivation value and partly according to the support the EU gives to the area. In Denmark, around half of the fields are leased. Here, the agricultural subsidy is included in the lease tax. Thus, the support goes primarily to the landowners, so it is not necessarily the farmer who cultivates the land who benefits from the support.  

What are the ups and downs in the new reform of agricultural support applicable from 2023-2027 

Each individual member state must draw up a national plan for how the agricultural support is to be used, which must be approved by the commission.  

Denmark had its plan for 2023-2027 approved by the commission on 31 August 2022. 

At least 40% of the agricultural support's total budget must support climate measures and biodiversity. 

Objectives and development are continuously monitored and evaluated every two years by the commission. 

It is possible for member states to make annual changes to the national plans. This also means that you do not have to wait until the next CAP period (2027-2033) to increase the contribution to climate, nature and environmental initiatives. 

Pillar 1 in the agricultural subsidy, the direct hectare subsidy, i.e. payment per hectare of agricultural land, as well as eco-schemes, which are hectare subsidies conditional on climate, nature and environmental measures. The hectare subsidy is subject to nine conditionality requirements. Eco-schemes must constitute a minimum of 25% of the total Pillar 1 funds. However, this requirement may be less if requirements for green measures in pillar 2 are over-fulfilled. 

Up to 25% can be transferred between Pillar 1 and Pillar 2.  

A further 15% can be transferred from Pillar 1 to Pillar 2, if these funds are used for environmental or climate purposes. 

Pillar 2 

Support partly for a number of targeted environmental initiatives, and partly for development in rural areas in the form of innovation, business development and promotion of quality of life in the countryside. The support in Pillar II is voluntary schemes and pools and is therefore not paid to all farmers. 

In Denmark, these schemes and pools include, among other things, of support for the extraction of low-lying soils, construction of wetlands, afforestation, biorefining and nature conservation. 

A minimum of 35% of the funds in Pillar 2 must be used for purposes that support climate, biodiversity, the environment or animal welfare. 

Conditionality requirements 

The conditionality requirements condition payment of the hectare subsidy under Pillar 1. They are made up of nine requirements, also called GLM requirements: 
 

1. Maintenance of permanent grassland 

2. Protection of wetlands and peatlands - reduced nitrogen quota and ban on ploughing 

3. Prohibition against burning stubble fields 

4. Construction of 3m barriers along streams and lakes that must not be cultivated, fertilized or sprayed 

5. Prohibition against plowing when there is a risk of erosion 

6. There must be ground cover, i.e. no bare soil during sensitive periods, which depend on soil type 

7. Crop rotation on 35% of areas each year. No crop may be grown on the same area for more than three years 

8. At least 4% of agricultural land is taken out of operation for the sake of nature 

9. Prohibition against conversion or plowing of environmentally sensitive grassland 

Budget for agricultural support 

Annual budget for the entire EU's agricultural support: 2021-2027 DKK 411 billion 

Denmark's annual allocation, 2023-2027: DKK 7,10 billion. DKK (100%) 

Of this, Pillar 1 funds: DKK 6,13 billion. DKK (86%)  

Of this, Pillar 2 funds: DKK 0,97 billion. DKK (14%) 

Of pillar 1 funds, Eco-Schemes make up: 1,22 billion DKK (20%) 

Of pillar 2 funds, green schemes make up: DKK 0,64 billion. DKK (66%) 

Annual funds moved from Pillar 1 to Pillar 2: DKK 0,40 billion. DKK (6,3%)