German Farmers’ Perspectives on Direct Payments in the Common Agricultural Policy

Abstract

SummaryAfter several reforms of the Common Agricultural Policy and gradual liberalisation, direct payments that serve to stabilise farm incomes remain highly pertinent for EU farmers in that they continue to contribute a high share of total farm income. This was also reflected in our survey of German farmers’ perspectives on direct payments, which showed the importance that these payments play in their financial situation. However, several economists have pointed to the lack of justification for poorly targeted direct payments in achieving societal goals, namely the delivery of valued public goods. In particular, the surveyed German farmers also recognised societal disapproval of the direct payment scheme. However, without direct payments, an accelerated structural change in German agriculture is very likely, leading to larger, less diversified farms and more intensive farming; which contrasts with the expectations of the German society for the agriculture sector. As German tax payers contribute substantially to financing the CAP, societal approval in terms of animal welfare and environmental services should receive greater priority in the direct payment scheme. The latter could be achieved by a well‐aimed targeting of direct payments, providing compensation for farmers producing agri‐environmental public goods and/or clearly contributing to improved animal welfare.