After two years of intense negotiations, a deal was agreed today on the reform of the Common Agricultural Policy.

New rules will apply to how €1.5 billion is channelled towards Ireland’s 130,000 farmers annually.

 RTÉ's Damien O'Reilly reports

The CAP accounts for 38% of the total EU annual budget and it represents a massive 85% of total EU funds, which flow into Ireland every year.

Its basic principle is to underpin food production throughout Europe guaranteeing its citizens a safe, secure supply of traceable food, which is produced to the highest standards with consideration for the environment and animal husbandry.

That’s the principle that is perpetrated by politicians and farmers alike. Of course, there are many citizens who would disagree with this mantra fundamentally.

And there are many who disagree with the notion of subsidising farmers to produce food as there are other countries, such as New Zealand, where farmers make their money totally from the marketplace.

The reality in Ireland is that without the single farm payment from CAP, the vast majority of farmers would go bust as the market does not give them, particularly beef and sheep farmers, the returns they need to stay profitable.

So what was agreed this week and why was it so laborious and complex? We need to go back to the turn of the millennium to answer that.

In the last reform of the CAP in 2004, the link between production and payments was broken.

Up to that point, the more farmers produced, the more they got in direct payments or subsidies, if you prefer.

In order to continue funding food production, a mechanism was introduced whereby the average that a farmer received in 2000, 2001 and 2002 was calculated and whatever figure was arrived at was to become their annual “cheque in the post” regardless of whether they upped or downed their on-farm production.

Part of the aim was to focus farmers on higher quality and not just farming for a subsidy.

So for the past decade, farmers have been receiving the same annual payment.

And the payments have ranged from very low payments to very high payments, all relating to what farmers were getting in those reference years of 2000-2002.

During those years, farmers could not possibly have known what was lying in wait in the 2004 reforms as the reference years were retrospective.

If they did, they would have ramped up production so as to draw down as much subsidies as possible.

Those who were intensive and were receiving a lot of EU money in the reference years were lucky.

Those, for various reasons, who did not draw down much money in the reference were stuck with a smaller payment every year since.

Two years ago, EU Commissioner for Agriculture Dacian Ciolos published a document outlining a new way of subsidising farmers as part of the reform of the CAP.

He suggested that the historical payment based on those reference years should be done away with.

Why should we be paying farmers for what they farmed back in 2000?, was his battle cry.

He proposed that a new payment system be introduced whereby farmers across Europe would be paid a flat rate per hectare based on the country’s average payment to farmers.

It was immediately slapped down by various countries, including Ireland.

The main farm lobby groups lambasted the commissioner, saying that if a system like this was introduced, “active, productive” farmers would be penalised while others would benefit for “doing nothing”.

This inferred that the guys on the bigger payments, thanks to their intensity back in the reference years, were the ones who were working hard, investing in their farms and depending hugely on their single farm payment to survive.

Many, they said, on smaller payments were not commercially viable and would be getting a windfall, which would not lead to more production on those farms.

It was a bitter debate that divided farming opinion in Ireland.

Minister for Agriculture Simon Coveney listened and then adopted a compromise approach, which he tabled when he took over the Presidency of the European Council of farm ministers.

By a stroke of luck, his term as president also coincided with the timeframe set out to reach agreement on a new reform.

And so he set about knocking heads together around the ministerial council alongside the commission and the European Parliament’s agricultural committee, all three having an input into the final shape of a new look CAP.

As you can imagine, trying to find agreement among 27 different countries was always going to be nigh on impossible.

So it was all about compromise with the commissioner being forced to compromise most from his “flat rate” idea.

While the Common Agricultural Policy does exactly what it says on the tin, there is wriggle room allowed in each member state to implement the policy with rules that are suitable to their climate, farm structure and farm size.

In Ireland’s case, what was agreed this week will see 60,000 farmers get an increase in their single farm payment and 50,000 lose some of theirs.

It was never going to be possible to find a new policy that would suit every farmer, so the only ray of hope for the losers is that their losses will be capped at 30%.

Effectively, the average payment per hectare in Ireland, now that we are calculating payments this new way based on acreage, is around €270 per hectare.

Some farmers get over €800 - €900 per hectare, some get close to none.

Now the lowest paid will get a minimum payment of €150 per hectare, paid for by slicing off the payments to farmers over the national average.

This will happen gradually between 2014 and 2019 so it will not be in one foul swoop.

It will bring the payments to farmers somewhat closer together but not near what the commission originally suggested.

Maybe next time there is a reform, they will try again for a flat rate payment or maybe the beginning of phasing out payments altogether, who knows.

New rules regarding the environment have also been introduced, which means that 30% of farmers’ payments will be dependent on them complying with various greening measures to protect the environment and wildlife and birdlife.

In Ireland, this will not be such a problem as many farms already comply with most of what Brussels wants to see happening on farms across all member states.

And with only 6% of Europe’s farmers aged under-35, this CAP reform has agreed that all member states give a “top up” payment to young farmers.

This will be mandatory and will be taken from the overall single farm budget.

In other words, every farmer will contribute a little bit to make up 2% of the total.

It is not a lot, but it does help in trying to encourage more young people to take on family farms.

The Common Agricultural Policy is very complex and detailed because there are so many different types of farming, which come under its control from cattle farming to tobacco and olive farms.

This current deal agreed by all parties will run until 2019, but there will be a midway review and tweaking.

Minister Coveney set this meeting as the deadline to reach agreement and it has been achieved much to the relief of all concerned.

Had it run on, it is doubtful if the Lithuanian presidency of the EU would have prioritised getting a deal in the same way Ireland did.

By Damien O’Reilly, Countrywide, RTÉ Radio 1