The Federal Government’s action plan to combat the crisis in the agricultural sector

Agricultural holdings – and milk producers in particular – have been faced with an unexpectedly large drop in producer prices in recent months. The associated revenue losses – in combination with high prices for means of production – have led to considerable liquidity problems for these holdings. In addition, dairy farming on grassland is of great importance to our cultural landscape, particularly in our holiday regions in the Alps, the lower mountain ranges and on the coasts. Grassland areas act as significant carbon stocks and should therefore also be preserved for the benefit of climate protection. In order to adapt to this situation, the Federal Government therefore initiated a broad set of measures which will considerably ease the burden on agricultural holdings over the next two years.

Above all, the coalition agreement of the governing parties provides for a special programme for agriculture totalling EUR 750 million for the next two years to support the agricultural sector and in particular milk producers. During the three weeks since the formation of our government, we have prepared the implementation of this programme. The coordination with competent ministries, federal states and associations will take place in the weeks to come. The coalition agreement provides for the following measures:

• a grassland milk programme totalling EUR 500 million
• an increase of EUR 200 million in federal grants to agricultural accident insurance; and
• a crisis liquidity programme totalling EUR 50 million.

Grassland milk programme

The grassland milk package will be implemented in three stages:
We will introduce two new aid schemes for milk producers:

• A grassland payment for milk production holdings with grassland for the years 2010 and 2011. This payment will probably amount to approx. EUR 37/ha grassland. The budget provides for an annual sum of EUR 113 million for 2010 and 2011 (EUR 2 million of EU funds and EUR 111 million of federal funds).
• A cow premium of approx. EUR 20 per cow for milk production holdings for the years 2010 and 2011. This premium will be granted as de minimis aid, i.e. the ceiling for such aid (EUR 7,500 within three years) applies here. The budget provides for EUR 85 million in 2010 and EUR 75 million in 2011.

The remaining funds from the EUR 500 million of the grassland milk programme will be used to provide a further increase of federal funds for agricultural accident insurance, beyond the increase of federal grants agreed in the coalition agreement. Due to a revision of risk categories, this will be of particular benefit to livestock holdings. In detail:

Increase in federal grants to agricultural accident insurance

In addition to the increase of EUR 100 million annually in 2010 and 2011 as agreed in the coalition agreement, federal grants to agricultural accident insurance will be topped up by funds from the grassland milk programme (according to current figures: approx. EUR 100 million in 2010 and approx. EUR 14 million in 2011). This will reduce insurance premiums by about 45%. The agricultural holdings will receive this aid via credits entered in the premium statements they receive from their accident insurance associations in the next two years.

Crisis liquidity programme

The new programme, totalling EUR 50 million for 2010 and 2011, is intended to follow on as smoothly as possible in terms of content and timeframe from the Federal Government’s current highly successful liquidity programme. In early summer 2009, the Federal Government had already provided EUR 25 million for interest concessions on liquidity assistance loans provided by the Landwirtschaftliche Rentenbank (central refinancing institution for agriculture and the food industry). It is now planned, in addition to financing interest concessions on liquidity assistance loans provided by the Landwirtschaftliche Rentenbank, to also grant modified deficiency guarantees for these loans.

In addition to the special programme, the overall package contains the following elements:

• Early payout of the single farm payment for 2009 on 1 December
• Tax relief on agricultural diesel
  The retention and the ceiling for agricultural diesel have currently been set aside for a limited period; the Federal Government will retain this measure and make it permanent. In addition, the aim should be to work towards having a uniform taxation of agricultural diesel at European level.
• EU milk fund
  Germany is entitled to annual funds (EUR 150 million in 2010, rising to approx. EUR 300 million in 2013) from the EU milk fund which are intended to be used predominantly for investment aid in the dairy sector and for grassland and pasture premiums.
• EU milk programme
  Germany is entitled to EUR 57 million from the EU's immediate action programme for milk producers. It is planned to pay out these funds unbureaucratically as an additional grassland premium of just under EUR 20/ha.

Conclusions

With this overall package, the Federal Government has brought together and optimised the available possibilities in order to quickly and effectively react to the current problems experienced by the German agricultural sector, and milk producers in particular. In this way we are providing the holdings with greater security for the coming years. We have deliberately chosen a three-stage concept:

• improvements and aid for all holdings (e.g. agricultural accident insurance, agricultural diesel, liquidity assistance),
• additional measures for milk producers which have been hit particularly hard by the collapsing prices (cow premiums),
• Special support measures for milk production on grassland sites as there is often no alternative to milk production in these areas; this then also constitutes a contribution towards preserving these grasslands for productive use.

Some of the measures in this package are already providing effective relief. The full effect of the measures will be felt in 2010 and 2011. However, those involved now already know what support they can expect over the coming two years. The aid is an important contribution towards overcoming the current crisis so that families in Germany can face the future optimistically again.

However, it is also important to us that we have a two-pronged approach:

On the one hand there are the short-term measures presented today which are designed to provide security and support in the current crisis.

On the other hand there are the measures we have already introduced that aim at bringing about structural improvements in the medium-term. Particular mention in this regard should be given to:

• the additional funds in the Joint Task for the Improvement of Regional Economic Structures and in the EU Milk Fund which can be used to bolster investment support;
• the measures to strengthen the promotion of exports carried out by the Federal Agriculture Ministry; and
• the measures that will now be introduced to improve structures in the dairy sector.

They are all equally important. Both the short-term aid and the medium and long-term measures aimed at boosting competitiveness.