en.Wedoany.com Reported - The Council of the European Union recently approved an emergency regulation to provide temporary financial support and liquidity relief to agricultural producers severely affected by the surge in fertilizer prices, aiming to alleviate the growing agricultural hardship triggered by the Middle East crisis and the closure of the Strait of Hormuz, which have disrupted international trade in energy and raw materials.
The regulation completed its legislative process within the EU at an unusually rapid pace: the European Commission submitted the proposal on June 12, the European Parliament passed it on July 7 with 576 votes in favor, 62 against, and 15 abstentions, and the Council of the EU has now given final approval, all within just over a month. Portugal is listed among the member states that may benefit from a redistribution of over €162.2 million in direct payments next year.
According to the European Commission's own data, nitrogen fertilizer prices in the EU in April were 71% higher than the 2024 average, and fertilizer costs may now account for up to 16% of total agricultural production costs. The new regulation creates a novel support tool within the Common Agricultural Policy (CAP) framework, Article 78b, allowing member states to provide special, temporary support to active farmers affected by the severe increase in fertilizer prices.
This agricultural support covers part of the additional fertilizer costs incurred since March 1, calculated based on the difference between historical reference prices and actual prices during the crisis, with compensation up to 50% of these additional costs. For farmers who have committed to reducing fertilizer use, this percentage can be increased to 80%. The Council of the EU summarized the package as a series of emergency, targeted financial support measures, including a new liquidity scheme and arrangements allowing member states to advance direct payments to help farmers manage short-term funding needs.
The new liquidity scheme can be co-financed by the European Agricultural Fund for Rural Development (EAFRD) at up to 65%, and national governments are also permitted to add their own funds up to 200% of that amount. Member states may also use unspent funds. The regulation raises the maximum advance payment rate for direct payments this year from 70% to 75% and allows the relevant amounts to be paid immediately upon a farmer's request for support, without waiting for the usual period from October 16 to November 30.
The legislative document is accompanied by a table detailing the maximum amounts each country can transfer between CAP pillars in 2027. For Portugal, the limit for increasing its direct payment allocation is €162.2 million, while it could also choose to reduce it by nearly €160 million if it prefers to strengthen other components. The ratio between these two values is fixed at 0.99. In comparison, Denmark's ratio is 11.36, and the Netherlands' is 9.79. Portugal, along with Slovenia and Croatia, belongs to a small group of countries with ratios close to 1, indicating that their CAP financing structures were already more balanced between direct payments and rural development before the introduction of this new flexibility.
This flexibility stems from the new Article 103a, which extends the possibility for member states to transfer funds between direct payments and rural development until August 31, whereas previously this was only allowed from 2023 to 2026. This means Portugal has a flexible fund when managing 2027 CAP resources, allowing the government to choose one of two directions. On one hand, it can inject funds into direct payments from other areas such as rural development, up to a maximum of €162.2 million; on the other hand, it can withdraw up to nearly €160 million from direct payments for other measures such as farm investments or environmental projects. The final decision must be made by the end of August.
To accelerate fund delivery, the regulation raises the maximum advance payment rate for direct payments this year from 70% to 75%. The Portuguese government had already approved a special agricultural support in June, with a total allocation of €20 million for the second quarter to address rising costs. This national measure provides support of €28 per hectare for irrigated areas and €12 per hectare for dryland areas, along with corresponding subsidies for suckler cows, dairy cows, and eligible sheep or goats, with a cumulative cap of €50,000 per beneficiary.
Under the new tool, expenditures financed by the EAFRD are considered eligible from the date the regulation enters into force. The final deadline for farmers to actually receive this support is June 30 next year. Each country may reserve up to 25% of its existing annual amount for crisis payments related to natural disasters to avoid excessive resource transfers. Ireland's Minister for Agriculture, Food and the Marine, Martin Heydon, stated that recent global supply chain disruptions and soaring fertilizer prices have put immense pressure on the agricultural sector, and this decision demonstrates the EU's determination to act swiftly and decisively to support European farmers and food security. The legal text also requires member states to ensure that farmers who commit to reducing fertilizer use have access to relevant knowledge and information to optimize the sustainable use of fertilizers.
This measure is part of a broader package proposed by the European Commission on June 12, mobilizing a total of €540 million from the agricultural reserve within the EU budget. Combined with potential additional national co-financing from member states, total funding could reach €1.5 billion. The package also includes measures to strengthen European fertilizer production, improve supply resilience, and accelerate the adoption of bio-based, low-carbon, and circular fertilizers. The new regulation will enter into force the day after its publication in the Official Journal of the European Union.
