All about CAP subsidies

Find out everything you need to know about CAP subsidies

In Spain, the primary sector, which includes all those activities related to agriculture and livestock farming, accounts for 10% of the gross domestic product. Given its importance to the economy and its vulnerability to climate change, it is not surprising that it is one of the sectors that receives the most aids and subsidies.

At BBVA, we offer a wide variety of products for farmers, such as our SAECA loans (Sociedad Anónima Estatal de Caución Agraria), our agricultural insurance and the option to direct deposit your CAP (Common Agricultural Policy) subsidy, which will give you early access to the subsidy so you can deal with unforeseen events in your farming business. What if you haven't received a CAP subsidy yet? In this article, we will explain everything you need to know about how to get a CAP subsidy and what types of subsidies exist.

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Direct deposit the CAP in BBVA
And apply for the Agropréstamo Anticipo PAC to get your money before you receive the subsidy.

Origin and objectives of the CAP

Because the agricultural sector is one of the most sensitive to price variations due to its susceptibility to climate change, and to levels of supply and demand, farmers may be subject to precarious conditions when the harvest does not yield enough, even if the price of their products goes up in such a situation. In contrast, when the harvest is abundant, prices tend to decrease.

As a result of the inherent instability in the sector, it has always been subject to state intervention; Traditionally, the governments of the various European countries were responsible for maintaining the prices of agricultural products through aid and subsidy programs. However, with the entry into force of the Treaty of Rome in 1958 - which created the European common market between Germany, France, Italy and the Benelux countries - the aim was to create a common system of agricultural aids and subsidies, including the Common Agricultural Policy (CAP).

The main objectives of the CAP include improving the productivity of the European agricultural sector, achieving self-sufficiency for the European Union, keeping the prices of agricultural products affordable and providing a decent quality of life for European farmers. To achieve these objectives, the CAP provides three types of financial support: the direct payments, which constitute direct aid to farmers, targeted market measures and rural development programs.

Direct payments

Direct payments are intended to supplement the income of farmers through payments that are made based on the number of cultivated hectares, although they are also usually supplemented with other payments based on a number of factors, such as the type of crop, the agricultural practices used, the conditions of the activity and the farmer's age. In addition to a certain amount per hectare (which is on average €226 per eligible hectare), farmers can receive, where applicable, a green payment (for environmentally friendly agricultural practices), a subsidy for young farmers or a complementary subsidy for farming in areas with difficult conditions, among others.

As mentioned earlier, one of the ways that CAP aids are given is through direct payments. This is, in fact, the most common method for providing subsidies to farmers, accounting for as much as 72% of the European Union's agricultural budget. These subsidies, even though they come from the European Union's common budget, are given to the governments of each country so they can manage their programs individually and address the specific needs of their region.

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Get an advance of the grant by arranging for your CAP to be paid into your BBVA account.
You can also request the whole amount.

Beneficiaries and conditions for receiving subsidies

In order to apply for CAP aid in the form of direct payments, applicants must prove they are farming on land within the European Union and that their holdings are suitable for agricultural activity, meaning they contain arable land or permanent crops and pasture. It must also be noted that there are minimum area, or equivalent minimum subsidy, requirements, the limits of which are established by each national authority. This minimum normally ranges from 0.3 to 5 hectares.

Finally, those farmers receiving subsidies also have to observe a number of rules. Otherwise, the amount of the subsidies may be reduced. On the one hand, the Legal Management Requirements (LMG), which include rules on the environment and on animal, plant and public health, must be complied with. On the other hand, the Good Agricultural and Environmental Conditions (GAEC) must also be complied with. These include good practices for maintaining crop soil, protecting soil against erosion and protecting habitats.

In short, when requesting CAP subsidies, it is very important to take into account the requirements that are imposed on their potential recipients. It is also important to remember that, even if the subsidy is paid one year, the application must be renewed to ensure that it is received the following year. Lastly, we must ensure that the conditions and standards established by the European Union are met as a whole and that best practices are implemented. This guarantees that the amount of the subsidies will not be reduced and that they can be renewed annually.

BBVA is not liable for the content, truthfulness, accuracy, adequacy, integrity or timeliness of the information included in the articles, which were prepared by third parties external to BBVA. The article is for information purposes only. It is not binding or compulsory and it does not constitute a commercial offer or contractual commitment on the part of BBVA.

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