[Publication] The Multiannual Financial Framework and the Common Agricultural Policy for the period 2028-2034: The new CAP architecture and its potential impacts on EU farm viability

Key Results

• During 2021-2023, approximately one-third of EU farms generated sufficient returns to cover both cash and imputed costs (land, labour and capital). A further half covered cash costs but not imputed costs, while the remainder were loss-making. Smaller farms, non-dairy livestock farms and farms in constrained areas were particularly vulnerable. Direct payments remain a key income source, especially for smaller farms and grazing-livestock systems where market-based returns are relatively low. In many cases, direct payments account for a substantial share of family farm income and contribute significantly to maintaining agricultural activity in rural and peripheral regions.
• While larger farms receive higher levels of support in absolute terms because of their greater land area, smaller farms are generally more dependent on support relative to their income. As a result, reductions in direct payments are likely to have proportionally greater effects on smaller farms, increasing the risk of farm exit and accelerating structural change in some regions.
• The proposed minimum ring-fenced CAP budget of about €300 billion (Art. 10 of Commission proposal on the NRPP, COM (2025)565) implies an estimated 15% reduction relative to a comparable current baseline. While additional funding may be available through the National and Regional Partnership Funds, access to such funding will depend on national priorities and political choices. This introduces greater uncertainty regarding future support levels than under the current CAP framework.
• Simulation results suggest that a 15% reduction in decoupled income support would disproportionately affect smaller farms, non-dairy livestock systems and Member States where CAP payments account for a large share of farm income. The consequences would vary considerably across the EU, reflecting differences in farm structures, productivity levels and existing levels of public support.
• The proposed Degressive Area-Based Income Support (DABIS) could redistribute support towards smaller and younger farmers, by reducing support for the largest beneficiaries and reallocating resources to priority groups. DABIS has the potential to improve the equity of support distribution.  However, mandatory degressivity and capping are likely to affect only a relatively small share of beneficiaries, as most farms currently receive payments below the relevant thresholds. The overall distributional impact will therefore depend more on Member State choices regarding payment rates and the reallocation of any savings generated.
• Expanded flexibility for coupled support could benefit vulnerable livestock and other priority sectors, although uptake is likely to vary considerably across Member States, reflecting differences in current policy preferences and sectoral priorities.
• Increased use of coupled support may strengthen targeted assistance but it is generally regarded as a less efficient mechanism for transferring income to farmers because payments are linked to production decisions. As such farmers must engage in production  and purchase inputs to qualify for support, with some of the benefit of support “leaking” to input suppliers. Policymakers therefore face a trade-off between improving support for specific sectors and maximising the efficiency and neutrality of income transfers.
• A stronger crisis and resilience framework, including the €6.3 billion Unity Safety Net, could improve agriculture’s capacity to withstand economic, climatic and geopolitical shocks.  In the context of increasing climate-related risks, market instability and geopolitical uncertainty, improved crisis-management instruments may become an increasingly important component of agricultural policy.
• The likely environmental impacts of the proposals remain uncertain. Greater national flexibility may improve targeting, but the removal of EU-wide spending safeguards could increase differences in environmental ambition across Member States.
• The removal of minimum environmental spending requirements means that Member States will face a direct trade-off between supporting farm incomes and funding environmental and climate measures. Higher allocations to income support will leave fewer resources available for environmental objectives, increasing the likelihood of divergence in environmental ambition across Member States.
• Overall, the reforms increase flexibility and opportunities for better targeting, but are likely to produce more varied outcomes across farm types and Member States. Farm viability will depend heavily on national implementation choices.