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Luxembourg - EU negotiators agreed large farms will lose up to 30% of current subsidy payments in a major step towards consensus on reforms to the annual €50bn farm policy, but tough issues such as sugar quotas remain.
Representatives from EU governments, the European Parliament and the European Commission reached provisional agreement on elements of the complex reform to the common agricultural policy (CAP) during the first day of talks in Luxembourg, which ended in the early hours of Tuesday morning.
Negotiators aim to strike a final deal at a second round of talks in Brussels on Wednesday.
"On a lot of the big issues we have an agreement in principle, but I think it is very important to stress that this deal is not done," Irish farm minister Simon Coveney, who represented EU governments in the talks, said.
One of the main objectives is to shift to subsidies that are based on the size of agricultural holdings, replacing the current link between farm payments and historical production levels in many parts of Europe.
The present system disproportionately benefits those who has the largest output in 2000-2002, such as industrial-scale grain producers in France's Paris basin.
Europe's largest farms could have lost up to 40% of their current subsidies in the reforms, but negotiators agreed to give governments an option to set an upper limit at 30%.
"I think it's a fair deal. This is about redistributing in a fair way that doesn't have a significant shock effect on agriculture, in particular the productive side of agriculture," Coveney said.
But critics warned that cutting subsidies to Europe's largest and most efficient farms could harm the bloc's food security.
Steady progress
EU officials involved in the talks said good progress had been made towards a deal, particularly in the area of direct subsidies, which will continue to consume three-quarters of the total farm budget from 2014-2020.
Agreement was reached that 30% of future direct subsidies should be conditional on farmers' taking steps to improve their environmental performance.
That will include leaving 5 percent of their arable land fallow as a haven for wildlife - a share that could potentially increase to 7% from 2017.
Farm groups have warned that forcing farmers to leave large swathes of land out of cultivation could hit European food production.
Provisional agreement was also reached to prevent certain landowners such as airports, golf courses and campsites from claiming EU farm subsidies as they can at present.
Officials said some tricky issues remained, including a disagreement over the deadline for abolishing EU sugar production quotas, which are blamed for pushing up domestic prices and limiting European sugar exports.
The Commission proposed an end to quotas in 2015, while governments would prefer 2017 and the parliament 2020. EU officials involved in the talks say a phase-out in 2017 is the most likely outcome but that a final decision will not be taken before Wednesday.
Governments also oppose the setting of an upper limit on annual payments to individual farms of €300 000, which is backed by the Commission and parliament. To avoid scuppering a deal on CAP reform, the issue is expected to be left to linked talks on the EU's long-term budget.
To offset the impact of shifting subsidies away from some producers, negotiators have agreed to let some governments link up to 15 percent of total subsidies to output, which critics say reverses some of the market liberalisation of recent reforms.
Agriculture will consume nearly 40% of the bloc's €960bn ($1.3trn) budget for 2014-2020 - the period covered by the reform - ensuring it remains the biggest single item of EU expenditure.
Europe's biggest agricultural producer, France, will continue to scoop the largest share of CAP funds at around €8bn a year, followed by Spain and Germany each with about €6bn annually.
If the negotiators strike a deal on Wednesday as expected, it must be rubber-stamped by the full parliament and EU governments before entering force on January 1 next year.
