"Agenda 2000" began in 2000 in preparation for EU en­largement. Similar to the first CAP reform, Agenda 2000 used direct payments to compensate farmers for half of the loss from new support price cuts. Agenda 2000 reforms fo­cused on the grain, oilseed, dairy and beef markets.
     The most recent reforms (begun in 2003 and 2004) represent a degree of re-nationalization of farm policy, as each member state will have discretion over the timing and method of implementation. The 2003 reforms allow for decoupled payments—payments that do not affect produc­tion decisions—that vary by commodity. Called single farm payments (SFP), these decoupled payments will be based on 2000-02 historical payments and replace the compensation payments begun by the 1992 reform.
     When member states implement the reforms, compliance with EU regulations regarding environment, animal welfare and food quality and safety will be required to receive SFPs. Moreover, land not farmed must be maintained in good ag­ricultural condition. Coupled payments, which can differ by commodity and require planting of a crop, are allowed to continue to reinforce environmental and economic goals in marginal areas. The CAP budget ceiling has been fixed from 2006-13; if market support plus direct payments fall within 300 million euros of the budget ceiling SFPs will be reduced to stay within budget limits.

Domestic price support
Prices for major commodities such as grains, oilseeds, dairy products, beef, veal and sugar depend on the EU price sup­port system, although price support has become less im­portant for maintaining grain and beef farmers' incomes under the CAP reforms. The major method of maintaining domestic agricultural prices is through price intervention and high external tariffs. Farmers are guaranteed interven­tion prices for unlimited quantities of eligible agricultural products. This means that EU authorities will purchase at the intervention price unlimited excess products meet­ing minimum quality requirements that cannot be sold on the market, which are then stored or sold for export with subsidies.
     Other mechanisms, such as subsidies to assist with surplus storage and consumer subsidies paid to encour­age domestic consumption of products like butter and skimmed milk powder, also support domestic prices. The 2003 reforms, however, cut storage subsidies by 50%. Some fruits and vegetables are withdrawn from the mar­ket in limited quantities by authorized producer organi­zations when market prices fall to specified levels. Re­forms have lowered the cost of the CAP to consumers as intervention prices have been reduced. However, tax­payers now bear a larger share of the cost because more support is provided through direct payments.

Direct payments
While price supports remain a principal means of maintain­ing farm income, payments made directly to producers pro­vide substantial income support. Compensation payments for price cuts generated by the 1992 reform began in 1994 and were increased for the Agenda 2000 reform. These compensation payments were established on a historical-yield basis for arable crops by farm and required planting

to receive a payment. Production requirements have been eliminated in the 2003 reform for both crops and livestock, with payments made to farmers based on the average level of payments received during 2000-02. Direct payments cur­rently account for about 35% of EU producer receipts and for an even higher percentage of net farmer income (once input costs are subtracted from receipts).

Supply control
The 1992 reforms instituted a system of supply control that has been maintained through subsequent reforms. To be eligible for direct payments, producers of grains, oil­seeds, or protein crops must remove a specified percentage of their area from production. Small producers are exempt from the set-aside requirement. Supply-control quotas have been in effect for the dairy and sugar sectors for nearly two decades.

Border measures
The  CAP  maintains  domestic  agricultural  prices  above world prices for most commodities. In preferential trade agreements, such as those with former colonies and neigh­boring countries, the EU satisfies consumer demand while protecting high domestic prices through import quotas and minimum import price requirements. The CAP also applies tariffs at EU borders so that imports cannot be sold do­mestically below the internal market prices set by the CAP. Although the Uruguay Round of Agreement on Agriculture called for more access to the EU market, market access to the EU's agricultural sector remains highly restricted in practice. In addition, the EU subsidizes the agricultural ex­ports to make domestic agricultural products competitive in world markets.

Additional aspects of 2003 reform
Important components of the 2003 reform reflect a philo­sophical change in the approach to EU agricultural policy. For the first time, much of the pressure to reform the CAP came from environmentalists and consumers. The require­ment to comply with environmental and animal welfare standards to qualify for the SFP reflects these pressures. Moreover, farmers must meet food quality and food safety regulations for payments to continue. Another important feature of the 2003 reforms is the move from a price sup­port policy to an income support policy through decoupled payments. EU farmers will have more choices in their plant­ing decisions because of decoupled payments. Commodity support prices continue to exist but at lower levels, while direct payments to farmers without requirements to plant a crop are more widespread.
     There is also a marked shift in the way rural develop­ment is treated. The 2003 CAP reforms established two pillars in the budget: Pillar I for market and price support policies and Pillar II for rural development policies. In the reforms, a ceiling was imposed on Pillar I spending, where­as Pillar II spending seems open-ended. The intended bud­get for rural development will more than double over the next 10 years, while the CAP budget for Pillar I may only increase by 1% per year in nominal terms from 2006-13. Moreover, in a concept called modulation, SFP payments greater than 5,000 Euros are reduced by 5%, while farmers