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Definition: Subsidies on agricultural products paid to agricultural producers

National accounts

The method of valuation of output at basic prices requires a fundamental distinction between subsidies on products and other subsidies on production. In line with their definition, subsidies on agricultural products include in particular the following grants (with an indication of the corresponding budget item in the general budget of the European Union):
Subsidies on agricultural products paid to agricultural producers:
· Certain grants introduced with the reform of the Common Agricultural Policy. The grants in question are compensatory aid for arable crops (cereals, protein crops and oilseeds) (B1-104 and B1-1050 to B1-1055) and premiums for cattle (for suckler cows and special premiums; B1-2120 to B1-2122, B1-2127). This classification is based on the following three considerations: 
 - the concept of subsidies on products has been enlarged in the ESA 95 to include subsidies in the form of "deficiency payments". Compensatory payments for arable crops are similar in application to forms of deficiency payments. Moreover, the amounts of these payments are strictly linked to the quantities produced (at macro-economic level);
 - the working and economic effects of the CAP reform: these grants are part of a policy which has always been aimed at products, combining market support and direct aid, and accompanied by measures to curb production. This policy has been maintained despite a degree of "decoupling" between the level of grants and agricultural production or the level of use of the means of agricultural production (only the breakdown of the various types of support (aid in the form of export subsidies, intervention aid and direct aid) has been changed);
 - the price-based part of the premium for cattle adopted under the CAP reform is a form of compensatory aid for declines in cattle intervention prices. It is classified as subsidies on products, in line with compensatory payments for arable crops. Despite the more complicated treatment of the premiums prior to the reform of the CAP, it has been agreed not to divide them into two, in order to provide a degree of consistency with the compensatory payments for arable crops.
· grants for olive oil production (B1-1210);
· grants for the production of textile crops (fibre flax and hemp; B1-140);
· grants for silkworm production (B1-1420);
· grants for banana production (B1-1508, only the part relating to compensatory aid);
· grants for dried grape production (B1-1513);
· grants for seed production (B1-180);
· grants for hop production (B1-181);
· premiums for ewes and she-goats (B1-2220);
· any subsidy in the form of a deficiency payment to holders (i.e. in cases where general government pays the producers of agricultural products the difference between the average market prices and the guarantee prices of agricultural products).
Eurostat, "Manual on the economic accounts for agriculture and forestry EAA/EA 97 (Rev. 1.1)", Luxembourg, 2000