EU trims biofuel crop subsidy due to overplanting

BRUSSELS (Reuters) - The European Union has reduced the subsidy amount payable to farmers in 2007 to help them grow more biofuel feedstock crops after plantings increased more than expected, the European Commission said on Wednesday.

One such payment, called the energy crop premium, was introduced in 2004 after the EU's major farm policy reform the previous year. From 2007, the bloc's newest joiners, including Bulgaria and Romania, get the same payments.

A flat-rate subsidy of 45 euros ($63.83) per hectare, it aims to encourage farmers to plant more raw materials that can be used for making biofuels. Crops targeted include sugar beet, cereals and vegetable oil plants such as rapeseed.

This year, the EU raised the maximum area that can benefit from the energy crop subsidy to 2 million hectares from 1.5 million previously. EU governments may also fund farmers to grow such crops, with a subsidy of up to half the costs incurred.

But that increase was not enough, since EU farmers exceeded that maximum and planted around 2.84 million hectares this year.

To keep within its budget of 90 million euros, the Commission has had to calculate how much of that land qualifies for the energy crop premium: slightly more than 70 percent of the land on which farmers have claimed the payment.

"The simplification of the scheme, introduced recently by the Commission, has apparently contributed to its popularity among both farmers and the processing industry," the Commission said in a statement.

"The farmer's interest in production of energy crops has significantly increased in only four years and for the first time in 2007 the total budget of 90 million euros will be fully used," it said.