RELIEF greeted last week's announcement that Defra would adopt the three-region system for calculating the single farm payment - but farming organisations were quick to point out that there were still many complex issues to be worked out.

A major concern was the allocation of payments to farmers whose land straddled more than one tier and there were still worries for beef and dairy producers in the severely disadvantaged area.

Margaret Beckett, Defra Secretary of State, announced on Thursday of last week that England would be split into three regions: moorland within the upland SDA; the rest of the SDA, and all other land.

She accepted that the original two-region system would have taken subsidy away from more productive SDA land to the less productive moorland, but said the new scheme would still disappoint some producers and pledged to find extra help for hill farmers.

"There will be farmers in the SDA who will gain from this decision; some others, particularly those within the moorland line, will see payments at a lower level than would have been the case under the original announcement, and in some cases less than their coupled historic receipts," she said.

Mrs Beckett realised there could be some minor inaccuracies in the moorland boundary line and promised an early announcement on an appeals system.

The Government would need to see that hill farming communities received appropriate support from other sources, including the England rural development programme.

Mrs Beckett said the hill farm allowance scheme would continue to operate for the remainder of ERDP - up to the end of 2006.

"In addition, I want to ensure that farms in the uplands have a full opportunity to be rewarded for improved environmental management of their land, including through agri-environment schemes," said Mrs Beckett.

"I have asked my officials to consider how the next round of rural development programming, from 2007 onwards, can better reflect the needs of upland communities, and the public interest in good management of some of our best-loved landscapes."

It was impossible to determine the precise payment rates for the three regions until applications had been received in 2005, and the total areas of land identified.

Industry organisations have, however, predicted a moorland payment of £25-£35/ha; £120-£150/ha for the SDA non-moorland, and £210-£230 for the rest of England. Deductions would be made for the national reserve, modulation, and financial discipline if the CAP budget looked likely to be exceeded.

The NFU welcomed Mrs Beckett's announcement, saying it would result in a fairer outcome for most farmers, but it was still concerned for beef and dairy farmers in the SDA.

"The NFU is absolutely determined to find other ways of helping these farmers," said Tim Bennett, president. "We are particularly thinking of a redirection of the hill farming allowance, agri-environment schemes and other rural development measures."

It would be vital for farmers to look to the market. "But, equally, the rest of the supply chain must wake up to the fact that, if prices are not remunerative, the production base will be lost," he said.

The Country Land and Business Association, which drew industry organisations together, also welcomed the announcement although Mark Hudson, CLA president, said there was still much work to be done.

"Even the wisdom of Solomon cannot say how payments should be allocated on a farm on which the animals graze the moorlands in summer, are housed in buildings in the uplands in winter, and eat the hay made on lowland pastures," he said.

The National Beef Association thanked Mrs Beckett for her decision but made no apology for having called for two regions split by the moorland line.

Robert Robinson, chairman, said the three-region compromise would give farmers in the non-moorland section of the SDA about £120/ha, rather than the original £75, through those above the moorland line being scaled back to £30/ha.

If the two-region moorland line split had been agreed, he claimed, all farmers outside the moorland area would have received £203/ha instead of an expected £211.

"We were forced to give up because some lowland farmers told their representatives they were not prepared to pass on just £8/ha - even though this would have created a level playing field by putting an additional £83 on the upland payment," said Mr Robinson.

The NBA settled for three regions only because Mrs Beckett insisted on a unanimous agreement.

The Tenant Farmers' Association originally wanted a system based on historic payments and, when Defra said it had to be regional, warned it would set farmer against farmer. "And how right those words were, looking back," said Reg Haydon, chief executive.

The TFA then backed the two-region moorland split but went along with three regions when Mrs Beckett demanded unanimity and other organisations refused to budge.

"The TFA felt that three regions was at least better than the status quo and so gave it our support," said Mr Haydon.

It had tried to make it work as well as possible for the majority of members but had received many expression of concern from SDA farmers about their ultimate regional payments, compared with the rest of England.