Farming representitives have welcomed the reforms

The change is intended to simplify the system of subsidies which amount to about �220m a year.

Stormont Minister Ian Pearson said the industry must have the freedom to farm in response to market demands.

Farmers will no longer be encouraged to boost the size of their herds and flocks to maximise EU grants.

The switch to an annual farm payment will be based on what is being called "a static, vertical hybrid model of decoupling".

Agriculture is a vital part of the Northern Ireland economy and I want to see it continue to develop and to be come more competitive Ian Pearson NIO minister

The flat-rate area-based component on entitlements will be funded from: 50% of the beef special premium budget, 50% of the slaughter premium, 35% of the sheep annual premium, 80% of the less favoured areas supplement, and 20% of decoupled arable area payments.

Preliminary estimates give a basic area payment of about �48 per hectare across all Northern Ireland eligible land.

This basic entitlement value will be topped up by a farmer's historic claims pattern using the money left in the budget and all the the money arising from the suckler cow premium, the extensification premium and the dairy premium schemes.

Full decoupling of all direct payments in the beef, sheep and arable sectors will be introduced from 2005.

It will also be introduced then in the local dairy sector regardless of decisions elsewhere in the United Kingdom.

The Ulster Farmers' Union says the latest common agricultural policy reform will allow the industry to respond directly to public opinion on issues such as food safety and water quality.

UFU President John Gilliland said the reforms would bring farmers and the general public into a new era.

"The CAP support given to farmers accounts for about 3% of public expenditure," he said.

"In return, Northern Ireland farming families will be looking after the countryside and our environment."