Disaggregated Impacts of CAP Reforms: Proceedings of an OECD Workshop (AGRICULTURE ET)

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Breustedt, G. Burfisher, M. Cahill, S. Chavas, J. Economics Journal of Agricultural Goodwin, B. Happe, K. The impact of switching the agricultural policy regime on farm structures. Hennessy, D. Kallas, Z. Katranidis, S. Ghent, Belgium. Key, N. American Journal of Key, N. Orlando, Florida.

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AgriFood-Övrigt: Disaggregated impacts of CAP reforms

Koundouri, P. Lamb, R. Lambert, D. Latruffe, L. Lence, S. Lin, W. Makki, S. McIntosh, C. O'Donoghue, E. OECD, a. OECD, b. OECD, c. Ooms, D. Risina, M. Mladenova, D. Mitova, R. Popov and I. Boevski Koteva N. Bachev, M. Mladenova, and K. Kaneva Latruffe L. Manrique E. The economic effects of the CAP reform on Aragonese sheep farms, Mediterranean livestock production: uncertainties and opportunities. Mladenova M. When there are only two countries in the customs union, the effect of the coupled payment is to increase the production of good 1 in country A and overall production of good 1 Figure 2.

This has the impact of decreasing the price for good 1, because of the free movement of goods. The coupled payment for good 1 in country A, within the single market, leads to lower prices for all producers Figure 2. That is, the more inefficient country A expands production of good 1 at the expense of the more efficient country B. Furthermore, the distortion in production of good 1 also affects production and prices for good 2, as shown in Figures 2.

Production impacts of coupled payment for good 1 in country A Good 1 2 country situation Good 1 10 country situation Good 2 2 country situation Good 2 10 country situation Supplies 80 60 40 20 0 0 2 4 6 8 10 Figure 2.

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These highlight that, if the output of the sector receiving the payment represents a small proportion of the total output of the custom union, then the depressing effects on output and prices becomes negligible. However, higher values of such payment actually depress the profits of both countries. This negative impact arises because under the assumptions of the model the coupled payment prompts a supply response that leads to a price reduction for the commodity to the extent that the market price for the good receiving the coupled payment is depressed by a greater proportion than the coupled payment therefore the total revenue per unit of commodity, i.

If the proportion of the production under coupled payments is small i. Impact on profits of coupled payment for good 1 in country A Country A 2 country situation Country B 2 country situation Country A 10 country situation Country B 10 country situation 2 2 Profits 2 1 1 1 1 1 0 1 2 3 4 5 6 7 8 9 10 The above simulation exercise highlights a number of factors which are important in determining the extent of the impact of partially coupled payments. These include: the value of the payment; the proportion of overall production that is coupled and; the relative competitiveness of producers.

Whilst the exercise usefully highlights some of the potential impacts of partial decoupling, it is clear that the actual impacts may be influenced by a whole range of factors. For example, if production of a good subject to coupled payments is not profitable in its own right as is often the case with agricultural products within the European Union , then the incomes of those producers receiving the payments might be reduced compared to a fully decoupled situation, even in the absence of any price-depressing effect.

This is because part of the payment will have to be used to subsidise loss-making production, whereas in a decoupled situation producers would be able to cease production and keep the whole of the decoupled payment as income less a small cost to ensure that the regulatory requirements such as maintaining land in good agricultural and environmental condition are met. However, there has been much discussion as to the likely direct and indirect production effects of decoupled payments see for example Westcott and Young, ; OECD, ; Serra et al.

The most direct production-inducing effect is if producers continue to treat the payment as coupled i. For example, Renwick and Revoredo highlight that in the first year after decoupling in the United Kingdom, production levels were virtually identical to the pre-decoupled situation despite the fact that a number of enterprises were clearly unprofitable.

However, it might be argued that this was more of a reaction to the uncertainty surrounding decoupling rather than farmers making longer-term production decisions. Less directly, there are also possible production-inducing effects from decoupled payments arising from their impact on wealth and attitudes to risk OECD, If this is the case, then the difference between a partial and full decoupling scenario might be smaller than highlighted by the simulations. A further confounding effect when considering the impact of coupled payments in agriculture is the fact that some products e.

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In this situation, increased production of the input arising from a coupled payment may in fact reduce costs of production for the other producers. However, in a similar way, the contraction of other crops or livestock due to the substitution effect in production may increase the cost of final goods that use the substitute goods. This highlights that the structure of production including own- and cross-price elasticities of supply and demand are important factors in determining the actual impacts of coupled payments.

Adopting partial rather than full decoupling has the potential to impact on production, and this impact may or may not be negligible. In terms of understanding the impact within the EU, a range of factors will be important in addition to those discussed above. A further important point was made by the OECD , although in the context of decoupling.

They argued that a policy may lead to the same equilibrium outcome as would have occurred without the policy, but that it may still have the potential to be distorting if the situation changes. However, if prices were to fall again to their levels of around GBP 60 to GBP 70 per tonne when relatively little production in the European Union was profitable, there may well be a different production response between the decoupled and partially decoupled situation. However, a number of factors make quantifying the actual impact from available statistics challenging.

These include: the relatively short period since implementation; the staggered nature of implementation across countries and sectors; and the complexity of capturing the impact of other key drivers for example, the food price spike of Detailed analysis of production changes since the introduction of decoupling has been undertaken by Thomson et al.


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The results of this analysis highlight few distinct differences in production trends between those countries that fully decoupled and those that did not. The one exception appears to be in the beef sector where there is a divergent trend emerging between France who maintained the maximum allowable degree of coupling and countries such as the United Kingdom and Germany who fully decoupled.

The potential complexity of the issues involved and the lack of long-run data on the impact of partial decoupling support the use of an approach that, whilst taking account of up-to-date data, is able to simulate the development of markets within the European Union over time with and without decoupling. Therefore the approach adopted is to use a well recognised partial equilibrium model the CAPRI model to consider the development of agricultural markets up to the end of current policy period and to examine the impacts on production, prices and revenues.

The next section briefly describes the key features of the model.


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The market model allows the impact on the market price of any changes in production as a response to the direct payment to be fed back to farm-gate prices. It also simultaneously allows the simulation of policy changes at the market level export subsidies, intervention, import tariffs, tariff rate quotas.

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The payment scheme for subsidies to farmers under the current legislation is part of the optimization procedure of CAPRI. The design of the direct payment and SPS adheres closely to the mechanisms defined by the EU regulations. Each premium is associated with 1 a list of eligible agricultural activities, 2 a national or regional ceiling in monetary or physical terms, and 3 information as to how the premium amount is computed, i. The ceilings mentioned under 2 are used to decrease the payments if the ceilings are overshot.

For the premiums defined in the CAP reform, a special routine removes premiums that are to be decoupled, and adds a corresponding amount of money to the SPS.

poplaceporcomp.ml In CAPRI, therefore, the SPS as well as the single area payment scheme in the new member states influence land rents, but hardly affect the choice of crop mix, except for marginal land abandonment. In effect, the SPS payment rates are computed in two steps. The total regional payment is then divided by the regional eligible area to obtain the average SPS amount per hectare in each region, with the total regional amount as the payment ceiling. This approach means that it is possible to capture regional differences in payment rates, if not farm-by-farm differences.

In order to gain a better understanding of the potential role individual countries may play, the scenarios were re-run on the assumptions that: only France decoupled; only Spain decoupled; and countries that maintained some form of coupled payments with the exception of France and Spain decoupled. The results are presented in terms of changes from the baseline scenario in , i. Results In order to simplify analysis, the results presented here are those salient to assessing the key impacts of partial decoupling as highlighted above.

Prices Table 2. Change in prices under decoupling scenarios Percentage change from baseline scenario in Spain only France only Other countries All fully decoupling Soft wheat 0. It is evident that in terms of overall production full decoupling is not projected to have a major impact when compared to the baseline scenario of continuation of the reform situation. At the member state level, Table 2. In terms of the earlier conceptual analysis, some of the changes may seem counterintuitive, and it is worth exploring these further as they highlight the complex interdependencies in the agricultural system and the difficulty of capturing these within a modelling framework.

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