Farmers' behavior and the provision of public goods: towards an analytical framework

The new CAP reform aims to stimulate the role of agriculture as provider of public goods. An analytical framework is developed to model farmers’ decision making and to gain insight into farmers’ behavior in response to a number of policy instruments. The framework integrates characteristics of farm, farmer, market, as well as the policy instruments. Theoretical analysis suggests that attitudes, off-farm employment opportunities, non-pecuniary benefits and expectations of future developments can play important roles in farmer’s decision making regarding the provision of public goods. Empirical research is needed to test the hypothesis

Structural change in the dairy sectors of Germany and the Netherlands - A markov analysis

With the milk quota announced to be abolished in the future, the dairy sector is going to face a significant policy regime shift. This paper sets out to analyze the impact of milk quotas on the dairy farm structure of two important milk producing member states: Germany and the Netherlands. Based on proper behavioral assumptions, non stationary Markov chain models are specified and estimated using a generalized cross entropy procedure, which takes into account both sample and prior information. Moreover four mobility indicators characterizing structural change are developed and calculated. Structural change in the dairy sector as measured by the mobility measures is faster in West Germany than in the Netherlands. However, in the transition region East Germany structural change outpaces that of the traditional German and Dutch dairy sectors by a factor two or more. The introduction of milk quotas as of April 1, 1984 reduced overall farm mobility for the Netherlands, but increased mobility in West Germany. However, in both cases the milk quotas lead to an increase in upward mobility

The 'milk quota rent puzzle' in the EU: economic significance, review and policy relevance

In the so-called Common Agricultural Policy (CAP) 'Health Check' the European Commission has recently proposed gradual transitional measures to allow a 'soft landing' of the milk sector to quota expiry. The aim of this paper is to support policy makers to get better insights in the implications of some of the most important economic assumptions and empirical choices made in partial equilibrium models focusing on dairy. Three partial equilibrium models are considered: the Agricultural Member states MODeling (AGMEMOD) model, the Common Agricultural Policy SIMulation (CAPSIM) model, and the European Dairy Industry Model (EDIM). The paper analyzes how the most important economic supply components, as they are part of the three key dairy models, affect milk production projections. A main conclusion is that the evaluation of the contribution of a study should not be based on one single characteristic (such as quota rents, supply responses). One isolated characteristic is not able to explain finally obtained model outcomes. Quota rents, supply responses, shifters and the demand side have to be integrated with each other

Modelling dairy farm size distribution in Poland using an instrumental variable generalized cross entropy markov chain approach

The aim of this paper is to analyse the evolution of the dairy farm structure of Poland during the post-socialist period. First the paper focuses on how the farm structure has changed over time and what path it is likely to follow in the coming decade. Second, it is tested whether the evolution of farm size is explained by non-stationary effects. Finally, several statistical indicators are computed on farm mobility and on which farms are likely to survive. An instrumental variable generalised cross entropy Markov chain approach which incorporates prior information is applied for estimation. Prior information included general and plausible information on farm mobility and structural adjustments based on independent literature. The projections show that dairy farm numbers will continue to decline, although accompanied by an increase in the number of medium-sized and large farms. Subsistence dairy farms are expected to slowly leave the sector in the coming decade

Cost-benefit analysis of the Dutch nature conservation policy: direct, indirect effects and transaction costs of the ecological main structure in the Netherlands

The scattering of nature areas in the Netherlands and the increased demand for nature lead to a governmental project in 1990 to complete a network of nature favouring areas, the ecological main structure, in 2018. The financial and economic costs and benefits of this project were analysed. Targets for purchasing of agricultural land and conversion into nature were adjusted several times as the land price doubled between 1995 and 2000. The purchasing rate still has to double, which will probably drive up the land price even further. The alternative is long-term contracts with farmers or private landowners for nature conservation

Is prevention better than cure? An empirical investigation for the case of avian influenza

The new EU Animal Health Strategy suggests a shift in emphasis away from control towards prevention and surveillance activities for the management of threats to animal health. The optimal combination of these actions will differ among diseases and depend on largely unknown and uncertain costs and benefits. This paper reports an empirical investigation of this issue for the case of Avian Influenza. The results suggest that the optimal combination of actions will be dependent on the objective of the decision maker and that conflict exists between an optimal strategy which minimises costs to the government and one which maximises producer profits or minimises negative effects on human health. From the perspective of minimising the effects on human health, prevention appears preferable to cure but the case is less clear for other objectives

Economic Analysis of the Effects of the Expiry of the EU Milk Quota System

This report has been prepared to provide a quantitative assessment of the impact of the abolition of EU milk quotas on the EU dairy sector, including the different policy approaches of gradual phasing out and abrupt abolition of milk quota

Removing EU milk quotas, soft landing versus hard landing

This paper analyses EU dairy policy reforms and mainly focus on EU milk quota removal scenarios. The model used to evaluate the scenario is a spatial equilibrium model of the dairy sector. It integrates the main competitor of the EU on world markets, Oceania, as well as the main importing regions in the rest of the world. The paper first assesses the impact of the Luxembourg scenario in the prospect of a new WTO agreement in the future. It then provide a quantitative assessment of the impact of the abolition of EU milk quotas on the EU dairy sector either through a gradual phasing out or through an abrupt abolition of milk quotas. Compared to a status-quo policy, the Luxembourg policy leads to a 7.6 percent milk price decrease and a 1.9 percent milk production increase. A gradual increase of milk quotas as recently proposed by the European Commission (+ 7% over 6 years) generate a 9% drop in the EU milk price (compared to the Luxembourg scenario) and an increase in production by 3.5%. A complete elimination of quotas leads to an additional 1% increase in production and an additional 3% drop in the EU milk price. As compared to the baseline scenario, in the Luxembourg scenario in 2014-15, producers gain 1.3 billion ¿, whereas in the same year they lose 2.6 billion ¿ in the soft landing scenario. As such the direct payments are more than sufficient to compensate producers for the loss of producer surplus in the Luxembourg scenario, but fall short to achieve full compensation in the soft landing scenario

New member States and Cross Compliance: The case of Poland

The New Member States did not yet have to implement the full cross-compliance package. Currently the GEAC requirements in the conditionality clause for the direct payments. The SMRs will become part of it starting from 2009. This paper looks into the Polish case and looks whether timely implementation is feasible. Several factors are mentioned, indicating that this will be a hard task. The problems with implementation explain why the new member states are advocating a gradual phasing in of the SMRs

Cross compliance and competitiveness of the European beef and pig sector

Beef and pig production are important sectors affected by the cross-compliance policy. Full compliance with SMRs and GAECs generates costs and benefits which may have an impact on the competitiveness of these sectors on the world market. Compliance with the Nitrate Directive, animal identification and registration requirements and animal welfare standards can give rise to non-negligible cost of production increases at individual farm level and at sector level. Additional costs can be relevant either due to a low degree of compliance or by significant adjustments costs at farm level. Full compliance generates a level playing field between Member States of the EU, as some countries have to face higher additional costs than others, which are be attributed to differences in degree of compliance. This paper first presents evidence of additional costs at individual farm level due to full compliance. Then for beef and pork a methodology has been developed in order to calculate sector cost impacts following an upcsaling procedure for each of the analysed directives. Simulations with the GTAP model have enabled an assessment of the trade effect of compliance with standards and the impact on the external competitiveness of the EU beef and pork production. In some policy fields covered by cross-compliance important trade partners such as Canada, USA and New Zealand have implemented policies similar to the EU. In these three countries comparable standards to those in the EU were identified and the level and cost of compliance have been assessed. The pig sector will be affected most by a unilateral compliance with standards in the EU, in particular as the Nitrate Directive is concerned. Within the EU pig production costs will rise by 0.545 %. Imports may increase by 4% and exports may fall by 3%. However full application of the Clean Water Act in the US, which contains similar obligations to the Nitrate Directive, generates a significant sector cost increase (1,08%) which may counterbalance the loss of competitiveness of EU pork production towards the US. Compliance with the mandatory animal welfare standards has only minor cost implications and has negligible effects on external competitiveness of the EU both because of a high degree of compliance and relatively low adjustment costs at farm level. Finally, in many EU member states the degree of compliance of beef farms with the animal registration and identification directives is below 100%. Additional costs for full compliance within the EU have been estimated at 0.455%, which may cause an increase of beef imports of 2.21% and a decline of exports of ¿2.12%. This loss in competitiveness of the EU will further favour the position of Brazil on the world beef market. At the other hand significant benefits are obtained in food security of EU beef