Impacts of the flat rates and digressive schemes on the distribution of Direct Payments in the EU

The Mid-Term Review and the Health Check reforms of the EU’s Common Agricultural Policy (CAP) include numerous options for national implementation of the Single Payment Scheme. After the far-reaching decoupling of Direct Payments, a further reform of the Common Agricultural Policy is necessary with respect to the financial guidelines to be established for the period after 2013. Referring to Germany, the principles of the hybrid and regional models and their effects on the distribution of Direct Payments are shown. With regard to future CAP, the impacts of alternative payment options are analysed based on farm individual FADN data of EU-27. Options of digressive premium schemes, including capping with regard to labour input and regionalised or EU-wide flat rates are analysed.CAP, Direct Payments, Decoupling, Modulation, FADN, Financial Economics, Q12, Q18,

Impacts of SPS options on the distribution of support

The Mid-Term Review and the Health Check reforms of the EU’s Common Agricultural Policy include numerous options for national implementation of the Single Payment Scheme. After the farreaching decoupling of Direct Payments, further reforms and changes of support measures are necessary with respect to the financial guidelines to be established for the period after 2013. Referring to Germany, the principles of the hybrid and regional models and their effects on the distribution of direct payments are shown. With regard to CAP after 2013, the impacts of alternative payment options are analysed based on farm individual FADN data of EU-27. Options of digressive premium schemes, including capping wrt labour input, regionalised or EU-wide flat rates, lowering the premium level and the partial transfer of Pillar-I in favour of Pillar-II is analysed.CAP, Direct Payments, Decoupling, Modulation, FADN, Agricultural and Food Policy,

Auswirkungen und alternative Ausgestaltung der Modulation von Direktzahlungen

The system of direct payments in the European Union’s Common Agricultural Policy (CAP) is being criticised with respect to the level, unequal distribution and allocation effects on production. Besides the decoupling of direct payments a modulation and a partial transmission to the second pillar of CAP are proposed. Modulation on a voluntary basis was already introduced in Agenda 2000. In its Mid-term Review of the Agenda the Commission proposes an obligatory dynamic modulation scheme including the capping of direct payments beyond a threshold of 300 000 €. Possible impacts of the Commission's proposal are assessed with simulations based on farm accounting data of EU-FADN. Distribution effects between farm sizes and member states are unveiled. Alternate options with regard to capping and progressive reductions of direct payments are analysed. Due to the different distribution of direct payments, farms of EU Member states will be affected differently by the proposal of the Commission: The franchise of 5 000 € will exempt from modulation about tw -thirds of farms being represented by FADN respectively 15 % of the premium volume. About 80 % of the volume are subject to proportional reductions and 5 % fall off due to capping. More than four fifths of the capping affects Eastern Germany alone. The capping measurement leads to large distributional effects between farm sizes and between member states: In the first step of the dynamic modulation, premia beyond the franchise are reduced by 3 % while they are totally taken away beyond the capping threshold. Direct payments to large farms in Eastern Germany would be reduced by more than half. Due to drastic income shortfalls farm adaptations by splitting-up the farm enterprises or reducing the number of hired workers would be induced. An alternate scheme of modulation based on a progressive reduction of direct payments has been proposed. Elements of this system are a franchise, dynamic progressive reductions of direct payments within a progressive zone and proportional premia reductions beyond the upper limit of the progressive zone. There is no capping and with regard to administration purposes no other factors than the level of direct payments are included. With the determination of a few parameters — the franchise, the progression zone and the minimum and maximum rates of reduction — the system can be handled flexibly in view of social and budgetary objectives. Compared to the Commission's proposal farms entitled to less than 100 000 € of direct payments would forfeit less money under the progressive reductions system. Farms entitled to 100 000 to 300 000 € of direct payments would lose moderately more. Among the large farms however, premia reductions would be distributed more evenly and never exceed the maximum rate of e.g. 35 % while by the capping as proposed by the Commission affected farms could lose much more with the average loss increasing from 35 to 42 % of original entitlements.midterm-review, modulation, farm accounting data network, direct payments, Agricultural and Food Policy,

The challenges of model based policy advice

In policy consultation, communicating model results to administration and policy makers has always proven to be a challenge for scientists. Many of the relevant preconditions for effective and successful policy advice are aggravated when results are based on the simultaneous use of a multitude of different models. This paper identifies key issues – e.g., relations to administration; correct identification of prevailing objectives of all agents involved; ability to run scenarios ‘in time’ - and discusses strategies for successful communication based on the experiences of the vTI model network. Specific attention is paid to the issue of communicating ‘conflicting’ results of different models: while often seen as a source for scientific insight, such ‘inconsistencies’ have proven to be a major obstacle for acceptance in a non-academic institutional setting. The experiences, as well as the literature, point specifically to the importance of tight linkages between modellers and policy makers, and the need to abandon decisionist or technocratic approaches of policy advice in favour of pragmatic approaches stressing the bilateral nature of communication.model network, policy advice, Agricultural and Food Policy, Teaching/Communication/Extension/Profession,

Impacts of Decoupling and Milk Quota Trade on the French and German Dairy Sectors

This paper analyses the impacts of the 2003 CAP reform and of milk quota trade at the national level. To this end, a mathematical programming model has been further developed for Germany and extended to other main milk-producing EU member states like France. Homogeneous farm groups are built on the basis of EU Farm Accountancy Data Network. The results show that quotas will be fully used in both countries if quota trade is possible. A clear tendency in the reallocation of production from small towards large farms can be seen in all regions for France. In Germany, the redistribution of direct payments induced by the implementation of the regional scheme of decoupled payments leads to higher reductions of income in dairy & beef farms than in France.2003 CAP reform, milk quota trade, model, mathematical programming, International Relations/Trade,

Impacts of environmental regulations on the efficiency of arable farms in France and Germany

This paper develops a methodology for asymmetric treatment of desirable and undesirable outputs. First, a hyperbolic output efficiency measurement is used to describe a middle term transformation of production processes where producers try to improve their competitiveness together with a reduction of the negative impact on the environment. Second, a radial efficiency measurement, called directional output distance function, is used to depict a long-term transformation of the production process. A non-parametric Data Envelopment Analysis (DEA) and a Stochastic Frontier Analysis (SFA) are used to evaluate the impact of agricultural policy changes, both in France and Germany, on the technical and environmental efficiency of arable farms, taking into account participation or not in agri-environmental programs. The results from both methods indicate only limited possibilities for environmental improvements, mainly for farms participating in agri-environmental programs.Frontier analysis, technical and environmental efficiency, environmental regulations, Agricultural and Food Policy, Environmental Economics and Policy, Productivity Analysis,

Assessing impacts of CAP reform in France and Germany

The 2003 CAP Reform left EU member states much room for national implementation. The farm group model EU-FARMIS is applied to quantify the effects of the reform and the impacts of the options for national implementation. The analysis is done for France and Germany because their implementation schemes adequately reflect the broad range of options. It is found that cereal and fodder maize production is reduced both in France and Germany. In contrast, the acreage of other arable fodder crops, of set-aside and of non-food crops is expanded. While bull fattening is substantially reduced in both countries, suckler cow production is extended in France due to partial decoupling, but reduced in Germany due to full decoupling. Sectoral income effects measured in Farm Net Value Added are similar. The regional implementation of decoupling in Germany induces a significant redistribution of direct payments and therefore causes differences in income effects depending on farm type, location and size.CAP Reform, decoupling, farm group model, FADN, Agricultural and Food Policy, Land Economics/Use,

Cost of production estimates for wheat, milk and pigs in selected EU member states

Summary: This study summarizes cost estimates based on the EU Farm Accountancy Data Network using the General Cost of Production Model, developed, applied and tested within the FACEPA project. Results are provided for wheat, pigs and milk for the main producer countries of the EU for the period 1999 to 2007. Estimated input-output coefficients are generally based on monetary figures, expressing cost shares referring to total output. Effects of scale, specialization and location can be derived by estimates based on respective sub-samples. Costs per unit are derived based on input-output coefficients and output values, providing costs per hectare or ton for wheat and per ton of milk. There is a considerable variation between Member States not only of production costs, but also of output, and output plus subsidies (due to the national implementations of full or partially decoupling schemes), especially for wheat and milk. -------------------------------------------------------------------------- ---------------- Zusammenfassung: In dieser Studie werden Schätzungen von Produktionskosten basierend auf EU-Testbetriebsdaten unter Verwendung eines in dem EU-Forschungsprojekt FACEPA entwickelten Modells durchgeführt. Ergebnisse werden bereitgestellt für Weizen, Milch sowie für Schweine für die Hauptproduktionsländer der EU und für den Zeitraum 1999 bis 2007. Die geschätzten Input-Output Koeffizienten drücken die durchschnittlichen Kostenteile zum monetären Output des zugrundeliegenden Samples dar. Einflussfaktoren auf die Kosten wie Betriebsgröße, Standort und Spezialisierung können mittels Schätzung auf Basis entsprechend geschichteter Samples analysiert werden. Die Kosten je Einheit werden basierend auf den Schätzkoeffizienten und Outputs abgeleitet, und zwar je Hektar (für Weizen) sowie je Tonne für Weizen und Milch. Zwischen den Mitgliedstaaten bestehen erhebliche Unterschiede sowohl bei den Produktionskosten, dem monetären Output als auch den gekoppelten Direktzahlungen vor allem für Weizen und Milch.econometric analysis, production costs, ökonometrische Analyse, Produktionskosten, Agricultural and Food Policy, Farm Management, Production Economics, Research Methods/ Statistical Methods, C39, Q12,

Aufbau und Anwendung des FAL-Modellverbunds für die Politikberatung

The FAL model group combines several market, regional and farm models for comprehensive policy impact assessments. Since 1996, policy impact analyses have been provided at the request of the German Agricultural Ministry with respect to the design of direct payments, the Agenda 2000, the Mid-term Review, the Enlargement of the EU as well as several other policy measures. This article gives an overview of the models available as part of the model group, specifically describes the design of the representative farm group model, and provides results with respect to the impacts of the Midterm Review. The paper ends with a discussion of the experiences gained in model based policy consulting and the implications for future developments.Policy assessment, models, agricultural policy, midterm review, policy impact analysis, Agricultural and Food Policy,

Health Check der EU-Agrarpolitik - Auswirkungen der Beschlüsse

Zusammenfassung: Der Agrarministerrat hat im November 2008 zum Health Check (HC) der Gemeinsamen Agrarpolitik (GAP) eine politische Einigung erzielt. Das Ziel der Studie im Auftrag des Bundesministeriums für Ernährung, Landwirtschaft und Verbraucherschutz ist es, aufbauend auf einer Wirkungsanalyse der Kommissionsvorschläge zum HC, die Konsequenzen der HC-Beschlüsse mit Hilfe des Modellverbundes der vTI-Agrarökonomie sowie mit einer statistischen Auswertung des EU-Testbetriebsnetzes (FADN) im Vergleich zu einer Referenzsituation im Zieljahr 2015 zu untersuchen. In der Referenzsituation wird eine langfristig positive Entwicklung im Agrarbereich unterstellt. Vor diesem Hintergrund wird in Deutschland nach den Modellergebnissen die Milcherzeugung nach Auslaufen der Quotenregelung um 6 % im Vergleich zur Baseline ausgedehnt, infolgedessen der Erzeugerpreis um 8 % sinkt. Die Ausdehnung erfolgt vor allem in Regionen mit hoher Produktionsdichte, so dass sich der regionale Konzentrationsprozess fortsetzt. Die Betriebseinkommen gehen im Bundesdurchschnitt um 4 % zurück; in Milchviehbetrieben um bis zu ca. 11 %. Negative Einkommensentwicklungen der Milchvieh haltenden Betriebe lassen sich abfedern, wenn die eingeführten Milchbegleitmaßnahmen genutzt werden. Das dafür avisierte Mittelvolumen von 300 Mio. Euro aus der zusätzlichen Modulation leistet dazu einen nicht unerheblichen Beitrag. -------------------------------------------------------------------------- ---------------- Summary: In November 2008 the EU agriculture ministers reached a political agreement on the Health Check of the Common Agricultural Policy (CAP). The goal of the study, on behalf of the German Federal Ministry of Food, Agriculture and Consumer Protection, is to analyse the impacts of the HC agreement with the help of the Modelling Network of agricultural economics institutes of vTI, as well as with a statistical evaluation of the EU-wide Farm Accountancy Data Network (FADN) in comparison to a baseline in 2015. In the baseline a positive development in the agricultural sector is assumed in the long run. Against this background according to the model results, milk production will expand by about 6 % in Germany after elimination of the milk quota regulations. This implies a decline in the market price of 8 % against the baseline. The expansion of production occurs particularly in high density production areas, so that the regional concentration process continues. Farm income drops on national average by about 4 %, in dairy farms by about 11 %. The accompanying measures in the dairy sector can help alleviate negative income effects on dairy farms if they are used accordingly. The scheduled funding of 300 million Euro obtained from the additional modulation makes a considerable contribution for this purpose.Health Check, Gemeinsame Agrarpolitik, modellgestützte Politikfolgenabschätzung, Common Agricultural Policy, model-based impact analyses, Agricultural and Food Policy, Q12, Q15, Q18,