Adenäuer, M.

Andersen, E.

Ittersum, M.K., van

Janssen, S.J.C.

Kanellopoulos, A.

Thérond, O.

Wolf, J.

English

Name not available

Effects of high prices on Farming systems across the European Union

Wageningen Yield 

Effects of high prices on Farming systems across the European Union
Marcel Adenäuer 1, Joost Wolf 2, Sander Janssen 3, Erling Andersen 4,
Argyris Kanellopoulos 2, Olivier Therond 5, Martin van Ittersum 2
1 Institute for Food and resource economics, University of Bonn
2 Plant  Production  Systems group, Wageningen University
3 Alterra, Wageningen
4 Faculty of Life Sciences, University of Copenhagen
5 Agrosystems and territorial development, INRA Toulouse
Introduction
Prices of agricultural commodities have peaked in the period 2007 to the middle of 2008 (FAO, 2008), 
following years of sub-average yields in important production regions and higher demand for livestock 
products as a result of economic development as well as increased biomass use for bio-fuel production. 
Despite current rather low prices, a return to prices above long term trends after macroeconomic recovery 
is possible and several experts (OECD, USDA) argue that this is likely to happen in the medium-long 
term. Continuing higher prices for agricultural commodities would be a real trend break and 
unprecedented since the introduction of the Common Agricultural Policy (CAP) in the European Union. It 
raises new questions regarding the reform of the CAP (EC, 2008). Interesting questions related to the 
possible high prices for agricultural products in the future are: (a) what effects do high prices have on 
agriculture in the European Union as a whole and how do regions that differ with respect to agricultural 
productivity and production orientation, respond to this new economic environment?; (b) will a sustained 
price increase for key agricultural commodities lead to further intensification of agricultural production 
and which environmental consequences may arise from this for the EU as a whole and in specific 
“problem regions”?
Methodology
The SEAMLESS-IF approach (Van Ittersum et al., 2008) is applied in this study to analyse the effects of 
sustained high product prices on European agriculture. SEAMLESS-IF (being further developed within 
the SEAMLESS Association, see http://www.seamlessassociation.org/)  has been designed for integrated 
assessments of policy impacts and technological innovation on agriculture, using knowledge from 
different scientific fields and being suited to do analyses at different scales. The model chain applied in 
this study consists of the agricultural sector model CAPRI (Britz et al., 2008) and the bio-economic farm 
model FSSIM (Louhichi et al., 2010), and makes use of a pan-European integrated data base (Janssen et 
al., 2009). The model chain is applied for a Base year (i.e. year 2003), mainly for calibrating FSSIM on 
the observed cropping patterns, and is next applied to a Baseline and 4 high price scenarios for the year 
2013. These scenarios consist of shocks given to the CAPRI market model that lead to increasing 
commodity prices. In Scenario E1, a shortfall of supply in Australia due to water scarcity is simulated. 
Scenario E2 addresses an increase in the international raw oil price. Increasing demand from evolving
countries like China and India as well as stronger demand for biofuels are tackled in scenario E3. The last 
scenario (E4) combines a global shortfall in the production of agricultural commodities with a global 
increase of food demand. The resulting price increases from scenario E4 are then taken over to the FSSIM 
model in order to assess the impact of increased prices on different farmtypes in 15 regions across the EU. 
Results and discussions
Table 1 gives the average European market prices for agricultural product aggregates for the baseline as 
well as their relative changes in the different scenarios. The first observation is that all scenarios lead to a 
price increase for all shown aggregates, underpinning that the chosen parameters have an impact in the 
Table 1.  Mean European market prices for agricultural product 
aggregates for the Baseline and their relative changes for the four 
scenarios compared to the Baseline (2013)
Baseline (€/t) E1 - Supply shifts E2- Oil price E3 - Demandshifts E4 - Exteme
Cereals 122 1.1% 3.9% 10.1% 38.1%
Oilseeds 247 1.6% 3.5% 17.1% 61.4%
Other crops 129 0.1% 4.7% 2.8% 23.8%
Meat 615 0.2% 3.1% 3.2% 27.3%
Dairy products 1802 0.2% 7.0% 6.6% 41.9%
Oils 1216 0.2% 3.4% 4.2% 29.4%
Oil cakes 1280 0.1% 0.6% 1.3% 7.7%
envisaged direction. The second 
observation is that price increases in 
scenarios E1 to E3 are small, if we bear in 
mind that similar shocks have contributed 
to the high prices observed in 2007/08. 
However, we face here the difference 
between a medium term and short term 
equilibrium. The difference between 
modelled and observed results is that in the 
modelling all international regions can react 
to increased prices, being actually not 
possible in the short term and thus 
preventing enormous price increases in the modelling exercise. In other words, short term supply 
elasticities are much lower than the medium term elasticities as used in our modelling exercise. This 
explains the small effect observed in scenario E1. The supply shortfall in Australia was said to contribute 
a lot to the tremendous cereal price increases in 2007/08, given the global player position of Australia on 
world cereal markets. The modelled price increase in Europe is only about 1%. This is because in the 
medium term, other nations could step in to partly compensate the supply decrease of cereals. At the same 
time slightly increasing prices will bring down the demand for cereals. 
Scenario E2 shows that an oil price increase of 50% is only transferred for a small part into agricultural
commodity prices while in Scenario E3 the strongest price increases can be found in the cereal and oilseed 
sectors. This is directly connected to the assumed increase in bio-fuel demand in Europe. Scenario E4 
results in the strongest price increases (30% to 60%) for all shown categories due to the shocks being 
more global than in the previous scenarios. As we are particularly interested in analyzing the effects of 
strongly increased prices on farming systems over Europe, we take experiment E4 as starting point for 
performing the regional high price scenario analyses on farmtype level. Results at regional and farm type 
level will be presented at the conference.
Conclusions
This analysis addresses the connection between global developments on the macro level and the farm 
level. So far we can conclude that long term price increases are to be expected way below the peaks 
observed in 2007/08 but changes in supply and demand structures impact on international prices. We are 
currently analysing effects on farming systems in 15 EU-regions to assess effects in terms of cropping 
patterns and management, which in turn affect economic and environmental performance indicators.
References
Britz, W. and Witzke, P., 2008. CAPRI model documentation 2008: Version 2. URL:
http://www.capri-model.org/docs/capri_documentation.pdf
European Comission (EC), 2008. Health check of Common Agricultural Policy. 
URLhttp://ec.europa.eu/agriculture/healthcheck/index_en.htm
Food and Agricultural Organization of the United Nations (FAO). 2008. Soaring food prices: Facts, perspectives, 
impacts and actions required. High-Level Conference on World Food Security: The Challenges of Climate 
Change and Bio Energy, Rome, 3–5 June, 2008.
Janssen, S., Andersen, E., Athanasiadis, I.N., van Ittersum, M.K., 2009. A database for integrated assessment of 
European agricultural systems. Environmental Science and Policy 12, 573-587.
Louhichi, K., et al, 2010. A generic Farming System Simulator In: Brouwer, F., van Ittersum, M.K. (Eds.), 
Environmental and agricultural modelling: integrated approaches for policy impact assessment. Springer, 
Dordrecht.
Van Ittersum, M.K., Ewert, F., Heckelei, T., Wery, J., Alkan Olsson, J., Andersen, E., Bezlepkina, I., Brouwer, F., 
Donatelli, M., Flichman, G., Olsson, L., Rizzoli, A.E., van der Wal, T., Wien, J.E., Wolf, J., 2008. Integrated 
assessment of agricultural systems - A component-based framework for the European Union (SEAMLESS). 
Agricultural Systems 96, 150-165.


A database for integrated assessment of European agricultural systems.

A generic Farming System Simulator In:

CAPRI model documentation 2008: Version 2. URL: http://www.capri-model.org/docs/capri_documentation.pdf European Comission (EC),

Integrated assessment of agricultural systems - A component-based framework for the European Union (SEAMLESS).

Effects of high prices on Farming systems across the European Union

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