1. © 2008 Séan Rickard WHAT PRICE PROTECTION: An economic assessment of the impact of proposed restrictions WHAT PRICE PROTECTION: An economic assessment of the impact of proposed restrictions Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk

2. © 2008 Séan Rickard  I have worked as an economist in agriculture for more than 30 years; Introduction …  Most of my work has been focused on the direct and indirect effects of policies;  The impact of any significant change in policy should be assessed and understood.

3. © 2008 Séan Rickard Based on two earlier studies – a PSD interpretation of the loss of substances under four scenarios Based on two earlier studies – a PSD interpretation of the loss of substances under four scenarios My study was … And a study by ADAS – the UK’s science based consultancy – estimating the associated loss of yields And a study by ADAS – the UK’s science based consultancy – estimating the associated loss of yields My study translated this work into the effect on farm and retail prices

4. © 2008 Séan Rickard Herbicide Fungicide Insecticide Herbicide Fungicide Insecticide Herbicide Fungicide Insecticide Herbicide Fungicide Insecticide Herbicide Fungicide Insecticide Herbicide Fungicide Insecticide Wheat: Potatoes: Brassicas: Wheat: Potatoes: Brassicas: 13 49 26 29 11 0 8 44 17 13 49 26 29 11 0 8 44 17 37 65 47 36 22 38 50 44 37 65 47 36 22 38 50 44 37 62 92 36 33 77 50 55 83 37 62 92 36 33 77 50 55 83 84 97 100 79 72 100 75 83 100 84 97 100 79 72 100 75 83 100 Commission Ex Sub Parliament Ex Sub Percent loss (PSD) …

5. © 2008 Séan Rickard Yield (t/ha) Price (£/t) Revenue Op. Costs (£/ha) Margin (£/ha) % rise in price Yield (t/ha) Price (£/t) Revenue Op. Costs (£/ha) Margin (£/ha) % rise in price Scenarios Status Quo 8.6 110.0 974.0 635.0 339.0 - Status Quo 8.6 110.0 974.0 635.0 339.0 - Commission Minimum 6.7 145.0 964.0 625.0 339.0 32% Commission Minimum 6.7 145.0 964.0 625.0 339.0 32% Parliament Maximum 3.4 259.0 870.0 531.0 339.0 135% Parliament Maximum 3.4 259.0 870.0 531.0 339.0 135% Wheat margins …

6. © 2008 Séan Rickard Yield (t/ha) Price (£/t) Revenue V. Costs (£/ha) Margin (£/ha) % rise in price Yield (t/ha) Price (£/t) Revenue V. Costs (£/ha) Margin (£/ha) % rise in price Scenarios Status Quo 47.0 85.0 3,995.0 2,217.0 1,778.0 - Status Quo 47.0 85.0 3,995.0 2,217.0 1,778.0 - Commission Minimum 37.0 107.0 3,957.0 2,181.0 1,776.0 26% Commission Minimum 37.0 107.0 3,957.0 2,181.0 1,776.0 26% Parliament Maximum 22.0 179.0 3,938.0 2,160.0 1,778.0 111% Parliament Maximum 22.0 179.0 3,938.0 2,160.0 1,778.0 111% Potato margins …

7. © 2008 Séan Rickard Yield (t/ha) Price (£/t) Revenue V. Costs (£/ha) Margin (£/ha) % rise in price Yield (t/ha) Price (£/t) Revenue V. Costs (£/ha) Margin (£/ha) % rise in price Scenarios Status Quo 9.0 700.0 6,300.0 3,938.0 2,362.0 - Status Quo 9.0 700.0 6,300.0 3,938.0 2,362.0 - Commission Minimum 6.8 845.0 5,745.0 3,383.0 2,362.0 21% Commission Minimum 6.8 845.0 5,745.0 3,383.0 2,362.0 21% Parliament Maximum 2.0 2,391.0 4,782.0 2,420.0 2,362.0 236% Parliament Maximum 2.0 2,391.0 4,782.0 2,420.0 2,362.0 236% Calabrese margins …

8. © 2008 Séan Rickard A 100% increase in cereal prices – without any mark-up – would raise a standard loaf by 9p, a litre of milk by 3p & a kilo of pork 40p A 100% increase in cereal prices – without any mark-up – would raise a standard loaf by 9p, a litre of milk by 3p & a kilo of pork 40p Retail food prices … The knock on effects from the recent 100% cereals price rise raised retail food inflation in the UK to 13% but for low income families the increase was higher The knock on effects from the recent 100% cereals price rise raised retail food inflation in the UK to 13% but for low income families the increase was higher The potential impact on vegetables very severe so less healthy eating

9. © 2008 Séan Rickard  The increase in prices could be lower if the lost output was made up with imports;  But in this situation many farm businesses would be unviable with widespread hardship;  Reduced domestic production puts at risk many food processing-manufacturing jobs;  The effects for EU countries’ trade in food would be adverse;  Recent events point to the need for higher not lower productivity from EU’s farms.  But in this situation many farm businesses would be unviable with widespread hardship;  Reduced domestic production puts at risk many food processing-manufacturing jobs;  The effects for EU countries’ trade in food would be adverse;  Recent events point to the need for higher not lower productivity from EU’s farms. Wider considerations …

10. © 2008 Séan Rickard  Food inflation returned in 2008 and food prices are predicted to be higher in future;  The over-riding lesson is that the world needs to increase the productivity of farming;  Restrictions on protection substances are not appropriate at this time and are not substitutes for training and education. Concluding thoughts …

11. © 2008 Séan Rickard WHAT PRICE PROTECTION: ANY QUESTIONS? WHAT PRICE PROTECTION: ANY QUESTIONS? Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk