Farm viability in the EU Impact of reduction of farm payments

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Farm viability in the EU Impact of reduction of farm payments 14/01/2019 Farm viability in the EU Impact of reduction of farm payments OECD NETWORK FOR FARM LEVEL ANALYSIS 9 – 10 september 2010, Paris Dr. Hans C.J. Vrolijk; LEI Agricultural Economics Research Institute

Overview Problem description Methodology Results 14/01/2019 Problem description Methodology Results Conclusion and discussion www.lei.wur.nl/UK/ publications and products

Problem description Farm viability depends on level and volatility of incomes Level of income depends to different extents on farm subsidies Farm payments under discussion Research objective Importance of subsidies in the agricultural sector Impact of reduction of payments on viability of farms

Methodology FADN dataset Three scenarios evaluated: Most detailed micro-economic dataset Includes the variety among farms in a country Focus on income from farming Three scenarios evaluated: All farms subsidies Decoupled payments Decoupled payments plus production related subsidies

Farm viability categories

Importance of subsidies (countries)

Importance of subsidies (types of farming)

Results (national results, decoupled payments)

Results (national results)

Results (national results bottom and top 5)

Results (arable, decoupled payments)

Results (arable, decoupled payments)

Results (arable, decoupled and product payments)

Other types

Other impacts of abolishment of farm payments Simulation describe first order impacts Other indirect effects Adaptations of farmers Land prices Structural change Risk exposure Prices of products

Sensitivity 20% price increase of output and intermediate consumption 15% of farms improve viability class 3.5% shift from negative to positive income Large number of farms shifting to positive income in Denmark (12%), France (8%), Germany (8%), Luxembourg (7%) and the UK (7%)

Discussion Limitations of approach First order impacts Assumption of fixed cost structure Only income from farming included in the analysis

Conclusions Denmark, Ireland, Sweden and UK heavily affected, for some types France, Germany, Hungary and Slovakia CAP types of farms less vital, adaptations can be expected, intensive sectors (horticulture, permanent crops and granivores) less affected Land related farming activities most affected, impact on rural areas FADN of great importance to estimate effects at farm level, integration with other agricultural models

14/01/2019 Discussion © Wageningen UR