CAPRI Common Agricultural Policy Regional Impact

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CAPRICommon Agricultural Policy Regional Impact
Impact analysisof the Luxembourg
Agreementimplementation optionsCAPRI
results Wolfgang Britz Ignacio
Perez University Bonn
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CAPRICommon Agricultural Policy Regional Impact

• Outline
• What is CAPRI ?
• How are decoupled premiums presented in CAPRI ?
• What implementation options are considered ?
• Which are the main results ?
• What may we learn from the results ?

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What is CAPRI ?

• Common Agricultural Policy Regionalised Impact
• A tool to support policy makers and the publicin
  assessing future impacts of agricultural policy
  reforms
• on farm income, production, input use and the
  environmentat regional level (NUTS II, 200
  regions)
• on prices, demand, consumer welfare at Member
  State level
• on imports, exports, import and export prices,
  market interventions and FEOGA budget at EU level
• Developed, maintained and applied by a network of
  European researchers
• Mostly financed by DG-RSRCH since 1996

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How are decoupled premiums presented in CAPRI ?
Plus premiums which continue to be coupled rice
premiums, energy crops, pulses ..
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What options are analysed ?

• In here, four implementation strategies are
  analysed
• Full decoupling for all Member States
• Plausible implementation (will be explained
  later)
• Slaughter premiums fully coupled, rest fully
  decoupled
• Crop premiums coupled as far as possible (Member
  State specific implementation), animal premiums
  fully decoupled
• Implementation as farm premium

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A plausible coupling ?
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A plausible hybrid model ?(DE,DK,FI,UK)
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Expected effects of decoupling

• Farmers win if production program influencedby
  coupled premiums in Agenda 2000? more market
  orientation possible
• Reduced production triggers price increases?
  further income gains for farmers
• Higher prices hurt consumers
• Environmental effects positive less negative
  externalities, negative effects of land
  abandonment dampened by cross-compliance

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Main results

• The Luxembourg Compromise
• increases farm incomes
• stabilizes the FEOGA budget
• but hurts consumers due to higher prices
• Welfare gain 1 Bio Euro(2009, compared to
  Agenda 2000 for the plausible implementation
  scheme)
• 4.6 Bio Euro for farmers
• -2 Bio Euro for consumers
• -1.5 Bio Euro for the processing industry
• Similar picture across all EU 15 Member States

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Results for crop activities, EU15(2009, compared
to Agenda 2000 for the plausible implementation
scheme)

• Reduced incentives for Grandes Cultures
• More fallow land (8 or 800 th. ha)and
  pasture/fodder production (4 or 2.3 Mio ha)
• Less cereals (-7.5 or -2.7 Mio ha ),oilseeds
  (-5 or -250 t ha), pulses (-5 or -220 t ha)
• Sharp drop in durum wheat (-24 or -0.9 Mio ha)
• Change in cropping pattern strong in marginal
  areas and where durum is important.

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Change in cereal area
2009, Luxembourg compromise, probable
implementation scheme, compared to Agenda 2000
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Change in durum wheat area
2009, Luxembourg compromise, probable
implementation scheme, compared to Agenda 2000
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Results for crop markets, EU15(2009, plausible
implementation scheme compared to Agenda 2000)

• Higher cereals (6) and oil seed prices (4)
• Effects on EU-15 feed quantities
• -4 for cereals
• -5 for oil cakes
• Feed composition in cattle changes
• Less cereals (-6) and oil cakes (-8)
• More own produced fodder (5 grass, 20 fodder
  from arable land)
• Higher feed prices are reflected into higher
  prices for pork (1.4) and poultry (1.2)

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Results for animal activities

• Reduced incentives for beef and sheep production
• Less suckler cows (-10), beef cattle (-7.5),
  sheep (-7.5)
• Meat production drops beef -5, sheep -6
• Beef (8) and sheep (12) meat prices increase
• Shift to higher final weights
• Demand changes are less pronounced,range of /-
  0.5 for different meat products
• Beef exports drop by -22, imports increase by
  10
• Changes in administrative prices for butterdo
  not impact on dairy cow herds (milk
  quota),butter prices drop around 4

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Change in suckler cow herd
2009, Luxembourg compromise, probable
implementation scheme, compared to Agenda 2000
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Results for environmental indicators

• In overall positive
• Smaller herds reduce ammonia and greenhouse gas
  emissions and potential leaching
• Extensification in fodder production,lower
  stocking rates
• But
• Possible negative effects of increased idling
  land must be off-set by strict cross-compliance

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Change in Nitrogen Surplus
2009, Luxembourg compromise, probable
implementation scheme, compared to Agenda 2000
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Change in GHG Emissions (in CO2 Equivalents)
2009, Luxembourg compromise, probable
implementation scheme, compared to Agenda 2000
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Change in farm incomeMio Euro, 2009, compared to
Agenda 2000
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Change in farm income
2009, Luxembourg compromise, probable
implementation scheme, compared to Agenda 2000
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Change in consumer welfareMio Euro, 2009,
compared to Agenda 2000
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Change in cereals area2009, compared to Agenda
2000
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Change in durum wheat area2009, compared to
Agenda 2000
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Change in suckler cow herds2009, compared to
Agenda 2000
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Possible conclusions

• Partial compared to full decoupling leads
• to welfare losses, especially for farmers
• to higher pressure on the environment
• to lower market prices ? more likelihood of
  market interventions
• Complex mix of green and amber box
  instruments
• But,
• Overall only minor differences between
  implementation schemes
• Pronounced effects only for some sectors such as
  suckler cows or durum wheat

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Thanks for your attention Further information on
CAPRI or the results www.agp.uni-bonn.de/rsrch/c
apri/capri_e.htm orbritz_at_agp.uni-bonn.de