Change in Farm Production Structure Within Different CAP Schemes – an LP Modelling
Abstract
After accession to European Union in 2004 direct payments became very
important income source also for farmers in Slovenia. But agricultural policy in
place at accession changed significantly in year 2007 as result of CAP reform
implementation. The objective of this study was to evaluate decision making
impacts of direct payments scheme implemented with the reform: regional or more
likely hybrid scheme. The change in farm production structure was simulated with
model, applying gross margin maximisation, based on static linear programming
approach. The model has been developed in a spreadsheet framework in MS Excel
platform. A hypothetical farm has been chosen to analyse different scenarios and
specializations. Focus of the analysis was on cattle sector, since it is expected that
decoupling is going to have significant influence on its optimal production
structure. The reason is high level of direct payments that could in pre-reform
scheme rise up to 70 % of total gross margin. Model results confirm that the reform
should have unfavourable impacts on cattle farms with intensive production
practice. The results show that hybrid scheme has minor negative impacts in all
cattle specializations, while regional scheme would be better option for sheep
specialized farm. Analysis has also shown growing importance of CAP pillar II
payments, among them particularly agri-environmental measures. In all three
schemes budgetary payments enable farmers to improve financial results and in
both reform schemes they alleviate economic impacts of the CAP reform.
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