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Impacts of decoupling on farming in EU15

As previously stated, a key advantage of AgriPoliS is that it models structural change in space and time. In this section, we present results regarding the impact of the 2003 reform on farm structure, income, land rental prices and land use for six regions in the EU15.

Farm structure

AgriPoliS results presented in Figure 1.4 show that the REFORM scenario slows down structural change compared with a continuation of Agenda 2000 (Sahrbacher et al., 2007). As a consequence, average farm size shown in Figure 1.5 is also smaller in the REFORM scenario (i.e. farms grow more slowly) compared to AGENDA in 2013. The rationale behind this result is that particularly farmers with grassland remain in the sector, because decoupled payments provide additional income opportunities. For these farms, simply maintaining some or all grassland in good agricultural and environmental condition is more profitable than off-farm work.

The hypothetical BOND scheme scenario implies that the linkage between the SPS and land is broken, such that the payment is granted to the farmer independent of any farming activity. This scenario represents to some extent a gradual phasing-out of direct payments to agriculture since, over time, more and more payment entitlements will belong to farmers who have left the sector (e.g. have retired). AgriPoliS results for this scenario demonstrate that the bond speeds up structural change considerably in all regions compared to both AGENDA and REFORM (Figure 1.4), which also results in a significantly larger average farm size in all regions (Figure 1.5).

Figure 1.4. Change in number of farms from 2004 to 2013 under alternative scenarios

Source: Sahrbacher et al. (2007).

Figure 1.5. Average farm size in 2013 under alternative scenarios

Source: Sahrbacher et al. (2007).

 
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