Home Economics Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.
Decoupling: an incentive to produce with more grassland?
This section pays special attention to the distribution between silage maize and grassland in the forage area (intensification strategy versus extensification strategy) with the partial decoupling of the crop premium in France.
In S1 scenario, the implementation of the reform leads to the extensification of dairy production with a decrease in cereal and silage maize cropping and an increase in grassland (for the grass-based, semi-intensive and milk + cereals farms, see Table 6.4). The decoupling of 75% of crop premium (maize silage included) rebalances the choice between grass and maize but is not enough to encourage farmers to comply with the criteria for the premium for grassland (the grass-based farm is the only one to benefit from this premium). These results confirm those highlighted by Ridier and Jacquet (2002). Regarding environmental criteria (nitrogen application, livestock unit per ha of forage, and milk produced per hectare of forage), the decoupling has a positive impact and encourages farmers to extensify their production. With the increase of grass, the measure of maintaining surfaces in permanent pasture is never a constraint. Moreover, none of the farms studied see its production limited through the application of the Nitrate Directive.
Nevertheless, the model does not take into account some other elements, which affect farmers’ behaviour. Many farmers will continue to focus on maize, since feeding management of dairy cows based on grass is more complex (nutritional values constantly change). Moreover, the labour constraint may curb the use of pasture, since it requires driving the animals to the plots and bringing them back for milking. Similarly, the greater use of milking robots requires grassland around the robot, which must be accessible at all times.
In the more favourable price conditions of 2007 and 2008 (S2), farmers sought to increase their cereal production by converting to cereals those areas which were previously under grass. The decline in gross margin of crop production caused by the decoupling is more than offset by the rise in prices: the marginal yield of an additional hectare of land increases by 20% between the baseline and S2 (and more than double for the grass-based farm). The gains generated by cereal production are higher than the savings arising from grass-based milk production. The model therefore proposes a production system close to the 2003 situation in its pattern crops and livestock composition. The milk + cereals farm, on the contrary, reduces a little its share of cereals in favour of its maize silage area. Indeed, with the rise of cereal prices, concentrate feed prices also increases. Therefore, the farmer reduces the quantity of concentrate feed for the cows (from 2.020 kg to 1.250 kg) and increases the share of forage in the diet.
Figure 6.1 shows the evolution of the share of cereals in the total area in the decoupled situation according to the cereal price. Farmers increase cereal production when cereal price increases. But the more intensive farms, which have the highest yields and the best techniques, take advantage more rapidly of a lower price and thus reach their rotation limits faster. At the same time, all types of farming reduce the share of grass in the diet of dairy cows and replace it by maize silage to intensify milk production. The intensity of this decline depends primarily on the yield and on the production costs of cereal crops and maize silage. We can also see that the “grass-based” farm chooses to no longer meet the criteria of the “premium for grassland” when cereals price exceed EUR 220/tonne.
Figure 6.1. Proportion of cereals in the total area according to the cereals price
The increase of cereal price encourages farmers to develop these crops. However, it appears that maintaining milk production is always a priority for farmers, regardless of the price considered (milk and cereals). Indeed, the costs incurred to establish a dairy operation are often too high for farmers to consider abandoning milk for cereal production. This is especially true because the agricultural area of dairy farms is often far below the threshold of profitability traditionally met with amongst specialised crop farms.
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