The interest of decomposition method has been demonstrated; for example, the two production sectors based on bovine ruminants have very different responses to individual elements of the same set of policy instruments. It is instructive to put the above discussion into the overall context of EU agricultural land-use change. Figure 7.8 clearly shows the reaction of the agricultural sector to multiple policy influences and the particular policy instruments that may need to be given specific attention in their use to be identified. This is a singular benefit of the scenario approach, particularly when associated with the capacity to decompose policy impact.
The major general conclusions with regard to the impact on policy changes on agricultural production and rural areas are as follows.
• Alternative policy scenarios seem to have little impact on the overall production levels of agro-food complex (although more on income and farm structure), with the exception of for livestock and mixed arable / livestock.
• “Liberalisation” would:
- affect production levels, mainly through increased market access rather than through the absence of income support; and
- show a significant impact on income and agricultural assets, including land (though this may help to facilitate the structural adjustment process).
• At the regional level, however, the (negative) impact may be more significant.
- A process of liberalisation would lead to intensification in the most competitive regions and an extensification of production in others.
- Adjustment processes in agriculture might be accompanied by an adverse or supportive economic and social situation.
• An increasing number of rural areas will become increasingly dependent on other sectors and will be driven by factors outside of agriculture.
More specific commodity conclusions are as follows.
• Impact of EU policies on agri production
- Growth in crop production is principally stimulated by the Renewable Energy Directive (RED).
- Limited impact of rural development measures is noted; human and physical capital investments stimulate productivity growth.
- Reduction in border support reduces prospects for beef sector even as consumption increases (through cross-price effects with white meat in an enlarged market area).
- Less protected agri-food products are only driven by macro-effects.
• Commodity markets
- Real price evolution for arable crops are generally negative, except those related to RED. Liberalisation affects ethanol price and therefore cereal prices negatively.
- A liberalising trend at first affects milk, beef and sheep prices more than pork, poultry and egg prices.