Home Economics Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.
Positive Mathematical Programming - changes on farming activities and employment
CAP reform will definitely affect the enterprise mix, and changing the enterprise mix at farm level affects on-farm employment too, as adopting new activities could require more or less labour and could also change input requirements and output flows. To trace out the course of anticipated changes at farm level and then to aggregate them to regional level, a Positive Mathematical Programming (PMP) model was applied in all case study regions. This model, utilizing mainly FADN data provided by the EU Commission, simulated the post-reform conditions at farm level, and envisioned two scenarios: the first (S1) concerns the option of total decoupling payments for all agricultural products (including milk); the second (S2) includes the first scenario and also anticipates product price changes as they are recorded in the EUROSTAT database. The baseline scenario reflects the farm structure before the application of the horizontal Regulation EC 1782/2003, based on observed conditions in farming prior to 2005. The simulation results indicate significant changes in different indicator variables in each region (land allocation, livestock structure, economic impact of the reform and farm employment), which have resulted from the 2003 CAP reform.
Land allocation is predicted to be the primary change in farming activities due to policy reforms, especially following the introduction of decoupled payments. As can be seen from Table 14.3, farmers in all case study regions are most likely to reduce land allocated to cereals. The magnitude of this land reallocation varies among the case study regions depending on the importance of cereal production. Fodder crops will gain ground, as the new regime provides better opportunities and higher returns. Nevertheless, cereal production will continue, mainly on highly efficient farms, and assuming, of course, the continuation of the current supportive regime. This behaviour of farmers could be justified under a strategy of minimizing costs and responding to market signals.
In the livestock sector, due to the changes in subsidies and in the production cost of feed crops, shifts among activities are anticipated. Generally, dairy cows and sheep will remain at the same levels of production, while beef production will drop; a positive effect on overall gross margins is expected (Table 14.4).
Table 14.3. Land use effects of the CAP reform
% differences from baseline scenario
Table 14.4. Economic Impacts of the CAP Reform
Furthermore, an attempt is made to extrapolate these changes in enterprise mix to anticipated employment changes at regional level (Arfini and Donati, 2008). The employment changes are depicted in Table 14.5 by region and farm type. The two types of labour considered in the PMP analysis — family and hired workers — show a decrease in all case study regions due to decoupling. This is attributed to a reduction in the production costs by substituting farming activities (cereals and industrial crops) with fodder crops and other good farming practices (GFPs). Thus, overall, a significant reduction in employment levels in the farm sector is expected, that may be regained later if the farm sector turns out as more efficient and competitive.
Table 14.5. CAP reform impacts on farm and off-farm employment according to farm type
(% differences from baseline scenario)
a FT1: field crops, FT2: horticulture, FT3: permanent crops, FT4: animal production, FT5: granivores, FT6: mixed cropping, FT7: mixed livestock, FT8: mixed crop-mixed livestock.
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