Assessment of CAP reform post 2013 in the rural areas of Emilia-Romagna Region

Assessment of CAP reform post 2013

in the rural areas of Emilia-Romagna Region

RESULTS OBTAINED AND

POLICY IMPLICATIONS

R. Gigante, F. Arfini, M. Donati – University of Parma, Department of Economics

n order to assess the CAP 2014-2020 reform

in Emilia-Romagna region have been used the

positive mathematical programming (PMP)

methodology included in the AGRISP

(Agricultural Regional Integrated Simulation

Package) model. The model used consider the

impact of Greening’s criteria, capping and the

regionalization scheme on land allocation in

different farm systems and the relative

economic effects.

INTRODUCTION OBJECTIVE

STRUCTURE OF

THE MODEL

CONCLUSIONS

METHODOLOGY

AND DATA

Wheat -4,3%

Corn -6,0%

Other cereals +18,3%

Rice -3,7%

Soybean -4,1%

Other oil seeds -10,5%

Sugar beet -1,2%

Tomato -2,4%

Forage

-10,6%

Pasture

+3,6%

Other crops

-1,6%

Greening

surface

37.630 hectares

BASELINE GREEN

Variations

of land use

Changes in economics value by province and

altimetry level

BASELINE GREENING VARIATION

(€/Ha) (%)

RE

GIO

N

GSP 3.276 3.033 -7.4%

- TOTAL VARIABLE COSTS 2.356 2.176 -7.7%

= GROSS MARGIN (1° level) 920 857 -6.9%

+ TOTAL PAYMENT 307 237.8 -22.5%

= GROSS MARGIN (2° level) 1.227 1.095 -10.8%

PL

AIN

GSP 3.416 3.238 -5.2%



+ TOTAL PAYMENT 339 237,8 -29.9%


HIL

LS

GSP 2.922 2.606 -10.8%



+ TOTAL PAYMENT 246 237,8 -3.4%


MO

UN

TA

IN

GSP 3.029 2.409 -20.5%


= GROSS MARGIN (1° level) 1.041 763 -26.7%

+ TOTAL PAYMENT 186 237,8 27.6%


Changes in aids distribution at provincial

and altimetry level

-25

-20

-15

-10

-5

+0

BO-HBO-M

BO-P

FC-H

FC-M

FC-P

FE-P

MO-H

MO-M

MO-P

PC-HPC-MPC-P

PR-H

PR-M

PR-P

RA-H

RA-P

RE-H

RE-M

RE-P

RN-H

RN-P

GSP GSP (media ER)

-25

-20

-15

-10

-5

+0

+5

BO-HBO-M

BO-P

FC-H

FC-M

FC-P

FE-P

MO-H

MO-M

MO-P

PC-HPC-MPC-P

PR-H

PR-M

PR-P

RA-H

RA-P

RE-H

RE-M

RE-P

RN-H

RN-P

TOT. VAR. COSTS TOT. VAR. COSTS (average ER)

-45

-40

-35

-30

-25

-20

-15

-10

-5

+0

BO-HBO-M

BO-P

FC-H

FC-M

FC-P

FE-P

MO-H

MO-M

MO-P

PC-HPC-MPC-P

PR-H

PR-M

PR-P

RA-H

RA-P

RE-H

RE-M

RE-P

RN-H

RN-P

GROSS MARGIN - 1°level GROSS MARGIN - 1°level (average ER)

-35

-30

-25

-20

-15

-10

-5

+0

+5

+10

BO-HBO-M

BO-P

FC-H

FC-M

FC-P

FE-P

MO-H

MO-M

MO-P

PC-HPC-MPC-P

PR-H

PR-M

PR-P

RA-H

RA-P

RE-H

RE-M

RE-P

RN-H

RN-P

GROSS MARGIN - 2°level (average ER) GROSS MARGIN - 2°level

The aim of this contribution is to provide a first evaluation of the impacts of the European Commission

proposals on homogeneous rural areas of Emilia-Romagna Regions organized by province and altimetry

level. Model used represent one of the possible application of the PMP across Europe. The model have

been designed to reproduce effects of regionalized single payment system, Greening measures, and the

new capping mechanism on farm behavior and farm economic performances. Work is based on the

European Commission draft, so have to be consider as a possibility for understanding the potential

consequences on farm system in the examined region. The simulations demonstrate a differential

capability of farms in reacting to new policy and market scenarios, and how reform affect productions

and economic levels of the investigated farms.

The PMP model provides an insight of the production decisions of entrepreneurs, not only with reference

to the observed situation (baseline), but also to the situation after reform, so as to compare the

strategic changes of the farmer. The model is formed by three main phases: i) extraction of information,

which is constituted by the data management of the two databases related to the sample of the selected

companies; ii) through the PMP are estimated the cost functions of the selected farms, once obtained,

there will be the calibration of the model compared to the observed reality and simulation; iii) Analysis

of results.

The one database composed by the land use (from AGREA database) and the profitability of single

processes (form FADN database) with the methodology of PMP, allows to analyze the impact of

agricultural policies at micro-level (for the purposes to define rural policies) and macro-level (for the

purposes to estimate changes in supply on a regional and /or national level). In the phase concerning

the reproduction of the effects of the agricultural policy measures at regional level, the relevant aspects

of the AGRISP model are therefore the aggregation of the cost functions into a single regional model,

and the construction of a suitable set of constraints able to correctly simulate the policies for the whole

region.

The integrate database

FA

DN

• Production

• Output prices

• Variable costs (crop

and livestock)

• Total variable costs per

farms

AG

EA

• Farms distribution

• Use of the land

• Livestock density

• Payments per farms

Results are detailed at regional and provincial level, with a focus also on altitude level. In particular the following scenarios have

been identified:

1) Baseline: The base scenario on which the comparison is carried out is represented by the situation recorded in 2010,

obtained by updating the results with the market price variation of the year 2007.

2) Greening: This scenario foresees the full application of the CAP reform. All the constraints and the new policy type of aids

have been activated (new Basic Payment Scheme considering the distribution of aids on the all UAA, Greening scheme

considered as mandatory, and the new capping scheme).

esults produced by the model (assuming to maintain constant prices) show that the introduction of Greening practices combined with the

regionalized distribution of basic payments will lead to substantial reductions in terms of the GSP and farm income. The greater consequences will be the difficulties to cover, at

farm level, fixed cost for investment. The Greening component generate a double effect: a contraction of harvested surfaces and a strong reallocation in land use and resources

towards those production that has higher price. The extension of regionalized aids to almost all UAA, with a single payment level in all regional territories, complemented by the

reduction of the aids amount, will reduce the average aid per hectare for the areas like plain (where at present farmers are used to receive higher support) in favor of mountain

areas. Despite to the increment of direct payment for mountain areas these areas appears as the most affected by the reform.

POLICY IMPLICATION As formulated the new CAP offer less assurance to specific local and territorial farmers because delegate to single Member States the possibility to activate or

not specific aids as “less-favored areas”, or maintain coupled aid for “productions with a local relevance”. This demand a direct intervention by the Policy Maker of Member States in

order to activate specific and voluntary schemes. So if "the market" will be the new driver for production choices of farmers (whom can no longer focus on the maximization of aids),

the strategic choices of European agriculture should not ignore the need to protect and guarantee the subsistence of local farms or of an entire productive sectors that operate in

less favored areas. It will be necessary in all this cases to operate with a different logic: the lack of competitiveness of farms located in the regional mountain areas is due in most of

the cases to factors involving territorial characteristics and economic environment rather the competitiveness of the farm itself.

Assessment of CAP reform post 2013 in the rural areas of Emilia-Romagna Region

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