Economic Assessment Results

Markus Kempen

Cross Compliance Assessment Tool

Outline

Scenarios Definition

Agricultural Income Effects

Main Market Effects

Overview on Cost Impacts

Conclusion/Discussion

Cross Compliance Assessment Tool

Analyzed ScenariosMain Scenarios:

Baseline 2005:• Technically: CAPRI “base year”• All measures implemented in base period 2005-2009• Compliance varies among SMR directives( GAEC issues and countries (70% -

100%); on average about ~90% • No implementation in Bulgaria and Romania• Violation of measures as estimated/observed in base year

Zero Compliance:• Hypothetical situation without CC related measures• Mainly used as comparison scenario

Compliance100pct:• Assuming full compliance with all measures

Variations of Compliance100pct for Sensitivity Analysis:Cost200: cost doubledCost500: cost increased by factor 5Crops000Animals200: no cost for crops, animals doubledCrops200Animals000: no cost for animals, crops doubled

Cross Compliance Assessment Tool

Income Effects (EU27)Zero Compliance Reference 2005 Compliance100pct

Agricultural Income [Mio €] 223219 217729 216503

[% diff] -2,5% -3,0%

Premiums [Mio €] 34293 34284 34279

Total Output Value [Mio €] 327671 327951 327931

[% diff] 0,1% 0,1%

Total Input Value [Mio €] 138745 144506 145707

[% diff] 4,2% 5,0%

of which related to CC [Mio €] 5919 7183

Crop Production Output [Mio €] 161460 161315 161259

[% diff] -0,1% -0,1%

Crop Production Input [Mio €] 40619 42835 43270

[% diff] 5,5% 6,5%

of which related to CC [Mio €] 2359 2755

Animal Production Output [Mio €] 166211 166636 166672

[% diff] 0,3% 0,3%

Animal Production Input [Mio €] 29555 33148 34022

[% diff] 12,2% 15,1%

of which related to CC [Mio €] 3559 4428

Cross Compliance Assessment Tool

Income Effects (EU27)Zero Compliance Reference 2005 Compliance100pct

Agricultural Income [Mio €] 223219 217729 216503

[% diff] -5490 -6716

Premiums [Mio €] 34293 34284 34279

Total Output Value [Mio €] 327671 327951 327931

[% diff] 0,1% 0,1%

Total Input Value [Mio €] 138745 144506 145707

[% diff] 4,2% 5,0%

of which related to CC [Mio €] 5919 7183

Crop Production Output [Mio €] 161460 161315 161259

[% diff] -0,1% -0,1%

Crop Production Input [Mio €] 40619 42835 43270

[% diff] 5,5% 6,5%

of which related to CC [Mio €] 2359 2755

Animal Production Output [Mio €] 166211 166636 166672

[% diff] 0,3% 0,3%

Animal Production Input [Mio €] 29555 33148 34022

[% diff] 12,2% 15,1%

of which related to CC [Mio €] 3559 4428

Cross Compliance Assessment Tool

Income Effects – Sensitivity of Results

Cross Compliance Assessment Tool

Regional Income Effects

Cross Compliance Assessment Tool

Summary - Income

– Minor effects comparing baseline situation (about 90% compliance) and full compliance (100%)

– Cost related to CC standards are almost equal to drop in agricultural income

– Agricultural Income decreases compared to a situation without regulation ( ~ -3%)

– CC standards cost are significantly lower than premium payments

– No significant difference between crops and animal production ( … with respect to income)

– Output value of animal products goes up with increasing cost (market effects can partially compensate)

– Output value of crops slightly decreasing (at most stable)

– Income drop homogeneous among regions [-5%, -1%]

Cross Compliance Assessment Tool

Market effects for selected activities/products

Production Revenue CC Cost Price Supply Demand Net Trade

[1000 ha or heads] [€ / ha or head] [€ / ha or head] [€ per ton] [Mio tion] [Mio tion] [Mio tion]

22501 589,24 13,9 98,62 127961 121780 6030

0,40% -3,03 -0,44% 1118 1032 86

14044 451,67 13,2 98,62 61235 57908 3327

0,93% -3,66 -0,62% 887 822 64

4586 667,06 29,1 200,16 14194 14154 29

-1,13% 2,25 0,37% -288 -286 -1

2306 3362,24 46,7 122,65 62272 56572 5701

-0,45% 13,42 0,37% -584 -530 -54

12294 23,2

-1,87%

25267 2018,12 45,8 280.53 143568 143568 0

-0,02% 2,39 0.25% -10 -10 0

239122 117,63 3,1 1302,23 21497 18575 2923

-1,33% 2,28 2,01% -624 -566 -58

Dairy cows / Raw milk

Pig fattening / Pork

Selcted Indicators in 100% Compliance Scenario (2005) - absolut or relative diff. to Zero Compliance

Soft wheat

Barley

Rape seed

Potatoes

Fallow Land

Cross Compliance Assessment Tool

Regional Production Effects

LU per ha

Cross Compliance Assessment Tool

Summary – Market/Production Effects

Animals:– Overall decrease in herds;– Increasing prices almost compensate CC cost (… but not loss of production)– Decreases in prevailing intensive regions (… due cost related to manure

application)– Dairy sector almost not affected (quota!)

Crops:– Cereal production increasing (“best alternative”); – Cereal prices go down due decreasing (feed) demand and increasing acreage– Additional cereal production is processed to bio fuels (at lower prices)– “demanding” crops go down, costs can be partially compensated by price

effects)

Fallow Land: – Set aside and fallow land decrease (due GAEC enforcing minimum

maintenance)– Assumptions on cost of fallow land are crucial!

Cross Compliance Assessment Tool

Cost Implication at EU level

Cross Compliance Assessment Tool

Regional Cost Implication

Total cost per UAA Crop related cost per UAA Animal related cost per LU

Nitrate Directive Animal Welfare Directive(s)

Cross Compliance Assessment Tool

Summary - Cost

Cost:– Animal production more affected then crops– Dir 4 (crops and animals) and Dir16-18

(only animals) major cost drivers– Significant regional difference in cost

effects (especially for animals)

Cross Compliance Assessment Tool

Conclusion/Discussion

– CC Cost are not compensated by market effects

– Divergent effects in Crop and animal sector

- Public service payments might need to be targeted more strongly to livestock sectors (also in the light of important positive and negative externalities to environment by these sectors)

– Maybe accompanying measure needed on maintenance of fallow land level?

Cross Compliance Assessment Tool

Minimum legal standard

Animal Welfare

Minimum legal Standard

Dairy cows Suckler cows Calves Pig fattening

Estimated on farm condition

Cross Compliance Assessment Tool

Animal Welfare CriteriaDairy cows - loose housing

0

20

40

60

80

100

T1f T1e T1a T1b T2b T2c T2e T2d T2a T3a T3e T3f T3b T3c T3d T4e T4f T4a T4b T4d T4c T5d T5a T5e T5g T5f T5c T5b

Locomation Social interaction Flooring Light, air and noise Stockmanship

Animal Nedds Index criteria

% o

f o

pti

ma

l c

on

dit

ion

legal standardon farm condition

Pig fattening

0

20

40

60

80

100

T1e T1a T1c T1b T2f T2d T2e T2a T2b T2c T3f T3a T3e T3c T3d T4g T4f T4b T4a T4e T4c T5c T5g T5d T5e T5b T5a T5f

Locomation Social interaction Flooring Light, air and noise Stockmanship

Animal Needs Index criteria

% o

f o

pti

mal

co

nd

itio

n

legal standard

on farm condition

Cross Compliance Assessment Tool

Summary – Animal Welfare

– Based on Animal Needs Index (Cattle and Pigs)

– Minimum legal standard based on EU and national legislation

– Estimated on farm condition extrapolated from own field study (Austria, 60 farms)

– Overall: On farm condition above minimum standard ( … but several standards “binding”)