The Impact of EU Common Agricultural Policy on Beef Production: A Dynamic Modelling of Producer’s Behaviour

When the Common Agricultural Policy (CAP) was originally established in the early 1960s, the aim of the policy was to encourage farmers to produce more by offering them subsidies and putting systems in place that would guarantee farmers a high price for their products. However, by the 1980s this has led to large surpluses of products and calls for reform. As a consequence several reform and adjustments of the CAP took place in the 1990s culminating in 1999 with the introduction of the Agenda 2000 reform. This led to the last major reform of the CAP in 2003. The main aspect of the 2003 reform was the replacement of numerous income and production subsidy schemes by the Single Payment Scheme. This meant that payments to farmers were no longer linked to production or number of animals kept. Instead, a form of basic income support is given to farmers who maintain their land according to agricultural and environmental compliance requirements. Regarding the Common Market Organization of the beef and veal, the 2003 reform of the CAP severed the link between headage and payments and replaced it by a single farm payment based on historical entitlements. A system of premiums remains in force, subject to certain conditions, in the form of additional payments to the farmer in order to avoid production abandonment. After a survey of the CAP policy on direct aids and in the beef sector, this chapter develops a microeconomic model for analysing the impact of market prices and premiums on beef production. The modeling framework is dynamic. It takes into account the cattle herd renewal resulting from biological constraints, the heterogeneity of the herd composition and the fact that producers have the choice between keeping an animal in the herd and slaughtering it. It characterizes the parameters that influence beef supply decisions as well as cattle herd management by taking into account time adjustments, price expectations and CAP support instruments. Results show that producers¿ decisions are influenced both by market prices and direct support schemes, but the impact is different depending on the herd composition.

PIOT-LEPETIT Isabelle; 

2011-11-21

Nova Science Publishers, Inc.

JRC61924

978-1-61209-630-8,   

https://www.novapublishers.com/catalog/product_info.php?products_id=16967,    https://publications.jrc.ec.europa.eu/repository/handle/JRC61924,