Appropriate methods for evaluating the agricultural policies' consequences at the farm level

Abstract

The Common Agricultural Policy is foreseen to suffer important reforms after 2013, which will greatly affect the farm's production environment. For the a priori analysis of such policy measures, there was built a recursive single period model adapted to the Romanian farming system. The positive mathematical programming method in use, proved to be in the last period highly applied in agricultural policies impact studies at the European level. Furthermore, the model was employed in order to test three different agricultural scenarios that were proposed by the European Commission as reform alternatives. The first policy option presumes to leave unchanged the current direct payment system while slightly changing the payment distribution pattern among Member States. The second policy option envisages substantial changes of the direct payment system that would be allocated only if farmers bring societal benefits. The last option consists in phasing out direct payments and provides limited financial support to farmers through the second Common Agricultural Policy pillar (rural development). All these options were investigated on the economical and financial data of 21 Romanian farms categorized according to the European classification system as mixed crops livestock farms. Results show that all these policy options have important effects on the farm revenue, in the sense that a decrease in the subsidy level produces important average gross margin falls. Soft landing approach in the first CAP pillar's reform is desirable especially for the Romanian agriculture that still presents important farm structural shortcomings.