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FAPRI-Ireland Partnership Department of Agriculture and Food January 21 st 2003

An Analysis of the Effects of Decoupling Direct Payments from Production in the Beef, Sheep, and Cereal Sectors. FAPRI-Ireland Partnership Department of Agriculture and Food January 21 st 2003. Introduction. The FAPRI-Ireland Partnership FAPRI-Ireland

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FAPRI-Ireland Partnership Department of Agriculture and Food January 21 st 2003

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  1. An Analysis of the Effects of Decoupling Direct Payments from Production in the Beef, Sheep, and Cereal Sectors FAPRI-Ireland Partnership Department of Agriculture and Food January 21st 2003

  2. Introduction • The FAPRI-Ireland Partnership • FAPRI-Ireland • a research consortium involving Teagasc and Universities • FAPRI-Missouri • Food and Agricultural Policy Research Institute • Main Aim • To provide timely and relevant analysis of policies and markets

  3. Background • Report analyses decoupling – not the full MTR • Team Effort • Co-operation of DAF staff appreciated • Presentation outline • Sector level results of decoupling analysis • Net greenhouse gas emissions under decoupling • Economy wide effects of decoupling

  4. Decoupling Analysis: Assumptions • Decoupling • Assumed to be complete decoupling • Payments not linked to land • Paid to farmers on basis of historical payments • Analysis assumes NO • Wealth and/or insurance effects from decoupling • Cross-compliance criteria (e.g. stocking density) • Change in external trade regime (WTO limits)

  5. Decoupling Analysis • Analysis conducted with the co-operation of colleagues at FAPRI-Missouri • Results differ from those presented to the Commission because of assumptions: • about Commission behaviour • about the extent of decoupling

  6. Decoupling Analysis Impact • Aggregate model impacts • Largest on EU and Irish beef and sheep sectors • Modest for cereals sector • Milk sector largely unaffected • Input expenditure declines • Direct payments held at Baseline levels • Agricultural sector income increases

  7. Decoupling Analysis: EU Beef • Cow numbers decline: • Ireland and UK large • Italy and Germany small • In Ireland suckler cow herd of 740,000 by 2010

  8. Decoupling: EU Beef Sector • Initial  in cow slaughter •  in cattle prices • Subsequent fall in beef supply due to  cow numbers • Market prices  • By 2010 EU adult cattle price  6%

  9. Decoupling: Irish Beef Sector • Suckler cow herd  30% • Beef Production  12% • Beef exports decline • but 95% to EU by 2010 • Cattle price  8%

  10. Decoupling: Irish Sheep Sector • EU ewe flocks decline • EU 7% • Irish  12% • Irish lamb production 12% • Price  after initial decline • By 2010  20%

  11. Decoupling: Irish Lamb Prices • Lamb prices more volatile than beef prices • Initial fall in 2004 - sharp recovery follows • EU a net importer of lamb • Assumptions: TRQ and Export Refunds

  12. Decoupling: Cereals • Supply response to decoupling is small • Overall volumes produced decline • EU Wheat Production  1% • Irish Barley Production  4% • Value of Irish cereal output  4%

  13. Decoupling: Irish Agricultural Income Relative to 2010 baseline • Output value  3% • Input expenditure 12% • Subsidies largely unchanged • Agricultural Income  11%

  14. Income: Baseline versus Decoupling Overall, with Decoupling: • Volume of Production  • Output prices  • Value of output  • Subsidies unchanged • Irish Ag. Sector Income 

  15. Decoupling: Effect on Greenhouse Gases • Lower animal numbers leads to lower emissions • Little change in sequestration • Net emissions decline on Baseline by 13% • Target for agriculture under NCCS achieved

  16. Decoupling: wider economy effects • Road map of the economy • Tracks links between sectors • Traces knock-on effects of decoupling e.g. •  cattle output •  ag. input use (fertiliser, feed, fuel, vets services) •  beef output •  beef processing sector input use •  in farm income (expenditure effect for whole economy)

  17. Decoupling: GNP Impact % change Agriculture 7.2 Food Processing - 3.7 Farm and Food processing 3.6 Other Sectors 0.1 Total GNP impact 0.8

  18. Decoupling: Employment Impact % change Food Processing - 4.6 Farm and Food processing - 5.1 Other Sectors 0.1

  19. For further information on our work go to www.tnet.teagasc.ie/fapri

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