The “Health Check” of the CAP reform: Impact Assessment DG for Agriculture and Rural Development European Commission

DG AGRI28 May The content of the Impact Assessment  Main Report –Three main sections, around the three policy questions of the HC  Annexes –A. Summary of stakeholder positions from public consultation –B. Economic background of EU agriculture –C. Background notes on the Single Payment Scheme flatter rate, decoupling, cross-compliance, payment limitations –D. Background notes on market issues cereals, dairy quotas, other support schemes, risk management –E. Background notes on new challenges RD measures, modulation impact –F. Background notes from microeconomic analysis (FADN) –G. List of relevant external studies and evaluations

DG AGRI28 May The methodology of the Impact Assessment  Background –Description of existing policies and situation –Identification of issue to be addressed in the HC  Options –Status-quo used as reference scenario (“baseline”) –Analysis assesses impact of changes with respect to baseline  Impact analysis and results –Main results presented in IA Report and summarised in tables –Background and more detailed information presented in the various Annexes

DG AGRI28 May The analytical tools of the Impact Assessment  Quantitative analysis –Econometric models to assess impact on markets from: changes in cereal intervention and set-aside abolition phasing-out of dairy quotas –Microeconomic static analysis to assess impact on farm margins from: further decoupling impact from market measures (cereals, dairy) flatter rates and payment limitations –Statistical analysis to assess impact from: payment limitations and modulation risk management tools  Qualitative analysis –To assess changes in the scope of cross-compliance –To assess suitability of RD measures related to new challenges

DG AGRI28 May Main conclusions - Direct support  Flat versus flatter rate –Move to EU-wide flat rate results in major redistribution across MS –Move to flatter rate results in targeted redistribution within a MS (or region of a MS)  Further decoupling –At farm level, impact of decoupling from neutral to positive on farm income –In some sectors, adjustment may be needed for industry –For extensive livestock, continuation of support provides environmental benefits  Payment distribution –Main issue in the extreme ends of the distribution of payments (0.3%-13%; 13%-0.3%) –Distribution of payments affected globally by shift from farm to area –Flatter rate affects (to different degrees) distribution of payments within MS or regions –Lower payment limitations linked to SPS implementation

DG AGRI28 May Redistribution between MS with an EU-wide flat rate

DG AGRI28 May Redistribution between MS with an EU-wide flat rate

DG AGRI28 May Potential impact of decoupling – beef breeders

DG AGRI28 May Distribution of EU CAP payments

DG AGRI28 May Main conclusions – Market issues  Cereal intervention-set aside –Wheat intervention allows other cereal prices to find their proper balance –Set-aside abolition brings supply response, but implies limited environmental losses  Dairy quotas –Main aim is smooth price adjustment (“soft-landing”) for the quota phasing-out –Some regions would face challenges with lower prices, require targeted support  Other support schemes –Income impact neutral to farmers –Differential impact implies need for transition for some supported industries  Risk management –Cost of EU-wide revenue scheme prohibitive; targeted measures preferred option

DG AGRI28 May Potential impact of 1% increase in milk quota

DG AGRI28 May Potential impact of an EU-wide revenue scheme

DG AGRI28 May Main conclusions – New challenges  RD measures –Existing RD measures sufficient to address new challenges –Existing funds insufficient to meet additional needs  Modulation –Existing modulation mechanism tailored to EU-15 needs –Additional modulation only affects NMS in 2012 –Progressive modulation results in balanced contribution of large farms

DG AGRI28 May For further information  CAP Health Check  EU agriculture and CAP reform  Economic Analysis and Evaluation  Agricultural Policy Analysis and Perspectives