[ slo-eu-agri ] MAFF, “Lecture for visiting students from the Marche Polytechnical University” 19 April 2004, Ljubljana Stane Kavčič, Emil Erjavec, Miroslav Rednak, Tina Volk Biotechnical faculty, University of Ljubljana & Agricultural Institute of Slovenia EU Accession Effects and Challenges for Agriculture and Agricultural Policy in Slovenia

[ slo-eu-agri ] 1.Accession to EU (2004) –prices, budget, income changes 2.CAP Reform (2005/ ) –which scheme of direct payments? Issues

[ slo-eu-agri ] Issue:Issue: –Effects on production and farm income –Effect of different direct payment scheme Standard scheme (pre-reform CAP policy) Simplified scheme (equal value/ha: reference quantities/UAA) Model inputs:Model inputs: –producer prices –quotas and direct budgetary support (acc.negotiations) commitments Scenarios:Scenarios: –Baseline (Slovenia 2000/01) –EUo: (standard scheme of DP; estimation of most likely economic and budgetary situation in year 2005, with the likely range) –Simp: (like EUo, except direct payments with equal value/ha) Model used:Model used: –APAS-PAM Accession Effects

[ slo-eu-agri ] APAS-PAMAPAS-PAM –Model type: partial equilibrium model national, synthetic, static, ‘closed’ on trade (exogenous prices) –Data and indicators: 10 PSE products food balances, income and competitiveness indicators EAA/ABTA ModelEAA/ABTA Model –Model type: Static deterministic model national farm, statistic data, balanced on flows and technical relations –Data and indicators: whole agriculture EAA calculation Models

[ slo-eu-agri ] Accession – Prices (SLO 2001 = 100)

[ slo-eu-agri ] Quotas and reference quantitiesQuotas and reference quantities –Accession negotiations as supply limitation Direct payments 2005Direct payments 2005 –30 % EU –60 % “top up” from national budget –absorption: 95% Rural developmentRural development –broad program according accession negotiations –agricultural environmental program (absorption 80%) –less favoured area payments (absorption 90%) Accession – Policy

[ slo-eu-agri ] Mio € Accession – Budget support for agriculture

[ slo-eu-agri ] APAS Model Results: Income per unit & Supply 8 Production (SLO 2000 = 100) Income (€/ha, head*)

[ slo-eu-agri ] APAS Model Results: Sector Income (SLO 2000 = 100) 9

[ slo-eu-agri ] Conclusions: 1.Economic effects –Production less response in short-term –Aggregate results stable, but… –Switch in income attractiveness 2.Policy implications –How to deal with sectoral shocks? –Increase of absorption and competitiveness! –Simplified scheme theoretically interesting, but means redistribution, different policy with EU-15 –Selection of the scheme is not only economic issue, admistrative capacity, reform of the CAP? Accession Effects

[ slo-eu-agri ] –Standard scheme at EU level of 75 % –Governmental decision for SS (85 % level). –No SAPS! CAP Reform for New members:CAP Reform for New members: –Regional single area payment. –Specific national solution in case of economic problems. Single area payment:Single area payment: –Redistribution between the sectors! –Significant income losses (from 1500 to 400 €/ha) for intensive beef producers CAP Reform Facts for SLO

[ slo-eu-agri ] A. Standard scheme , than regional single area payment and coupled production up to max level B. Standard scheme only 2004, than regional single area payment and coupled production up to max level C.Standard scheme 2004, than gradually introduction of regional single area payments and gradually reduction of payments based per farm. ***** Single policy principle: No differences in policy design between EU and national financial resources. CAP Reform Scenarios

[ slo-eu-agri ] CAP reform Scenarios (Structure of direct payments in %, EU=100)

[ slo-eu-agri ] CAP reform Scenarios

[ slo-eu-agri ] CAP reform Scenarios

[ slo-eu-agri ] CAP reform REPP

[ slo-eu-agri ] CAP reform REPP

[ slo-eu-agri ] CAP reform K2 Combined scheme of production coupled payments (bulls, sheep and goat) and additional specific (bulls; milk, suckler cows; other premium for cattle) and unified regional payments (arable land, grassland) (SS=100)

[ slo-eu-agri ] CAP reform K2 Results show combined concept makes it possible to almost completely prevent that payments of individual farms also at the end of reform decrease for more than 30% in comparison with standard scheme (class -3).

[ slo-eu-agri ] 1.Direct payments are the mayor accession issue for Slovene agriculture. 2.Slovenia is implementing policy which is changed significantly. 3.CAP reform for new member states with single area payment causes political and economic sensitive redistribution effects. 4.Graduall introduction of single are payments and degressive farm based payments is the “second best solution”. 5.Multi-annual program of direct payments is necessary. CAP reform Conclusions