1. © 2008 Séan Rickard WHAT PRICE PROTECTION: An economic assessment of the impact of proposed restrictions WHAT PRICE PROTECTION: An economic assessment of the impact of proposed restrictions Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk Séan Rickard Cranfield School of Management s.h.rickard@cranfield.ac.uk

2. © 2008 Séan Rickard  I have worked as an economist in agriculture for more than 30 years; Introduction …  Most of my work has been focused on the direct and indirect effects of policies;  The impact of any significant change in policy should be assessed and understood.

3. © 2008 Séan Rickard Based on two earlier studies – a PSD interpretation of the loss of substances under four scenarios Based on two earlier studies – a PSD interpretation of the loss of substances under four scenarios My study was … And a study by ADAS – the UK’s science based consultancy – estimating the associated loss of yields And a study by ADAS – the UK’s science based consultancy – estimating the associated loss of yields My study translated this work into the effect on farm and retail prices

4. © 2008 Séan Rickard Yield (t/ha) Price (€/t) Revenue Costs (€/ha) Margin (€/ha) % rise in price Yield (t/ha) Price (€/t) Revenue Costs (€/ha) Margin (€/ha) % rise in price Scenarios Status Quo 8.6 141.5 1,252.3 817.0 435.3 - Status Quo 8.6 141.5 1,252.3 817.0 435.3 - Commission Minimum 6.7 185.4 1,241.9 804.0 437.9 32% Commission Minimum 6.7 185.4 1,241.9 804.0 437.9 32% Parliament Maximum 3.4 332.5 1,117.3 683.2 434.1 135% Parliament Maximum 3.4 332.5 1,117.3 683.2 434.1 135% Wheat margins …

5. © 2008 Séan Rickard A 100% increase in cereal prices – without any mark-up – would cause increases of €0.11 for bread, €0.04 for a litre of milk & €0.48 kilo pork A 100% increase in cereal prices – without any mark-up – would cause increases of €0.11 for bread, €0.04 for a litre of milk & €0.48 kilo pork Retail food prices … The restrictions would increase the cost of food by an average of 8 per cent but the increase for low income families would be higher The restrictions would increase the cost of food by an average of 8 per cent but the increase for low income families would be higher The potential impact on vegetables very severe so less healthy eating

6. © 2008 Séan Rickard  The increase in prices could be lower if the lost output was made up with imports;  But in this situation many farm businesses would be unviable with widespread hardship;  Reduced domestic production puts at risk many food processing-manufacturing jobs;  The effects for EU countries’ trade in food would be adverse;  Recent events point to the need for higher not lower productivity from EU’s farms.  But in this situation many farm businesses would be unviable with widespread hardship;  Reduced domestic production puts at risk many food processing-manufacturing jobs;  The effects for EU countries’ trade in food would be adverse;  Recent events point to the need for higher not lower productivity from EU’s farms. Wider considerations …

7. © 2008 Séan Rickard  Food inflation returned in 2008 and food prices are predicted to be higher in future;  Only by increasing the productivity of farming can food prices be controlled;  Restrictions on protection substances are not appropriate at this time and are not substitutes for training and education. Concluding thoughts …