Using administrative data to model CAP reform

Sinéad McPhillips Economics & Planning DivisionDepartment of Agriculture, Food & the MarineKevin Hanrahan Agricultural Economics and Farm Surveys Department Teagasc

OverviewCommission proposals on SFPDAFM analysis Irish “internal convergence” proposalComparisons with other proposalsModelling by Teagasc on farm typesConclusions

COMMISSION PROPOSALS ON SFP

Distribution of Direct Payments within Member States (‘internal convergence’):

Progressive movement to uniform national or regional payment rates per hectare by 2019

Entitlements based on eligible hectares declared in 2014 by active farmers with at least one entitlement in 2011

DAFM analysisModelling based on DAFM administrative dataObjective: To quantify effects of Commission proposals, &

to develop and propose alternativesAdministrative data collected by DAFM (such as

contained in the SPS application form) provides a wealth of useful data eligible areapayment amountstocking density

2010 SPS databaseAverage payment

per hectare category, 2010 No of farmers Total Area 2010 SPS Payment

AverageArea (ha)

Average payment per ha (2010)

0 payment, some area 7,955 144,159 0 18.1 0.00

0 to 20 1,963 67,579 771,200 34.4 11.41

20 to 50 4,176 179,217 6,512,194 42.9 36.34

50 to 100 10,482 397,131 29,951,263 37.9 75.42

100 to 150 13,135 423,446 53,110,201 32.2 125.42

150 to 200 15,462 493,919 86,753,342 31.9 175.64

200 to 250 16,953 571,978 128,911,363 33.7 225.38

250 to 300 16,709 603,410 165,984,643 36.1 275.08

300 to 400 25,936 1,025,283 354,750,285 39.5 346.00

400 to 500 11,084 473,984 209,656,007 42.8 442.33

500 to 600 4,446 197,559 107,207,633 44.4 542.66

600 to 700 1,815 80,239 51,594,069 44.2 643.01

700 to 800 803 33,006 24,678,914 41.1 747.71

800 to 900 378 16,388 13,801,287 43.4 842.13

900 to 1,000 167 5,947 5,648,677 35.6 949.88

1,000+ 338 7,726 9,182,251 22.9 1,188.44

All 131,802 4,720,971 1,248,513,329 35.8 264.46

2010 SPS payment distribution

6%

1%

3%

8%

10%

12%

13%

13%

20%

8%

3%

1%

1%

0% 5% 10% 15% 20% 25% 30%

0 payment, some …

0 to 20

20 to 50

50 to 100

100 to 150

150 to 200

200 to 250

250 to 300

300 to 400

400 to 500

500 to 600

600 to 700

700 to 800

800 to 900

900 to 1,000

1,000+

2010 SPS Payment No of farmers

Models analysedFlat rate nationalFlat rate at NUTS 2 & NUTS 3 levelRegions based on stocking densityAll resulted in large transfers within

regions/local area as well as between regions

Example: Average payment per ha by NUTS III region, 2010

216

310

207

258

300

283

337

264

0

50

100

150

200

250

300

350

Border Midlands West Dublin Mid East Mid West South East South West

IRISH PROPOSAL ON INTERNAL CONVERGENCE

“Approximation” - move towards the averageApplies to the whole payment (green and basic)Based on commission’s proposals for external

convergenceResults; average gains of 29% for 65,000 farmers,

average losses of 9% for 56,000. Those with highest payments lose most.

5 Member States supportive (Spain, Portugal, Italy, Denmark and Luxembourg)

Note: All figures are estimates only, based on modelling exercises carried out by DAFM, using eligible area and actual payments to farmers in 2010, in order to analyse the overall impact of alternative proposals on Irish farmers.

Payment category (SPS euro per ha 2010) No of farmers % change compared to 20100 to 20 1,939 +662%20 to 50 4,129 +185%50 to 100 10,350 +72%100 to 150 12,998 +30%150 to 200* 15,300 +12%200 to 238.01 12,712 +3%GAIN 65,052 +29%

NO CHANGE: 238.02 TO 264.46 (90% to 100%) 8,943 -264.47 to 300 11,717 -2%300 to 400 25,658 -6%400 to 500 10,919 -11%500 to 600 4,368 -14%600 to 700 1,763 -16%700 to 800 769 -17%800 to 900 348 -18%900 to 1,000 153 -19%1,000+ 221 -21%LOSS 55,916 -9%TOTAL 129,911 +0%

Irish Proposal – Internal Convergence Breakdown

OTHER PROPOSALS EMERGING

However, other Member States have other ideas

In addition, other proposals are coming from the European Parliament all the time – this is a moveable feast CAP reform now s.t. “ordinary legislative

procedure”, i.e. co-decision of Council and Parliament

Note: All figures are estimates only, based on modelling exercises carried out by DAFM, using eligible area and actual payments to farmers in 2010, in order to analyse the overall impact of alternative proposals on Irish farmers.

Commission proposals -

national flat rate

Capoulas Santos proposals on internal

convergence

Ireland's proposal - External

convergence approach

No. of farmers gaining 73,995 73,995 65,052

Average % loss +85% +56% +29%

- - 8,943

No. of farmers losing 55,916 55,916 55,916

Average % loss -33% -23% -9%

Total transfers €m €297m €197m €79m

Comparative Analysis: Commission, Capoulas Santos (EP)and Irish Minister’s Proposals

MODELLING BY TEAGASC

Adding data from the AIM and other DAFM databases (animal numbers and type)

So as to allow farms to be categorised according to the FADN farm typologySimilar approach to that used in Census of

Agriculture typing of farmsUseful for CAP negotiations Database could be adapted for a variety of

analytical purposes

SPS Payment Share of FFI by Farm System (NFS 2010)

0%

20%

40%

60%

80%

100%

120%

Dairying Cattle

Rearing

Cattle

Other

Sheep Tillage Mixed

Livestock

All Farms

impact on income of a euro change in subsidy depends on the farming system’s subsidy dependence

Teagasc 2010 NFS (Hennessy et al. 2011)

Farms by Farm System and Economic Size

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

DY ML CR CO SH P151 NP151

num

ber o

f far

ms

S M L1 ESU = €1,200 SO

S ≤ 8 ESU; 8<M≤40 ESU; L>40 ESU

Flat Rate Payment Model (EC proposal)Winners and Losers by systemW= 75,011 & L = 56,764

0

5,000

10,000

15,000

20,000

25,000

Dairying MixedLivestock

CattleRearing

CattleOther

Sheep P151 NP151

Num

bers

of f

arm

s

Results from Teagasc analysisReform is a zero-sum game

If there are losers there are winners/If there are winners there are losers

Specialist dairying and tillage, which are more intensive systems, have more losers than winners, but still a substantial number of winners.

Drystock farms, by contrast, have more winners than losers, but still have a surprising number of losers.

Largest absolute gains/losses on those farms that are larger recipients of DP

Larger relative gains on farms with smaller DP receiptsDoesn’t make sense to talk about “cattle men winning” and “dairy

men losing” – there are winners and losers in all farm types

Cattle Rearing: SPS subsidy/haEC proposals

0

100

200

300

400

500

600

700

800

0-1000 1000-2000

2000-5000

5000-10000

10000-15000

15000-20000

20000-25000

25000-30000

30000-40000

40000-50000

>50000

SPS

euro

/ha

0

2000

4000

6000

8000

10000

12000

14000

farm

s

Winners Losers n

Cattle Rearing Farm System: SO/haEC proposals

0

100

200

300

400

500

600

700

800

900

0-1000 1000-2000

2000-5000

5000-10000

10000-15000

15000-20000

20000-25000

25000-30000

30000-40000

40000-50000

>50000

euro

SO

/ha

0

2000

4000

6000

8000

10000

12000

14000

farm

s

Winners Losers n

Dairy: SPS subsidy/haEC proposals

0

100

200

300

400

500

600

700

0-1000 1000-2000

2000-5000

5000-10000

10000-15000

15000-20000

20000-25000

25000-30000

30000-40000

40000-50000

>50000

SPS

euro

/ha

0

1000

2000

3000

4000

5000

6000

farm

s

Winners Losers n

Dairy Farm System: SO/haEC proposals

0

500

1,000

1,500

2,000

2,500

3,000

0-1000 1000-2000

2000-5000

5000-10000

10000-15000

15000-20000

20000-25000

25000-30000

30000-40000

40000-50000

>50000

euro

SO

/ha

0

1000

2000

3000

4000

5000

6000

farm

s

Winners Losers n

CONCLUSIONS

Detailed administrative data allows more precise modelling of the effects of policy changeCan provide insights not provided by other data

Particularly useful when comparing one proposal against another

Still have to bear in mind that they are just models Not predictive of what will happen in the real world

Cannot provide information on income or production effects