The latest Common Agricultural Policy (CAP) reforms could bring substantial changes to Scottish farming communities.
Two major components of this reform package, an introduction of environmental measures into the Pillar 1
payments and a move away from historical farm payments towards regionalized area payments, would have a
significant effect on altering existing support structures for Scottish farmers, as it would for similar farm types
elsewhere in Europe where historic payments are used. An optimizing farm-level model was developed to
explore how Scottish beef and sheep farms might be affected by the greening and flat rate payments under the
current CAP reforms. Nine different types of beef and sheep farms were identified and detailed biophysical and
financial farm-level data for these farm types were used to parameterize the model. Results showed that the greening
measures of the CAP did not have much impact on net margins of most of the beef and sheep farm businesses,
except for ‘Beef Finisher’ farm types where the net margins decreased by 3%. However, all farm types were better
off adopting the greening measures than not qualifying for the greening payments through non-compliance with
the measures. The move to regionalized farm payments increased the negative financial impact of greening on
most of the farms but it was still substantially lower than the financial sacrifice of not adopting greening measures.
Results of maximizing farm net margin, under a hypothetical assumption of excluding farm payments, showed that
in most of the mixed (sheep and cattle) and beef suckler cattle farms the optimum stock numbers predicted by the
model were lower than actual figures on farm. When the regionalized support payments were allocated to each
farm, the proportion of the mixed farms that would increase their stock numbers increased whereas this proportion
decreased for beef suckler farms and no impact was predicted in sheep farms. Also under the regionalized support
payments, improvements in profitability were found in mixed farms and sheep farms. Some of the specialized beef
suckler farms also returned a profit when CAP support was added.
- Agricultural economics
- Common Agricultural Policy
- Greening measures