A methodological tool for the ex post evaluation of past CAP reforms based on FADN data

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An essential objective of the FACEPA project was the evaluation of public policies based on FADN data. This objective includes the design, development and testing of FADN-based economic models appropriate for ex post analyses across selected Member States. The estimation is based on a ‘general cost of production model’ (GECOM). Adding special functions in a time variable to the cost function enables estimating the impact of past policy reforms on the cost function of farms. As such, it facilitates the ex post estimation of past policy reforms.

The methodology was applied in France, Germany, Italy, Belgium and the Netherlands. It included different types of products and addressed different policy instruments and policy reforms. The methodology considered the effects of the 2003 Fischler reform on dairy, cattle and crop farms. The Fischler reform was significant because it introduced the Single Farm Payment scheme, cross-compliance, IACS, the Farm Advisory System, rules for modulation and financial discipline and many others. The same methodology was used to examine the MacSharry reform, the first reform shifting the CAP from market support to producer support, and the Agenda 2000 reform on the cost structure of cattle and crop farms in Austria, the Netherlands and Germany.

Methodology
Results
Relevance for monitoring and evaluation of the CAP

Ex post evaluation of policy impacts: The proposed methodology allows the ex post estimation of the effects of policy changes (reforms) on the cost function of European farms by utilising only FADN data. It was tested in several commodities and different areas of Europe, confirming it as a valid methodology for evaluating policy impacts on the cost of production, including farm income, performance and viability. The methodology could estimate policy impacts on competitiveness in the current CAP context since the cost of production directly links to farm competitiveness.

The cost production model (GECOM) is a valuable source of information for competitiveness analysis. FADN data is the basis for product-level data so that evaluators can show the gross margin of one product or unit cost for another product. In the case of gross margin, they can allocate variable costs to different products, and in the case of unit cost, they need to allocate the total cost to different products. A sophisticated methodology is needed for this procedure, and the cost production model is such a methodology.

The tool describes the methodology and rationale for setting up the econometric model based on FADN variables to fit and test the model and interpret the results. The model requires only econometric skills and access to FADN farm-level data and can be adapted and used to assess policy and other impacts on many products in any Member State.

Last modification date: 
09/12/2021