High commodity prices and the EU's single payment scheme: Some consequences of double-dipping

Andrew Schmitz, Troy Schmitz, Paul Schure

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

When negotiating agricultural policies, decisions are generally based on historical net farm income figures, which are derived from the then current price and production data. In 2003, when the Single Payment Scheme (SPS) was introduced in the EU, agricultural commodity prices were "low." As a result the SPS is very generous when viewed in light of today's "high" agricultural commodities prices: farmers are double-dipping. We provide an empirical assessment of the implications for compensatory payments under the SPS in combination with high commodity prices for two major EU crops: wheat and barley. Yearly compensatory payments for these two crops alone exceed $10 billion. The lesson of this result for agricultural policy reform is that the payments under the SPS should have been made more flexible and tied to future (farm gate) prices, i.e., so payouts would usually vary with changing market conditions, while still being decoupled from production decisions.

Original languageEnglish (US)
Pages (from-to)523-531
Number of pages9
JournalCanadian Journal of Agricultural Economics
Volume56
Issue number4
DOIs
StatePublished - Dec 1 2008

ASJC Scopus subject areas

  • Global and Planetary Change
  • Ecology
  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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