Do EU direct payments to beef producers belong in the 'blue box'?

In the Uruguay Round Agreement on Agriculture, so-called 'blue box' support measures were exempted from reduction commitments, provided they were delivered under 'production-limiting' programs. Although classified as 'blue box', the EU system of direct payments (DP) to beef farmers imposes 'claim-limiting' restrictions rather than 'production-limiting' restrictions, allowing farmers to keep additional animals over and above the number upon which they are eligible to claim DP. The present paper provides empirical evidence that EU direct payments capitalise into the market prices of male calves and young steers in Ireland. It is also likely that DP capitalises into the prices of beef cows and heifers. Given this capitalisation process, some farmers can obtain 'capitalised' DP on animals produced over and above the 'claim-limiting' restrictions, by selling these animals through auction markets. Thus, 'capitalised' DP probably encourages production over and above the limiting measures.

New direct payments scheme: targeting and redistribution in the future CAP

The Commission has proposed that a revised version of the present regime of direct payments should be rolled forward into the post-2013 CAP. There would be a limited redistribution of funds between Member States. Thirty per cent of the budget would be allocated to a new greening component, which would be problematic in the WTO. Non-active farmers would not qualify for aid; and payments would be capped. Special schemes would be introduced for small farmers, for young new entrants, and for disadvantaged regions.

Allocating community-level payments for ecosystem services initial experiences from a REDD pilot in Tanzania

Payments for ecosystem services (PES) typically reward landowners for managing their land to provide ecosystem services that would not otherwise be provided. REDD—Reduced Emissions from Deforestation and Forest Degradation—is a form of PES aimed at decreasing carbon emissions from forest conversion and extraction in lower-income countries. A key challenge for REDD occurs when it is implemented at the community rather than the individual landowner level. Whilst achieving this community-level reduction relies on individuals changing their interaction with the forest, incentives are not aligned explicitly at the individual level. Rather, payments are made to the community as a single entity in exchange for verified reduced forest loss, as per a PES scheme. In this paper, we explore how community level REDD has been implemented in one multiple-village pilot in Tanzania. Our findings suggest that considerable attention has been paid to monitoring, reporting, verification, and equity. Though no explicit mechanism ensures individual compliance with the group PES, the development of village level institutions, “social fencing,” and a shared future through equal REDD payments factor into community decisions that influence the level of community compliance that the program will eventually achieve. However, few villages allocate funds for explicit enforcement efforts to protect the forest from illegal activities undertaken by outsiders.

Present bias predicts participation in payments for environmental services: evidence from a behavioral experiment in Uganda

Farmers are necessary agents in global efforts to conserve the environment now that croplands and pastures together constitute the largest terrestrial system on Earth – covering some 48% of ice-free land surface. Whereas standard economic models predict that farmers will participate in conservation programs so long as they are profitable, empirical findings from behavioral economics point to a number of normally unobservable preferences that may influence the decision-making process. This study tests, for the first time, whether heterogeneity in behavioral preferences correlates with decisions to participate in Payments for Environmental Services (PES) programs. We elicit individual trust and time preferences using economic experiments and link resulting measures to household survey data and participation decisions in a Ugandan PES program. We find that farmers who exhibit a preference for proximate gains – present-biased preferences – are 47.7% more likely to participate in the program than those who show time-consistent or future-biased preferences. This result has implications for ongoing and planned PES programs involving farmers, particularly in Africa, by highlighting a potential relationship between payment timing and participation, and further validates the use of behavioral experiments in explaining real-world decisions.

The impact of contract duration on the cost of cash retention

Cash retention is a common means of protecting an employer from a contractor's insolvency as well as ensuring that contractors finish the work that they start. Similarly, contractors withhold part of payments due to their sub-contractors. Larger contracts tend to be subjected to smaller rates of retention. By calculating the cost of retention as an amount per year of a contract, it is shown that retention is far more expensive for firms whose work consists of short contracts. The extra cost is multiplied when the final payment is delayed, as it often is for those whose work takes place at the beginning of a project. This may explain why it is that main contractors are a lot less interested than sub-contractors in alternatives to cash retention, such as retention bonds

The bond scheme

Under the bond scheme, a pre-determined series of payments would compensate farmers for lost revenues resulting from policy change. Unlike the Single Payment Scheme, payments would be fully decoupled: recipients would not have to retain farmland, or remain in agriculture. If vested in a paper asset, the guaranteed, unencumbered, income stream would be similar to that from a government bond. Recipients could exchange this for a capital sum reflecting the net present value of future payments, and reinvest in other business ventures, either on- or offfarm.With a finite, declining flow of payments, budget expenditure would reduce, releasing funds for other uses.

The 2002 US Farm Bill: what's in it for CAP reform?

The 2002 U.S. Farm Bill (the Farm Security and Rural Investment Act or FSRIA) provides considerably more government subsidies for U.S. agriculture than Congress envisaged when it passed the preceding 1996–2002 FAIR Act. We review the FAIR record, showing how government subsidies increased greatly beyond those originally scheduled. For FSRIA, we outline key commodity, trade, and conservation and environmental provisions. We expect that the commodity programmes will: (a) encourage production when the market calls for less; (b) significantly increase subsidies over FAIR baseline subsidies; (c) press against current WTO and possible Doha Round support limits; and (d) aggravate trading partners. Finally, we suggest two lessons from the U.S. policy experience that might benefit those working on CAP and WTO reform. First, past research shows that farm programmes have little to do with the economic health of rural communities. Second, programme transparency, and especially public disclosure of the level of payments going to individual farmers, by name, influences the farm policy debate. Personalized data show what economists have long maintained—that the bulk of programme benefits go to a relatively few, large, producers—but do so in a way that captures the public and policy-makers' attention

Costs to farmers of a tuberculosis breakdown

An on-farm survey of 151 cattle farmers who had experienced a bovine tuberculosis (Mycobacterium bovis) breakdown on their farms was undertaken in 2003 to assess the costs associated with the breakdown. In 90 per cent of cases the cost was estimated to be less than 18,513 pound for dairy herds and less than El 1,462 for beef herds, but with a range from 229 pound to 103,817 pound. The main cost was the slaughter of reactor cattle. For the majority of the farmers, the compensation payments seemed to meet most of the costs of their breakdowns, although a majority was still left with net losses.

The CAP and EU enlargement: Prospects for an alternative strategy to avoid the lock-in of CAP support

The integration of the central and east European countries (CEECs) into the Common Agricultural Policy (CAP) could become a major problem. At the Copenhagen European summit in December 2002, the EU agreed a transitional period with a gradual phasing in of direct payments. However, this strategy will not solve the problems of the CAP: budgetary limits remain problematic, the policy ignores possible developments in the World Trade Organization (WTO), and the extension of direct payments to the CEECs will further capitalize, and hence lock-in, agricultural support. The latter makes future reform even more difficult and, to overcome these problems, we suggest an alternative strategy to integrate the CEECs into the CAP. The EU should phase out direct payments by applying a bond scheme. Finally, we consider whether this option is politically viable.

The visibility of agricultural subsidies and market illusions in the Common Agricultural Policy: Some evidence from farmers' views in Germany, Portugal and the United Kingdom

This article demonstrates that the design and nature of agricultural support schemes has an influence on farmers' perception of their level of dependence on agricultural support. While direct aid payments inform farmers about the extent to which they are subsidised, indirect support mechanisms veil the level of subsidisation, and therefore they are not fully aware of the extent to which they are supported. To test this hypothesis, we applied data from a survey of 4,500 farmers in three countries: the United Kingdom, Germany and Portugal. It is demonstrated that indirect support, such as that provided through artificially high consumer prices, gives an illusion of free and competitive markets among farmers. This 'visibility' hypothesis is evaluated against an alternative hypothesis that assumes farmers have complete, or at least a fairly comprehensive level of, information on agricultural support schemes. Our findings show that this alternative hypothesis can be ruled out.