Organic Farms in the EU: Status quo, development strategies and policy impacts on selected arable and dairy farms

Abstract

Organic farming is increasingly considered in the European Common Agricultural Policy. Sound evaluations of the effects of policy measures on organic farms in the EU are needed to face the challenges in future policy design. The effects of various policy scenarios on profitability and development strategies of typical organic arable and dairy farms are analysed for the EU-countries Germany, Denmark, the United Kingdom and Italy. Based on an approach which links simulation modelling and focus groups consisting, profitability of model farms is analysed ex-post for year the 1999 and their potential development simulated until 2008 under Agenda 2000 and two alternative policy scenarios. For each policy scenario potential farm adaptation strategies are forecasted. Size, structure, productivity, achieved output prices and policy environment of typical organic farms differ widely between countries and farm types. Great differences in the contribution of payments to total farm profit and farm family labour remuneration are observed. Dairy model farms are expected to slightly benefit from Agenda 2000, while arable farms are more susceptible to price reductions of the Agenda 2000 package. In adaptation to Agenda 2000 organic dairy farms are expected to grow, while arable farms are more likely to diversify production or follow valued adding strategies. Two extreme alternative scenarios are also analysed in their impacts on organic farms, a policy-driven scenario (Organic Paradise) and a demand-driven scenario (Green Europe). The Organic Paradise scenario results in higher profitability of organic farms than Green Europe scenario in the long term. The effects of alternative policy scenarios on profitability of typical farms are similar in all countries. The choice of adaptation strategy of farmers in the different countries, however, vary significantly, mainly due to the current national market situation.