The influence of the EU Common Agricultural Policy on the competitiveness of organic farming.

Abstract

AbstractThe Common Agricultural Policy (CAP) strongly influences the economic framework of agriculture in the EU, contributing to a significant share of farm receipts. Organic farms tend to receive higher total payments than comparable conventional farms due to support from agri-environmental programmes. However, due to differences in production structures, they receive fewer payments from the general schemes like arable area payments and livestock headage premia, which were introduced as part of the 1992 CAP reform. As yields in organic farming are lower, organic farms are also likely to gain less from the still widespread use of price support measures. Still, the CAP reforms have significantly increased the competitiveness of organic farming relative to conventional farming. While the introduction of direct support to organic farming in all EU member states was probably the single most important change. Modifications of the general support schemes also play a decisive role in this development. The replacement of price support by partly decoupled payments favours extensive farming systems. The introduction of premiums for set-aside has especially benefited organic arable farms. Initial calculations indicate that further decoupling as envisaged in the current discussion of future reforms of the CAP, such as grassland premiums or general uniform area payments, will considerably increase the financial attractiveness of organic farming in the EU.