Farm Payment Research Articles

Conventional or organic cattle farming? Trade-offs between crop yield, livestock capacity, organic premiums, and government payments

CONTEXTAn important question for farmers is whether to run their farm conventionally or organically. This choice can significantly affect the farm's financial performance and its impact on the environment. OBJECTIVEThe primary objective of this study is to compare the profitability of conventional and organic cattle systems and investigate how it is associated with individual farm characteristics, like forage production capacity, forage quality, milk quota, animal housing capacity, and their relative presences. METHODWe employ a whole farm optimization model, customized for Norwegian cattle farming. The primary goal of this model is to maximize the gross margin by optimizing decisions related to land usage and animal inventory while adhering to a set of constraints. We systematically solve more than 200,000 model instances, with varying farm characteristics. RESULTS AND CONCLUSIONSThe results can be distilled to the following key points: If forage of good quality is readily available, but the livestock operation cannot be expanded due to animal housing and milk quota restrictions, organic may outcompete conventional farming. Otherwise, gross margin is maximized with conventional farming. These findings emphasize the crucial role of forage production capacity and quality in relation to available milk quota and infrastructure when considering the transition from conventional to organic farming. Extensive sensitivity analyses affirm the robustness of these conclusions. Regional regulatory factors, such as government farm payments, also play a significant role, and influence the optimal farming approach. Additionally, we show that increases in organic price premiums can markedly impact the competitiveness of organic farming, even in a system where government payments make out a significant part of the farm revenue. SIGNIFICANCEThe model can support farmers to make informed decisions about converting to organic or conventional farming. It can also be used by policymakers to determine the level of support required to make it worthwhile for different types of farms to convert. We also show that existing government payment schemes give rise to regional differences in the incentives for organic farming in Norway. To ensure equal incentives for organic farming across the country, the organic payments would have to be regionally adjusted, in line with the other already regionally dependent government payments. This insight may be of significant interest to policymakers and other stakeholders.

Understanding inequality in U.S. farm subsidies using large‐scale administrative data

AbstractUsing a large‐scale, individual‐level administrative data set for 2008–2021, we document the inequality in farm program payments across all recipients in the U.S. By examining the relationship between within‐county inequality and demographic characteristics of farmers in a county, we find that there is a positive association between the share of Black operators and within‐county inequality. We also provide suggestive evidence that a substantial portion of racial and gender disparities in farm payments are associated with crop production characteristics. We then utilize name information in farm payment data to infer the race and gender of individual payees. The analysis using approximately 4.9 million payee‐by‐year observations and predicted race and gender information of those payees shows that payments are lower for producers who are Black, Hispanic, and female. Our study provides a comprehensive empirical analysis of the equality of farm subsidy distribution covering most U.S. farm payment programs at a granular level over time. We also provide an empirical approach of utilizing name information from the administrative data that opens up more possibilities for racial and gender inequity research in agricultural economics.

Buying time: The effect of Market Facilitation Program payments on the supply of grain storage

AbstractWe estimate the impact of an unprecedented surge in ad hoc farm payments on grain inventories held by farmers. Payments thought to be decoupled from production may still distort markets if they affect other outcomes such as inventories. Through the Market Facilitation Program, US farmers received approximately 23 billion dollars over two marketing years. The economic theory of commodity storage suggests such a cash injection can increase inventories by lowering the opportunity cost of storage. Using a panel event study framework, we find Market Facilitation Program payments significantly increased grain storage by US farmers without similar impacts on off‐farm inventories.

Eco-Efficiency and Its Determinants: The Case of the Italian Beef Cattle Sector

In recent years, eco-efficiency assessment has proven to be an effective tool to reduce the environmental damages of agricultural activities while preserving their economic sustainability. Hence, this paper aims to assess the eco-efficiency of a sample of 148 beef cattle farms operating in the extensive livestock system of Central Italy. The analysis is based on Farm Accountancy Data Network (FADN) economic data in the year 2020 and includes, as environmental pressures, farm expenditure for the use of fuels, electricity and heating, and fertilizers. A two-stage approach was implemented: in the first stage, an input-oriented DEA model including slack variables was used to quantify farm eco-efficiency scores and determine the polluting inputs’ abatement potentials. In the second stage, the influence of possible influencing factors on eco-efficiency scores was tested using a regression model for truncated data. The analyzed farms were found to be highly eco-inefficient, as they could abate their environmental pressures, on average, in a range from 56% to 60% while keeping the value of their global production constant. Fertilizers and fuel consumption were identified as the least efficiently operating inputs, with potential reductions in terms of the related expenditures fluctuating between 9% and 42%. Farms showing a high-intensity livestock system, a low labor intensity, and a larger farm area were recognized as the most eco-efficient. Environmental and animal welfare subsidies were found to not affect eco-efficiency, while a negative influence was estimated for a single farm payment, which does not seem to be an incentive mechanism for farms to operate efficiently.

Biomass carbon stocks and stock changes in managed hedgerows

Landscape features, such as hedgerows, can play a role in enhancing terrestrial carbon (C) sinks, especially in North-western Europe, where they form a large part of the agricultural landscape. To date, there are few studies relating aerial imagery to ground-truthed biomass measurements and relating changes in biomass to hedgerow management. This study sought to develop relationships between measured biomass of hedgerows and digital elevation model (DEM) data from drones and aircraft. Furthermore, changes in hedgerow above-ground and below-ground biomass stocks were assessed using a systematic grid sample, DEM data and developed volume-biomass regression models. The developed inventory framework was then applied to a pilot study area of 419,701 ha in Ireland.Robust relationships were developed relating DEM data to volume and above-ground biomass. Model equations were also developed linking above-ground and below-ground biomass. However, these were less robust due to the confounding impacts of hedgerow management intensity, hedgerow type and dominant species. Above-ground biomass density was linearly correlated with hedge volume. Wider, less intensively managed, irregular hedges exhibit a higher biomass stocks per km, when compared to regular, more intensively managed hedgerows. When the models were extrapolated to the county level, hedgerow biomass C pools for Co Wexford and Waterford are suggested to be a net emission of −0.3 tC ha−1 year−1 due to hedgerow removals and management. Flailing or coppicing of hedgerows, in particular irregular profile hedgerows, had the largest impact on the biomass C balance in the pilot study area. Re-introduction of traditional management practices such as layering and increasing the allowable hedgerow width in areas qualifying for farm payments could be considered with the aim of increasing the maximum sink potential of established hedgerows.

Will Changes in the Common Agricultural Policy Bring a Respectful Approach to Environment in EU Countries?

Abstract Under the 2014–2020 Common Agricultural Policy (CAP), the existence of two pillars is maintained and the link between them is strengthened. Regulation (EU) No. 1307/2013 provides a new system of direct payments. The system consisting of the decoupling of agricultural aid from production (partial decoupling) and the provision of general income support, which came into force in 2003, is being transformed into a system in which single farm payments are replaced by a seven-component system of multi-purpose payments: basic payment per hectare, greening component, additional payment to young farmers, redistributive payment, additional income support in areas with natural handicaps, coupled support, voluntary simplified scheme for small farmers. There are three measures related to greening payments: crop diversification: the farmer must grow at least two different crops; preservation of existing permanent grasslands; the creation of an area of ecological interest corresponding to at least 5% of the arable land of a holding over 15 hectares (excluding permanent grassland and perennial crops). The new CAP aims to increase agriculture‘s contribution to the EU‘s environmental and climate objectives, provide more focused support for smaller farmers and allow Member States greater flexibility to adapt measures to local conditions.

Political returns to ad hoc farm payments?

AbstractThis paper investigates the extent to which ad hoc farm payments made under the Market Facilitation Program (MFP) and the Coronavirus Food Assistance Program (CFAP) affected voting patterns in the 2020 Presidential Election. MFP and CFAP payments were historically unique not only in terms of their magnitude, but also because they were authorized almost entirely by the incumbent Administration of President Donald Trump without direct Congressional authorization or appropriation. Our results indicate that these payments did influence county‐level voting outcomes. The observed response is driven almost exclusively by increased turnout among Trump supporters—we do not observe evidence that ad hoc payments generated widespread “vote switching” away from the Democratic or third‐party candidates and toward Trump. We find the MFP and CFAP programs generated 677,512 votes for Republican candidate Trump in the 2020 Presidential Election with an estimated cost‐per‐vote‐gained of $66,124. These votes induced by ad hoc farm payments were insufficient to change electoral college outcomes in any U.S. state.

How has the 2013 decoupled payment reform affected farmland rental values in Northern Ireland?

The degree of capitalisation of agricultural subsidies into land rents has been mainly determined by different payment implementation systems and land markets. The 2013 EU Common Agricultural Policy (CAP) reform introduces a transition of Single Farm Payment towards a flat rate system and entitlement reallocation. Based on 2009–2017 Farm Business Survey data, we used the Arellano-Bond dynamic panel data estimation technique to estimate the capitalisation impact of the 2013 CAP reform to decoupled payments (DP) in Northern Ireland (NI) where a short term conacre land rental system is dominant. Our estimates suggest that under the 2013 CAP reform in NI, the capitalisation of DP into land rental prices has continued even when entitlements are less than eligible land areas. Specifically, the marginal effect on rental rates of an additional pound of the DP is 22 pence, increasing to 43 pence following the 2013 CAP reform but only in the first year. Given that about one-third of land area is rented in NI, land capitalisation will be of particular relevance in designing more efficient future subsidy policies.

Stakeholder mental model analysis supports focused conservation policy and actions for Eurasian beaver (Castor fiber) reintroduction

Eurasian beaver, Castor fiber has been restored to England’s natural fauna following a trial reintroduction located in the country’s southwestern region. Beavers characteristically generate profound and frequently beneficial shifts to river dynamics, nutrient cycling, biodiversity, and human cultural experience, but can also be associated with unwanted human interactions, impacts and costs. Consequently, an important objective of the trial design was to ensure conservation leadership, monitoring and mitigation for problems such as burrowing, damming and flooding, and damage to valued trees. To understand how these developments are perceived and accepted, implicated key stakeholder mental models were elicited and explored, using fuzzy cognitive map techniques. Analysis showed broad alignment of ecological understanding between stakeholders. Social perspectives showed marked divergence, a focus of concern as social conflict can undermine otherwise ecologically viable conservation benefits. To investigate perceived effectiveness of trial conservation measures, stakeholder models with and without conservation actions were experimentally compared under dynamic analysis. Overall, the findings indicate that actions taken are sustaining beaver acceptance and limiting persecution. Of stakeholder groups examined, farming appeared most susceptible to model divergence, but also strongly protected by mitigation. This is important as reconciling mental model differences is considered a necessary element in building socio-ecological system resilience. These findings highlight mental model analysis as a valuable aid to assessment of social dimensions of conservation policies. Further, mental modelling could help to focus how farm payment reform in the U.K. and similar economies might be used to support leadership and mitigation designed to improve human-beaver ecosystem resilience.

US federal farm payments and farm size: Quantile estimation on panel data

AbstractThe marginal effect of government payments on farm size of US corn/soy and wheat producers is currently contested. This paper uses a quantile estimator with a restricted access panel dataset. Payments are positively associated with farm size; the association is statistically significant at select percentiles of the farm size distribution, but the statistical significance is not systematically related to farm size. Although the marginal effect is qualitatively larger for bigger farms, their differences are not statistically significant. This study does not provide any empirical evidence to suggest that federal farm dollars cause (i) only large farms to grow bigger or (ii) large farms to grow more than small farms.

Performance-Based Payments for Soil Carbon Sequestration Can Enable a Low-Carbon Bioeconomy.

Incentivizing bioenergy crop production in locations with marginal soils, where low-input perennial crops can provide net carbon sequestration and economic benefits, will be crucial to building a successful bioeconomy. We developed an integrated assessment framework to compare switchgrass cultivation with corn-soybean rotations on the basis of production costs, revenues, and soil organic carbon (SOC) sequestration at a 100 m spatial resolution. We calculated profits (or losses) when marginal lands are converted from a corn-soy rotation to switchgrass across a range of farm gate biomass prices and payments for SOC sequestration in the State of Illinois, United States. The annual net SOC sequestration and switchgrass yields are estimated to range from 0.1 to 0.4 Mg ha-1 and 7.3 to 15.5 Mg dry matter ha-1, respectively, across the state. Without payments for SOC sequestration, only a small fraction of marginal corn-soybean land would achieve a 20% profit margin if converted to switchgrass, but $40-80 Mg-1 CO2e compensation could increase the economically viable area by 140-414%. With the compensation, switchgrass cultivation for 10 years on 1.6 million ha of marginal land in Illinois will produce biomass worth $1.6-2.9 billion (0.95-1.8 million Mg dry biomass) and mitigate 5-22 million Mg CO2e.

A critical analysis of the potential for EU Common Agricultural Policy measures to support wild pollinators on farmland.

Agricultural intensification and associated loss of high‐quality habitats are key drivers of insect pollinator declines. With the aim of decreasing the environmental impact of agriculture, the 2014 EU Common Agricultural Policy (CAP) defined a set of habitat and landscape features (Ecological Focus Areas: EFAs) farmers could select from as a requirement to receive basic farm payments. To inform the post‐2020 CAP, we performed a European‐scale evaluation to determine how different EFA options vary in their potential to support insect pollinators under standard and pollinator‐friendly management, as well as the extent of farmer uptake.A structured Delphi elicitation process engaged 22 experts from 18 European countries to evaluate EFAs options. By considering life cycle requirements of key pollinating taxa (i.e. bumble bees, solitary bees and hoverflies), each option was evaluated for its potential to provide forage, bee nesting sites and hoverfly larval resources.EFA options varied substantially in the resources they were perceived to provide and their effectiveness varied geographically and temporally. For example, field margins provide relatively good forage throughout the season in Southern and Eastern Europe but lacked early‐season forage in Northern and Western Europe. Under standard management, no single EFA option achieved high scores across resource categories and a scarcity of late season forage was perceived.Experts identified substantial opportunities to improve habitat quality by adopting pollinator‐friendly management. Improving management alone was, however, unlikely to ensure that all pollinator resource requirements were met. Our analyses suggest that a combination of poor management, differences in the inherent pollinator habitat quality and uptake bias towards catch crops and nitrogen‐fixing crops severely limit the potential of EFAs to support pollinators in European agricultural landscapes. Policy Implications. To conserve pollinators and help protect pollination services, our expert elicitation highlights the need to create a variety of interconnected, well‐managed habitats that complement each other in the resources they offer. To achieve this the Common Agricultural Policy post‐2020 should take a holistic view to implementation that integrates the different delivery vehicles aimed at protecting biodiversity (e.g. enhanced conditionality, eco‐schemes and agri‐environment and climate measures). To improve habitat quality we recommend an effective monitoring framework with target‐orientated indicators and to facilitate the spatial targeting of options collaboration between land managers should be incentivised.

Baltic Sea eutrophication status is not improved by the first pillar of the European Union Common Agricultural Policy

Agriculture is an important source of nitrogen and phosphorous loads to the Baltic Sea. We study how the European Union’s (EU) Common Agricultural Policy (CAP), and in particular how its first pillar, containing most of the budget and the decoupled farm payments, affects eutrophication. To aid our study, we use three simulation models, covering the agricultural sector in the EU, a hydrological nutrient flow model and a model of eutrophication in the Baltic Sea. We compute changes in key eutrophication indicators in a business-as-usual baseline and in a hypothetical situation where the first pillar of the CAP, containing the direct payments, greening and accompanying measures, is not present. Comparing the outcomes, we find that in the scenario without the first pillar, production and agricultural land use is lower, while yields and fertiliser use per hectare are higher, causing less nitrogen and phosphorous loads (0.5 to 4% depending on the basin) and less eutrophication in the Baltic Sea as net effect. We therefore conclude that the policies of the first pillar of the CAP contribute to increased eutrophication in the Baltic Sea.

Profitability and Efficiency of High Nature Value Marginal Farming in England

AbstractThe UK Brexit vote triggered a new wave of policy developments for a future outside the EU. In this context, we analyse the business performance of English hill and upland farms, characterised by marginal economic conditions but also high nature value (HNV). The analysis aims to help identify farm‐level management and policy options for greater economic, environmental and social sustainability. Business performance is measured as technical efficiency and the occurrence and persistence of abnormal profits, estimated through stochastic frontier analysis and static and dynamic panel‐data methods. The results help indicate rationales for recent trends including farm enlargement, farm family diversification, and agri‐environment scheme entry. The single farm payment is found to be negatively associated with farm technical efficiency while agri‐environmental subsidies were positively associated to short‐term farm profitability. Farm adaptation and resilience during a period of likely turbulence in external circumstances is discussed in light of these findings, as well as potential parallels with marginal HNV areas across Europe.

Financial Vulnerability of Dairy Farms Challenged by Johne's Disease to Changes in Farm Payment Support.

Johne's disease is an endemic contagious bacterial infection of ruminants which is prevalent in the United Kingdom and elsewhere. It can lower financial returns on infected farms by reducing farm productivity through output losses and control expenditures. A farm-level analysis of the economics of the disease was conducted taking account of farm variability and different disease prevalence levels. The aim was to assess the financial impacts of a livestock disease on farms and determine their financial vulnerability if farm support payments were to be removed under future policy reforms. A farm-level optimization model, ScotFarm, was used on 50 Scottish dairy farms taken from the Farm Business Survey to determine the impacts of the disease. A counterfactual comparison of five alternative “disease” scenarios with a “no-disease” scenario was carried out to evaluate economic impact of the disease. The extent of a farm's reliance on direct support payments was considered to be an indicator of their financial vulnerability. Under this definition, farms were grouped into three financial vulnerability risk categories; “low risk,” “medium risk,” and “high risk” farms. Results show that farms are estimated to incur a loss of 32% on average of their net profit under a standard disease prevalence level. Farms in the “low risk” and “medium risk” categories were estimated to have a lower financial impact of the disease (22 and 28% reduction on farm net profit, respectively) which, along with their lower reliance on farm direct support payments, indicate they would be more resilient to the disease under future changes in farm payment support. On the contrary, farms in the “high risk” category were estimated to have a reduction of 50% on their farm net profit. A majority of these farms (61%) in the “high risk” category move from being profitable to loss making under the standard disease scenario when farm support payments are removed. Of these, 15% do so because of the impact of the disease. These farms will be more vulnerable if changes were to be made in farm support payments under future agricultural policy reforms.

Valuing social sustainability in agriculture: An approach based on social outputs' shadow prices

Interest in sustainability has gained ground among practitioners, academics and policy-makers due to growing stakeholders' awareness of environmental and social concerns. This is particularly true for agriculture. However, relatively little research has been conducted on the quantification of social sustainability and the contribution of social issues to the agricultural production efficiency. This paper proposes a framework based on state-contingent outputs to compute shadow prices of social outputs. Our methodological approach is based on the directional distance function and illustrated using a farm-level dataset from a sample of Catalan arable crop farms in 2015. Our results indicate that in the sample of 180 farms included in the analysis, efficiency scores are relatively high for the three alternative states of the nature considered in our state-contingent analysis. In addition, our findings show that social outputs' shadow prices are positive, indicating that producing more social outputs is considered as great value to the farm. For the efficient farms, the social outputs' shadow prices are contingent upon on the state of nature, in a way that social outputs' shadow prices increase with the improvement in crop growth conditions. These results have implications in terms of EU farm payment redistribution.

Civic Community in Late Medieval Lincoln: Urban Society and Economy in the Age of the Black Death, 1289–1409, by Alan Kissane

This is an impressively well-researched and detailed study of an important, but comparatively under-studied, late medieval town and its population. In analysing Lincoln, Alan Kissane’s study is part of a growing number of excellent English local studies, many published by Boydell, that demonstrate the value of an in-depth case-study. Like many of the studies he references on York, London and Norwich, there is an empirical and source-driven approach to the book, which demonstrates exemplary research but can, at times, lead to some rather dense passages laden with examples. The work is based on scrutiny of local sources and an impressive effort has been made to set Lincoln within wider studies of other English towns, especially York and Lincoln, and to look for patterns of local, national and international trade. The book is structured into two parts, each containing three chapters. Firstly, Chapters One to Three look at the fiscal and economic history of Lincoln between the loss of civil liberties in 1289 and the grant of urban county status in 1409. These chapters look respectively at occupational structure, tolls, trade and credit, and at the Crown and the fee farm. Each draws on a huge number of examples showing a sophisticated handling of local and national sources, particularly the Pipe Rolls. The detailed text is augmented by use of numerous graphs, maps and tables charting issues as diverse as tolls, fee farm payments, origins of traders and debts within Lincoln’s courts. These figures are useful in understanding the otherwise overwhelming data, and help Kissane to show how his data fits with broader debates about ‘English Urban Decline’ and particularly to explore the much-debated question of the impact of the Black Death.

Adaptation, Resilience and CAP Reform: A Comparison of Crofts and Livestock Farms in Scotland

ABSTRACTIn this paper, we assess the recent and anticipated changes on Scotland’s livestock-producing crofts, using a representative survey of Scottish farmers undertaken in 2013. We find that crofters are similar to other livestock farmers, both inside and outside of the traditional crofting counties, in terms of age, years of involvement in the holding and percentage of identified successors, but are less likely to own their holdings or to operate them for profit. Crofters reported being more subsidy dependent than other livestock producers, and many appear likely to retreat from crofting in the event of substantive subsidy reductions. However, crofting respondents identified input costs, regulations, commodity prices and climate change as having had greater influence on how they manage their crofts than the 2005 transition to the ‘Single Farm Payment’. Overall, crofters reported making fewer changes than their counterparts in non-crofting counties, but similar levels to those of other livestock farmers within crofting counties, suggesting less ‘room for manoeuvre’ within the remote areas in which most crofts are located. However, there is some evidence that ‘active’ crofts are ‘bouncing forward’ in response to recent challenges, particularly into forestry and agri-tourism, also reporting significantly higher perceived economic prospects.

Principles-Based Regulation Blueprint for A New Approachh for the Internal Agricultural Market

The European agricultural sectors and the Common Agricultural Policy (CAP) face the triple challenge of productivity increase to meet increasing demands for food, fibre and energy, pressing public policy issues regarding public health and nutrition and the public good components of agricultural land use (emissions, soil protection, landscape, biodiversity, water, climate change), and adaptation to a changing institutional environment with liberalised markets and integrated transnational value chains. The current governance arrangements for the sector are criticised for their complexity, implementation gaps, inefficiency and ineffectiveness. This paper discusses whether a shift towards a different regulatory approach – principles-based regulation (PBR) in the form of the “new approach” – could offer an avenue for fundamental improvements. After reviewing the problems in the current CAP and explaining the broader “new approach” to regulation, we discuss its applicability to the internal agricultural market. We describe how a “new approach” to the internal agricultural market as application of PBR could look like and how PBR could be linked to the farm payments made under the CAP. We finally reflect on the necessary legal competence basis and on the potential of PBR to address the major challenges facing the European agricultural sector and the CAP.

The impact of single farm payments on technical inefficiency of French crop farms

This paper analyses the effect of single farm payments (SFPs) introduced by the Luxembourg agreements (2003) of the Common Agricultural Policy, on the performance of crop farms in Eure-et-Loir, France, over the period 2005–2008. Technical inefficiency scores of these crop farms are first estimated. Then, the estimated technical inefficiency scores are regressed on SFPs received by farmers following a standard two-step procedure. The analysis shows a negative effect of SFPs on the technical inefficiency of Eure-et-Loir farms. This implies that subsidies granted to farms without production restrictions seem to reduce technical inefficiency.