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Abstract
Likely policy changes leading towards further liberalisation of the Common
Agricultural Policy would certainly influence farmers’ income and revenue risks. Thus, a
question arises both for farmers and for policy makers about possible effects and necessary
adjustments that should be made to face such changes. The paper examines long-term impacts
of changes of key policy factors on income risk in Polish dairy farms.
Deterministic linear programming farm model was used to estimate farm incomes and
likely changes in production pattern, while stochastic simulation farm model was applied for
examining income risk.
The main results of this model chain are optimal production structures for farm types
modelled in a set of assumed policy conditions as well as farm income and its volatility.
Comparison of model results across scenarios allows to state that increase of milk quota and
reduction of direct payments significantly decrease farm incomes on dairy farms in Poland.
Full liberalisation of the Common Agricultural Policy and withdrawal of direct payments
results with even more radical negative income effects especially in the cluster of smaller
milk producers. Simulation indicates significantly increased risk of achieving low farm
incomes.