Policy Risk Through Modulation of Direct Payments: Can Farms Live with a Strategic Disadvantage?

This paper explores the impacts of modulation as suggested by the EU Commission (“Preparing for the “Health Check” of the CAP reform”, 2007). The agent-based model AgriPoliS has been adapted to the case study region Ostprignitz-Ruppin (Brandenburg, Germany). Impacts on farm structures, regional production and the distribution of profits throughout farms are investigated, as well as impacts of the transfer of money coming from modulation to a second pillar measure widely spread in the case study region. The relative gains or losses of farms depending on their modulation groups are documented and potential expectations on such policies discussed.