An EU-wide individual farm model for common agricultural policy analysis (IFM-CAP) : first application to crop diversification policy

This report presents the first EU-wide individual farm-level model (IFM-CAP) aiming to assess the impacts of CAP on farm economic and environmental performance. The rationale for such a farm-level model is based on the increasing demand for a micro-simulation tool able to model farm-specific policies and to capture farm heterogeneity across the EU in terms of policy representation and impacts. Based on positive mathematical programming, IFM-CAP seeks to improve the quality of policy assessment upon existing aggregate and aggregated farm-group models and to assess distributional effects over the EU farm population. To guarantee the highest representativeness of the EU agricultural sector, the model is applied to every EU-FADN (Farm Accountancy Data Network) individual farm (around 60 500 farms). The report provides a detailed description of the IFM-CAP model prototype in terms of design, mathematical structure, data preparation, modelling livestock activities, allocation of input costs and the calibration process. The theoretical background, the technical specification and the outputs that can be generated from this prototype are also briefly presented and discussed. The report also presents an application of the model to the assessment of the effects of the crop diversification measure. The results show that most non-compliant farms (80 %) chose to reduce their level of non-compliance following the introduction of the diversification measure owing to the sizable subsidy reduction imposed. However, the overall impact on farm income is rather limited: farm income decreases by less than 1 % at EU level, and only 5 % of the farm population will be negatively affected. Nevertheless, for a small number of farms, the income effect could be more substantial (more than -10 %).