CAP REFORM, WHEAT PRICE INSTABILITY AND PRODUCER WELFARE

We use a simple nonlinear commodity market model to illustrate the impact of recent reforms of the CAP on the variability of EU and world wheat prices. Second, within an expected utility framework we estimate the transfer and risk effects on producer welfare due to market liberalizing reforms. We found that wheat producers were over-compensated for the losses due to lower prices following the 1992 reforms. The transfer effect clearly dominated while the risk component was small. Further, we did not find producer incomes to be more unstable following to the 1992 CAP reforms.