Investment behaviour in conventional and emerging farming systems under different policy scenarios

Objective of this study is to carry out an analysis of investment behaviour among farming systems of selected EU regions, and to assess the impact of the 2003 CAP reform on producers' investment behaviour, and on their sustainability. The study includes a review of the literature, a description of the methodology, the results of the empirical analysis and policy recommendations. The review of the literature on farm investment behaviour focuses on: a) the determinants of investment behaviour; b) the effects of policy on investment behaviour; c) the classification of quantitative tools for analysing farm investment behaviour; and d) the choice of methodology for the empirical analysis of farm investment behaviour. The methodology adopted is based on the integration of empirical primary information collected through a survey of about 250 farm households with a modelling exercise of the individual farms surveyed. The core model is a multi-criteria dynamic programming model of farm households. The model is calibrated on primary data from a survey of single farms through a questionnaire. Case studies were developed for France, Germany, Greece, Hungary, Italy, Poland, Spain and The Netherlands. In the majority of cases, farmers stated they were indifferent to decoupling. Where any change occurred, the impact of decoupling was highly differentiated. Scenario analysis showed that CAP as a whole is very important for the sustainability of farming systems. However, prices (in the range simulated) appeared to be more important than policy and adaptation of farm activities more important than investment as a reaction to both policy and prices. Post-decoupling CAP appeared from the interviews to be very much a policy with multiple objectives that takes on very different roles depending on the context in which it is cast. In particular it seems to tend to reinforce the strategy already adopted by farm-households, either in terms of expansion or abandonment. The results confirm the need for better empirical information, contextualized within the present stage of EU agriculture and policy.