outlook 2001
DESCRIPTION
Julian Binfield, Trevor Donnellan, Kevin Hanrahan, Thia Hennessy, Kieran McQuinn, and Pat Westhoff. Outlook 2001 Baseline Projections, BSE Impacts, and Export Subsidy Reduction Scenarios: At Aggregate and Farm Levels. Background. What is FAPRI-Ireland? What type of modelling? - PowerPoint PPT PresentationTRANSCRIPT
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Outlook 2001
Baseline Projections, BSE Impacts, and Export Subsidy Reduction Scenarios: At Aggregate and Farm Levels
Julian Binfield, Trevor Donnellan, Kevin Hanrahan, Thia Hennessy,
Kieran McQuinn, and Pat Westhoff
![Page 2: Outlook 2001](https://reader035.vdocuments.net/reader035/viewer/2022062309/56813515550346895d9c6b63/html5/thumbnails/2.jpg)
Background
• What is FAPRI-Ireland?
• What type of modelling?
• What’s a baseline?
• How does it work?
• Analyses so far
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FAPRI-Ireland
• Established in 1995 – following J Bruton’s visit
• Partnership with FAPRI-Missouri
• Ireland
– Teagasc
– Irish Universities
– Industry
• Modelling policy scenarios - agri-food sector
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Modelling
• Economic models projections
• Not prediciton based on best
information
• Two types of modelling
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FAPRI-Ireland Modelling
1. Aggregate Modelling– Examines the market level
– Individual commodity models
– Prices and volumes
2. Farm Level Modelling– Prices from commodity models
– Representative farms
– How will farmers react?
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Baseline
• Not reality – will never occur
• ‘Current policy situation
continues unchanged’
• Yardstick to measure policy scenarios
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How does it work?
World Model of AgricultureWorld supply and Demand
European Model of Agriculture
Representative Farms
FAPRI-Ireland Commodity Models
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Analyses so far• 1998 – analysis of Agenda 2000 proposals
– results were used in negotiations
• 1999 – analysis of agreed Agenda 2000
• 2000 – annual baseline and exchange rates
• 2001 – annual baseline, BSE and WTO
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Aggregate Outlook to 2010• Value of Output in 2010 down by 6% on
2000– Cattle output value down 17%
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Irish Cattle Price Baseline
0
20
40
60
80
100
120
1995 1997 1999 2001 2003 2005 2007 2009
IR£
Per
100
kg
Price Down13% on 2000
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Aggregate Outlook to 2010• Value of Output in 2010 down by 6% on
2000– Cattle output value down 17%– Sheep sector output value falls by 15%
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Irish Sheep Price Baseline
0
10
20
30
40
50
60
70
1995 1997 1999 2001 2003 2005 2007 2009
IR£
Per
100
kg
Price Down8% on 2000
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Aggregate Outlook to 2010• Value of Output in 2010 down by 6% on
2000– Cattle output value down 17%– Sheep sector output value falls by 15%– Milk output value falls by 2%
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Milk Sector Revenue
0
200
400
600
800
1,000
1,200
1,400
2000 2002 2004 2006 2008 2010
(£ 0
00
) m
illio
n
Value of Milk Sold Direct Compensation
2010 Output Value down 2% on 2000
£ 83m
2010 Revenue up 6% on 2000
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Aggregate Outlook to 2010• Value of Output in 2010 down by 6% on
2000– Cattle output value down 17%– Milk output value falls by 2%
• Operating Surplus in 2010 up 4% on 2000– Subsidies rise 45% over the period 2000-2010:
Account for 40% of GVA by 2010– Input expenditure falls 1%
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Subsidies
0
200
400
600
800
1000
1200
1400
1998 2000 2002 2004 2006 2008 2010
IR£
Mill
ion
On Products On Production
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BASELINE OUTLOOK AT FARM LEVEL
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Representative Farms
• Four Dairy Farms
1. Small less than 20,000 gals
contracting (11,000)
2. 30,000 gals young and
developing (8,000)
3. Large 100,000 gals (1,000)
4. Typical 40,000 gals
(13,000)
• Four Cattle Farms
1. Small full-time old
£5000 (28,000)
2. Commercial full-time
£20,000 (5,000)
3. Part-time efficient
£8,000 (8,000)
4. Hobby £2,000 (15,000)
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Static Analysis• What will farm profits be if farms are operated
as they are today?
• Value of gross output is mostly maintained
• Inflation biggest enemy
• Dairy farms margins down 10-15% by 2010
• Cattle farms margins down 15-20% by 2010
• Hobby-style farm margins down 50%
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Dynamic Analysis - Dairy Farms
• Key to success is quota
• Typical dairy farm by 2010 farm margins are
35% higher than in 1998 (nominal terms)
• Purchasing quota leased and extra increase in
quota farmed by 25% (up to 47,000 gals)
• Operating Store cattle only
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Dynamic Analysis - Dairy Farms
• Developer farm margins up 35% by 2010
from 1998
• Increase in quota farmed by 35%
• Large farm margins up 15% higher in 2010
than in 1998 (real loss)
• Leased quota purchased no extra but
benefits from increase in SBP limit
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Dynamic Analysis - Dairy Farms
• Small dairy farm to exit in 2005
• Expansion uneconomical
• Price cost squeeze
• Lure of off farm incomes
• Part-time beef system
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Dynamic Analysis - Cattle Farms
• Key to Success Maximise Premia Payments
• All Farms Margins volatile from 2000-04
• Small margins 30% higher in 2010 than in 1998
(nominal)
• Extensification and SCP claimed on heifers
• Off farm job not an option
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Dynamic Analysis - Cattle Farms
• Large full-time margins volatile in short
term but 15% higher in 2010
• Benefits from SBP limit increase and
rents more land continues as full-time
farm
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Dynamic Analysis - Cattle Farms
• Part-time efficient farm will maintain 1998
margins in 2010 although volatile in the
intervening period
• Reduce stocking rate to qualify for 1.4
extensification
• Hobby farm by 2010 margins 15% below 1998
• Cost structure - continue in farming?
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BSE SCENARIOS
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BSE Scenarios
BSE Scenario 1: 7-Point Plan1. Boost Organic Farming
2. Reduce Stocking Density 2lus to 1.8 lus
3. 90 head limit SBP compulsory
4. Special Purchase Scheme
5. SCP eligible on 40% heifers 20% compulsory
6. Individualisation of SBP
7. Non application of intervention ceiling
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Results of 7-Point Scenario• Policy constraints curbs production
• Irish beef prices 7% higher than baseline in 2010
• Effects of policy constraints evident at farm level
• Small cattle farms benefits from new SCP rules
• Margins 15% higher than baseline in 2010
• HOWEVER if individualisation were imposed the benefit is
mostly lost
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Results of 7-Point Scenario
• Larger cattle farms worse off than baseline
• Margins affected by 90 head limit on SBP and
reduction in stocking densities
• HOWEVER estimated that only 10% of cattle
farms are in this category
• HOWEVER large number of dairy farms would
be severely affected
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BSE ScenariosScenario 2: A More Pessimistic Outlook
• Expectations for demand worse than in baseline in medium term
• No return in demand to pre-crisis levels
• With exception of cows, all bovines over 30 months are slaughtered
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Results of Pessimistic Scenario
• By 2010 beef prices 8% lower than baseline
• Carcass weight 10% lower
• Market value of beef sector 17% lower than
baseline
• No change in farm plans but margins 5%
lower than baseline for all farms
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Export Subsidy Scenarios
• EU Export Refund limit reduction: period 2004-09 (analogous to URAA)
•Export Limits at 58 per cent of the URAA base
• EU Export Refund Elimination: period 2004-09
• We have not assumed anything about compensation for the resulting
price drops at farm level.
• Dairy and beef sectors are main beneficiaries of export refunds and
these are the sectors worst affected.
• Export refund reduction - only limited impact
• Main impact is on dairy sector
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Dairy : Export Subsidy Elimination
15
17
19
21
23
25
27
29
1995 1997 1999 2001 2003 2005 2007 2009
Eur
o pe
r 10
0kg
Baseline Elimination
0
200
400
600
800
1,000
1,200
1,400
2000 2002 2004 2006 2008 2010(£
000
) mill
ion
Value of Milk Sold Direct Compensation
Irish Farm Milk Price 3.7% fat Revenue of Irish Milk sector
2010 price down 24% on 2010 baseline2010 Value Down 20% on 2000
2010 Revenue down 13% on 2000
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Beef : Export Subsidy Elimination
0
500
1,000
1,500
2,000
2000 2002 2004 2006 2008 2010(£
000
) m
illio
n
Value of Cattle Sold Direct Compensation
Irish Cattle Price Revenue of Irish Cattle
20
40
60
80
100
120
1995 1997 1999 2001 2003 2005 2007 2009
IR£
Per 1
00kg
Baseline Elimination
Down 20% on 2010 baseline 2010 Value down 34% on 2000
2010 Revenue Down 13% on 2000
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Operating Surplus
1,000
1,200
1,400
1,600
1,800
2,000
2,200
1998 2000 2002 2004 2006 2008 2010
IR£ M
illio
n
Baseline Reduction Elimination
In 2010 Income is down -
• 19% relative to 2010 baseline or
• 15% relative to 2000
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Conclusion and Thanks•Paul, Kevin, Thia and Trevor would like to thank you all for your attention
•We welcome comments and queries relating to the FAPRI-IRELAND project
•Full details of our work and our individual contact details are available from the FAPRI-Ireland website
•Go to http://www.tnet.teagasc.ie/fapri/