Restrictions and Input Coefficients in the regional supply models

1
Restrictions and Input Coefficientsin the
regional supply models
CAPRICommon Agricultural Policy Regional Impact
2
Blocks of Restrictions

• Fixed Resources arable land, grass land
• Feed
• Fertilizer
• Young animal balance
• Supply balance
• Policy restrictions set aside
• Production quotas (milk, sugar)

3
Blocks of Restrictions
4
Restrictions - Land Policy
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N-, P-, K-balances
Losses
?
Herd sizes
N, P, K production by animals
availability factor
Manure per Head
Over- fertilization
Supply to crop production
overfertilization factor
Mineral fertilizer purchase
Export with harvest
Biological fixation
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Fertilization module

• Crop activities demand nutrients which are
  partially supplied by animal activities (manure)
  crops enter the equation as consumers, which
  need to cover their nitrogen needs through the
  application of fertiliser
• Nutrient correction and nutrient availability
  factors are included and specified in order to
  calibrate observed data on national mineral
  fertiliser consumption and regional manure
  production
• All sources and sinks of nitrogen in agriculture
  are introduced into the model (atmospheric
  deposition, biological fixation, ) ? exports and
  imports of nutrients are considered

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Ammonia module
Nitrogenfrom animals
NH3
N losses on grazings
N losses in stable
NH3
N losses in storage systems
NH3
NH3
Mineral N
NH3
Total cropN Need
N losses in manure application
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Calibration step fertilization
Losses
?
Herd sizes
N, P, K production by animals
availability factor
Manure per Head
Over- fertilization
Supply to crop production
overfertilization factor
Mineral fertilizer purchase
Export with harvest
Biological fixation
Given from statistics or engineering
knowledge Calibrated to base year situation
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Counterfactual scenarios
Losses
?
Herd sizes
N, P, K production by animals
availability factor
Manure per Head
Over- fertilization
Supply to crop production
overfertilization factor
Mineral fertilizer purchase
Export with harvest
Biological fixation
Given from calibration step / engineering
knowledge Endogen in model run
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Restrictions Feed module

• Animal activities demand nutrients which are
  supplied by crop feeding activities
• Energy, protein, fiber and dry matter
  requirements are calculated for 16 animal
  activities based on bio-physical equations
• Two parts
• Need of nutrients by animals and availability of
  them on feeding aggregates defined requirement
  functions for each animal category are estimated
  depending on the ingestion capacity, live weight,
  days of production and yields
• Fodder prices are estimated for non tradable
  feeding compounds in the model.

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Restrictions - Feed I
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Restrictions - Feed II
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Restrictions - Young animals
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Restrictions - Supply balance
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Production Quotas

• Introduce a new restriction
• nettrdom ? Q
• Works for milk
• Sugar regime requires more complex approach

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Main components of the CMO
2 Quota system (A and B) 3 prices for sugar
beets (A,B and C) prohibitive tariffs to avoid
sugar imports Preferential imports from certain
countries (ACP countries, India, Western
Balkans, Brazil) Intervention combined with
subsidised exports
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Sugar production in the EU15 (A398)
25
20
5
33
4
6
16
28
26
-17
7
9
4
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The quota/levy mechanism
Prices
Intervention price for sugar PI
A quota domestic demand
B quota
Export costs
A beet price PA
B beet price PB
C beet price PC
C sugar
Sugar world market price
Sugar quantities
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Profit maximisation
Sugar beet prices
Marginal production costs pC ?
Sugar beet production
General agreement marginal production costs
exceed C beet prices Profit maximising behaviour
insufficient to explain observed production
quantities in most EU countries
pA,B,C A,B,C beet prices qA,AB A and
AB quotax0 observed supply
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Expected Profit maximisation
Sugar beet prices

• EMR depends on
• Prices
• Quotas
• Yield variance

Marginal production costs expected marginal
revenue ?
Sugar beet production
Possibility to reconcile higher marginal cost
with observed production but High C sugar shares
still unexplained
pA,B,C A,B,C beet prices qA,AB A and
AB quotax0 x1 observed supply
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Shifting expected marginal revenues
Beet prices
EMR0
PA
PB
MC1
PC
PA,B,C A,B,C beet prices MCest marginal cost
(estimates)EMR expected
marginal revenues X sugar beet supply
XP
X0
Beet supply
QA
QAB
Assumption Yield underestimation
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Can expected profit maximisation explain observed
C sugar quantities (1)
Assume each EU Member State is a single farm
faced with the national quota
endowment national average prices national
average yield variation (FADN) national average
marginal costs (Estimates)
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Change in regional sugar beet production