Investigation of factors affecting arable farming profit, crop complexity and risk under the single farm payment policy

Kwadjo Ahodo, Robert P. Freckleton and David Oglethorpe

No 204231, 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK from Agricultural Economics Society

Abstract: The paper investigates the effect of variations in soil type, rainfall, N fertilizer amount and crop prices on the objectives of arable farms operating in Nitrogen Vulnerable Zones (NVZs) and receiving the Single Farm Payment (SFP). Sensitivity analysis was carried out using a mixed-integer programming (MIP) arable farm model (farmR). The farmR model estimates the arable farming objectives of interest: farm profit, crop complexity and risk minimization. Applying the 2014 SFP flat rate and the maximum N limits (N max) values (prescribed in the NVZ guidelines) to each crop, N max was varied under different soil types and rainfall interactions. Crop prices were also varied to illustrate the effectiveness of the SFP under a scenario of high crop prices. The results showed that even though applying N above N max increases farm productivity under all soil and rainfall interactions, doing so and forgoing the SFP reduces farm productivity and increases risk. The SFP thus acts as a payment for the opportunity cost to farms for not being able to apply N above N max. However under a scenario of crop price increases, applying above N max and forfeiting the SFP could generate higher productivity than at the N max level.

Keywords: Agribusiness; Agricultural and Food Policy; Farm Management (search for similar items in EconPapers)
Pages: 17
Date: 2015-04
New Economics Papers: this item is included in nep-agr, nep-eff and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aesc15:204231

DOI: 10.22004/ag.econ.204231

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