LAND HETEROGENEITY AND THE MAY 1992 REFORM OF CAP CEREAL PRICE SUPPORT

Robert Fraser

Journal of Agricultural Economics, 1997, vol. 48, issue 1‐3, 65-70

Abstract: This paper assesses the impact of the partial switch from price support towards compensatory payments of the May 1992 CAP cereal reform in the context of heterogeneous land quality. Two characteristics of land quality are identified: expected yield per hectare and the variability of yield per hectare. It is shown that the impact of the CAP reform on expected cereal income and the variability of cereal income is positive or negative depending on the level of each of these characteristics respectively. In particular, farmers with land which is both relatively low and unreliably yielding benefit from the CAP reform, while those with land which is both relatively high and reliably yielding lose from the CAP reform. The implications of these findings for the allocation of land between crops and livestock and the selling price of agricultural land are discussed.

Date: 1997
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