The Impact on the Farm Sector and Wider Rural Economy of Switching from Historic to Regional Single Farm Payments in North-East Scotland

One of the key features of the CAP 2014 reforms is the requirement for Member States currently distributing direct payments to farmers on the basis of historic support levels to switch an area-based payment scheme. This paper explores effects of this shift for both the farm sector and the wider rural economy in North-East Scotland. Analysis is carried out in two stages: First, the changes in payments for individual farm businesses are estimated based on the integration of several agricultural datasets. Second, the wider economy impacts are estimated using an agriculture-focussed static regional CGE model. The farm-level analysis shows that the North-East Scotland region is likely to suffer a significant net payment loss from the change in payment basis; however, there are gainers as well as losers both between and within farm types. The CGE analysis suggests that the wider economic impacts of the change in payments will be limited, in part due to the relatively small size of the sector in the overall economy. Within the agricultural sector itself, real agricultural GDP falls by 0.55%. Small cropping farm households suffer the largest overall income drop (-9.18%), with output from large “other” farm types falling most (-23.59%). Land rents fall across all farm types, and land switches into forestry. In terms of the wider agri-food chain, demand for agricultural intermediate inputs falls by 3% while the impacts on the downstream food sectors are more limited with meat processing predicted to fall most in percentage terms (-1.47%) due to increased raw imports from other regions. The paper concludes by suggesting areas for further research.