MILK QUOTAS ABOLISHMENT AND SIMPLIFICATION OF THE SINGLE PAYMENT SCHEME: IMPLICATIONS ON DAIRY FARMERS’ PRODUCTIVE STRATEGY IN THE WEST OF FRANCE

In this paper, we discuss the productive and economic implications of several options for the future Common Agricultural Policy (CAP) focusing on French dairy farms (as France includes 16% of the EU milk quota). The options studied follow the proposals made by the European Commission in May 2008 for the “Health Check” of the CAP. We examine the cross effects, on the productive strategy of French dairy farms, of the phasing out of milk quotas and a simplification of the single payment scheme (adoption of a full decoupling and implementation of a regionalization). To do this, a model based on mathematical programming has been developed. This bio-economic model enables us to measure the impact of a change in the CAP on supply behaviour. While respecting the principle of agent rationality (maximization of profit), the model incorporates the economic risk related to the volatility of input and output prices thanks to the “Utility efficient programming” method. Thus, the model maximises the expected utility of income while taking into account a set of constraints: regulatory, structural, zootechnical, agronomic and environmental. The model is applied to four types of dairy farms to reflect the diversity of production systems in the west of France. The model is used to produce quantitative estimations and to evaluate policy changes through the simulation of the CAP Health Check implementation. The results show that with the end of milk quota system, dairy farmers have a high productive potential. The adoption of a full decoupling of the single payment encourages farmers to substitute a part of corn silage by grass. However, rising prices of agricultural production encourage, on the contrary, farmers to intensify their system in order to free up land for growing cereals.