Effects of the EU Common Agricultural Policy and U.S. Farm Policy on Agricultural Land Markets

8/8/2019 Effects of the EU Common Agricultural Policy and U.S. Farm Policy on Agricultural Land Markets

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Effects of the EU Common

Agricultural Policy and U.S. Farm

Policy on Agricultural Land Markets

Harald von Witzke and Steffen Noleppa

Berlin, Germany

P. Lynn Kennedy

Louisiana, United States


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2007 The German Marshall Fund o the United States. All rights reserved.

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T Pb 3

C A L M

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T Fw 1

T Db P B

bw Lw O 15

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R

Effects of the EU Common Agricultural Policyand US Farm Policy on Agricultural Land Markets

The Distribution of Farm Policy Benefits Between

Land Owners and Operators

A Report to the German Marshall Fund of the United States

August 2007

H v Wz

Hb Uv B, G

P L K

L S Uv, U S

S N

, B, G


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Eects o the EU Common Agricultural Policy and US Farm Policy

on Agricultural Lan d Markets3

A z v bz1 C A P (CAP)

Ep U pv b v w pp pp (b p ,xp b, p q, p p, ) p, w p p Lw, US vb L D P w pp E

p b pz x p p b pp w , w p w b EU US p

x w , b pHwv, w p xp, b p , p p p b w , b p p b b b A p w p, b w w

bjv pp

z G U S w b p pv w q w p b w w w p

1The problem

1 T , wv, allz B Nw Z A v b p p , f p- b


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he German Marshall Fund o the United States4

2.1 Germany

G p D p10 , b b 25 p (BMELV, v v)A p, ppx 350,000 p G, b 17 ()A 60 p , w 70 p p (DESAIS, 2006)

1990 (F 1)

, pp G, U S, v w p z p p, p x 12

D pv bw W E G I

W G, pp 30 p

1980 v 50 p , w E b b b 80 p G 1990

I w p bw E W(F 2; b 1 2) I 2005, v p E w b 55 p p W I v p W b G , w E p b b 40 p

p v bwW E G ( D, 2002; N Lw, 2007):

Inthefirstfewyearsafterunification,farms

E w p p w b w w w w

TheGermanagriculturallandprivatization, w

Characteristics of the agricultural

Land Markets in Germany and the U.S.2

1991 1993 1995 1997 1999 2001 2003 2005

50

55

60

65

Share

ofrented

land

in

%

Year

S: Ap D (2002) DESAIS (v v)

Figure 1: The Growing Importance o Agricultural Land Rental in Germany, 19912005


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E G , bw p

IntheWesttherecontinuestobeamore

p , w E v p pw

EasternGermanyislessdenselypopulated

W; , v , p b w

AveragelandqualityislowerinEastern

W G, w vb( w pp)

A w b , CAP b p 1990 I p, b v b v b p b p, w x p p, b b

p b, b b N b b b H, b

A F 3 , CAP pp b , , p b I , p z b x pp p b qv (PSE),w ppp p w b O E C-p Dvp(OECD) w w A v, p CAP p pp EU

, b pp x PSE v b 20 p 1991 L p v b 20 p p pp p E G

1991 1993 1995 1997 1999 2001 2003 20050

50

100

150

200

250

RentalPrices

in

EUR

PerHa

Year

West Germany

East Germany

Figure 2: The Rental Price o Agricultural Land in Germany, 19912005

S: Ap D (2002) DESAIS (v v)


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Table 1: The Price o Crop Land in New (Multiyear) Rental Agreements, 1999 and 20051

RegionRental land price (EUR per ha) Change in price of

rental land (percent)1999 2005

W G L 285 295 3

B-Wb 206 256 24

B 292 269 -8

H 177 211 19

N 326 337 3

N-W 372 394 6

R-Pz 190 201 6

Sw-H 314 296 -6

E G L 119 140 18

Bb 81 86 6

Mb-Vp 105 147 40

S 106 135 27

S-A 167 186 11

120 165 37

S: Ap DESAIS (v v)

1 N B, B, Hb, S

Table 2: The Price o Pasture and Grazing Land in New (Multiyear) Rental Agreements,

1999 and 20051

Region Rental land price (EUR per ha) Change in price ofrental land (percent)1999 2005

W G L 163 146 -10

B-Wb 128 113 -12

B 176 162 -8

H 84 89 6

N 173 148 -14

N-W 195 182 -7

R-Pz 98 85 -13

Sw-H 198 174 -12

E G L 61 69 13

Bb 54 64 18Mb-Vp 61 70 15

S 61 75 23

S-A 67 71 6

68 65 -4

S: Ap DESAIS (v v)


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2.2 United States

S G, US wp B 2002C A (NASS, 2002), w

ppx 213 p U S j v 938 p b 392 p 1997 176 p p A b , p- U S,p bw b , b w (b 3, 4, 5)

S j

b x v, v v w v U S b M V P b V w q xb U S

w, v zHwv, Mw S M v 265 p b , p b ,017 p, v

bw v q p I p, b b w p v , b vA v xb b 6

I V, p b

x pp b w V x p v , p pw p p p A , v

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200560

80

100

120

140

Indexin

%

Year

Rental Price PSE Rental Price

Figure 3: Land Rental Prices and Agricultural Subsidies, 1991-2005 (1991 = 100 per cent)

S: Ap BMELV (2007), DESAIS (v v), OECD (2007)


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Table 5: Total Cropland, 1982-2002

Region1982

1,000 Acres1987

1,000 Acres1992

1,000 Acres1997

1,000 Acres2002

1,000 Acres

M 24,183 23,422 23,511 22,839 23,264

V 4,753 4,613 4,436 4,340 4,16848 S1 468,888 463,580 459,654 454,691 441,273

S: USDA/ERS (2007)

Table 4: Land in Farms and Harvested Cropland, 1997 and 2002

Land in FarmsFarmland area (Acres) Change in farmland

1997 2002 Percent

M 27,560,621 27,512,270 -017

V 8,753,625 8,624,829 -149

U S 954,752,502 938,279,056 -176

Hv Cp

M 19,794,078 19,398,309 -204

V 2,600,860 2,623,776 088

U S 318,937,401 302,697,252 -537

S: USDA/NASS (v v)

1 Ex A Hw

Table 3: Farms Numbers, 1997 and 2002

Land in FarmsNumber of Farms Change

1997 2002 Numbers Percent

M 78,755 80,839 2,084 265

V 49,366 47,606 -1,760 -357

U S 2,215,876 2,128,982 -86,894 -392

S: USDA/NASS (v v)


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p pv b pz v , p w p pv Gv pp b p, p, p v V

O , M V A M b xp p

v , - vv b , p- p b- xp b M bw 1997 2002 I , p M b v pp Gv p p p M

Table 6: Average Dollar Value o Cropland per Acre, 2002-2006

Region2002USD

2003USD

2004USD

2005USD

2006USD

Change20052006

Percent

N 3,210 3,400 3,800 4,390 5,040 148

L S 1,720 1,860 2,030 2,270 2,550 123

C B

N P

App

S

D S

S P

M

P

M

V

2,180

720

2,340

2,240

1,160

808

1,120

3,410

1,430

2,550

2,270

737

2,490

2,350

1,210

863

1,170

3,500

1,520

2,800

2,450

783

2,670

2,460

1,270

902

1,200

3,570

1,690

3,300

2,880

916

3,040

3,660

1,460

1,010

1,420

4,620

1,950

4,100

3,230

1,040

3,450

4,550

1,600

1,180

1,750

4,850

2,180

5,300

122

135

135

243

96

168

232

50

118

293

48 S1 1,590 1,660 1,770 2,110 2,390 133

S: USDA/NASS (v v)

1 Ex A Hw


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I pp, p b pp E

p qv v p F v p p v xp v p F p , p v xp v p b p I w, ww

v p :

(1) VMP = (Q/L) P = D

VMP = V pQ/L = P p

; p p p q p , b q

P = P p

D = D

w O pv p b p p, , b b p I , PSE bv v p pp qv b

p v pp , PSE p p

pp b b vb ( v, 2007); w p Hwv, v

pp w p , q pp p p b p pp v w b p b bw pp

G, w pv p , b, p p b w

p b H, xp b b w p R, w p b w pv b w:

(2) P b w= ||P b

= P ;

(p )/ ( p p )

= P pp ;

(p pp ) /(p p )

F 4 p w bp w p z x (L),w v x p () v p (VMP)

N pp (S) (p) (VMP1

0 VMP1

1) F 4 p p VMP

0 p v p b b p p

Theoretical framework

3


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b v VMP0 pppw VMP

1 A b bv, p b (S) p 0 1 b w

3.1 Specification for Germany

EpU G w p, p pp b p

w x p p , , p p EUR p pp p pp v j p p

A bv, p CAP pp p v b A b q, v p , , p pp pp, wv, b pb p b b p I , p b b p b H, p b j p p q p Ep U (B H, 2007)

p p w p p v v

VMP1

1

S

S

L1

L0

L

VMP1

0

r1

r0

VMP1

1, r

0

Figure 4: The Land Rental Price Eect o Agricultural Producer Price Support


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, , p Hwv, b v p v w , p q b , xp b p, v p v xp w p p U S 1996 F

F A EU pp vw p b v w (A , 2007;H , 2005) , bq, p I , bv vp G w w p pb

p w b p b v p

p p b b p (Lpp, 2001) p F 5

F4 xp p v p v VMP

2 A w p (2)

p b (S) pp, w

A w , v, p G w b v b b, b q p F 6,w p w b (1)

S: Ap Lpp (2001)

VMP1

1

VMP1

2

S

S

S

L1

L2

L0

L

VMP1

0

r1

r2

r0

VMP11

, r

0

Figure 5: The Land Rental Price Eect o Agricultural Producer Price Support Plus Direct Payments


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v; , b x

3.2 Specification for the United States

A pv , v p v p,b p p, v p v E p pv v p, v p p(p p) N v (wv p) b pp , v

p w v p b w:

(3) R = P Q

R = RvQ = Q p

(4) R/R = P/P + Q/Q

Hwv, p p p v Dp p w v , w p wb pv O , p

VMP1

1

VMP1

2

S

S

S

L

VMP1

0

r1

r2

r0

VMP1

1, r

0

Figure 6: The Land Rental Price o Agricultural Land Would be Negative in the Absence

o Subsidies in Certain Regions o Germany (Eastern Germany, Poor Soils)


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p v vp -w x ww p v A , p p p b

I x v, w b pp:

(5) L V = (C Rp ( b p), Cp Gv

P, DpGv P)

I p pvb, v b b F xp, x v , , v v ,

vb w b p p A, bw x p p b p w w v pp p p p p, w

vb v b p


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4.1 Evidence for Germany

I p b wM pp z ( Cb,1995; Hp, 1985) w p ppz b p v O p pz b v ( I, 2003;F, 2002; G, 2002) I ,

w v vv pp vb pp w pv b (01) 02 b w b Z (2003)

p(q 2) EUR b w v EUR 067 w EUR 033 b 7 xb b p b bw w

p Sb p p pp Rb CAP pp p, xp , pp pp w pv p

p p v wp pp x, , w , D vb

b - p EUR 40 EUR 60p I b 7 b - EUR 50 p p

b 7 b b b EUR 550 p O ,p b EUR 200, w EUR 350 p w

4 The Distribution of Policy BenefitsBetween Landowners and Operators

Table 7: The Distribution o Farm Policy Benefts Between Landowners

and Operators in Germany, 2005/06

Region Western Germany Eastern Germany

b(EUR p )1

568 533

P w b(EUR p )2

375 240

Sb w (EUR p )

379 355

Sb w p

(EUR p )189 178

P wSb (EUR p )

-4 -115

S: Ow b BMELV (2007)

1 T b p pp p p I qv f 62 C p w p b p


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b b b 7 q , p G , p , w b v b b Hwv, b b p w p, w

() N US Ep w bb v p w w p

pv v j p 30 F , U S jw xp, b p v p ( USDA/ERS,2007) Lw G wxp v w xp pp v p (v Wz Npp, 2006)

() p w p , , b p b U S Ep U ( A,1992) B p , w w p xp I b, p b US EU b p xp w,

, p w p(v Wz H, 1997) I w, b v px vp w p v w pUS EU p F , US Dp A (2007) w p x v w p U S 2004 2005 p w p, ,

b pp p b

() Sb pv (EU, 2003)I b b, wb z (

v Wz Npp, 2006)

(v) F b v w b b w b , w pbb b v b

b p b 8 I xb b p p x L (v ) G

Table 8: The Eect o Sugar Beet Price Support on Farm Land Rental Prices

in Selected Landkreise (Administrative Districts) in Germany, 2005/06

Region Western Germany Eastern Germany

L1 HI WF B OK EE OSL

A p b(p)

22 19 7 3 3 0

P (EUR p )

436 421 399 180 118 108

S: Ow b BMELV (2007)

1 HI H; WF Wb; B B; OK O; EE Eb-E; OSL Obpw-Lz


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S b b b p b pp v v I , p p b w w p I p, v p qw b v L HI, WF, B, OK px z b

v - Hwv, w vp b

p, , b b L EE OSL v p b p z b p w p, , b b b b p

4.2 Evidence for the United States

A w v p 19982004, w xp A, Hw, v N x

p p vp v I v b p x bwb -b-p w b 9

A - w pbw p v bpv 05492 p p, b

p , b, vb 05492 p A p G, b b w p b p p w w G p v A bz pp w, p b ,

vp, vw p

Table 9: The Determinants o Agricultural Land Values in the United States

Land value (log) Coefficient Standard Error t P > t

C 49153 01778 276400 0000

C p () 05492 00353 155500 0000

Gv p () -02526 00550 -45900 0000

b p 01513 00497 30400 0003

1998 02053 00919 22300 0026

1999 04358 01066 40900 0000

2000 05152 01130 45600 00002001 05456 01081 50500 0000

2002 04620 00969 47700 0000

2003 05243 01032 50800 0000

2004 04739 01000 47400 0000

R-q = 05839

S: Ow p b USDA/NASS (v v), G (2002) Gw (2003)


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p pbjv S- p b vw bjv p pw - w p w bz vp vw pp b pv

p v b b bp b p zb b I , , p v b p

15 p bv -b-p w b p G S Ep U v bz H p w b p

F US , b b b 10 10 p p p b b A v, b b pz v

p v v p ww b v Hwv, p, p p p w b w q p p

Table 10: The Eect o a Subsidy Which Increases Cash Receipts by 10 Percent

on Agricultural Land Values in Selected U.S. States

TobaccoProducers

Land Value(USD per acre)

CashReceipts(USD per acre)

10%Cash ReceiptIncrease

LandValue Chan(USD per ac

K 116286 14868 1487 6386

N C 254714 33100 3310 13989

S C 148000 24123 2412 8128

220429 14818 1482 12106

V 243000 18354 1835 13346

Non-TobaccoProducers

Land Value(USD per acre)

CashReceipts

(USD per acre)

10%Cash Receipt

Increase

LandValue Chan

(USD per ac

C 566143 238798 23880 31093F 356000 367640 36764 19552

I 242286 12773 1277 13306

Iw 202714 11682 1168 11133

M 138000 10085 1009 7579

S: Ow b NASS (v v), BEA (2007) b 9


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A b EpU U S v bz v :

Theyleadtoamisallocationofresources

w w

Theyresultinburdensomebudgetary

xp

Theydelaystructuraladjustmentin

w w

pv

Theyareinequitableinthattheybenefit

Theyerodeincentivesindeveloping

v , p v, v pv

I pp w v z p b Ep U

G US b v U S W p b p w w w p

O v E p G , w- p w q vv pb pp , b w b p b w

p b b Ep U;wv, w v , b w , b b p b I , b EU bw b v G

b p w b z

b p p p b pI p w pv p bw b p

p US p v b EU A p b v p v b x- p I U S, b b j p b N p, v b-p 15p -b-p I , v p w b w vp v w p v b , U S p b w b p b v

Conclusions

5


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M C A Hw Dp PA R A w FS? Ab Wv 2(3) (2007): 1-2

E B J-H H S N E- AKqz Lw, B Ap Dp AE R Dvp,G Uv G, 2007

BEA (B E A), R

E A U S Dp C, W, DC D I: p://wwwbv///?&b=CA45 , J 2007

BMELV (B E,Lw Vbz),Sp I Rq G F A D Nw(FADN) BMELV, B, 2007

BMELV (B E,

Lw Vbz),Ap B BB, B, v v

R G Cb I AP J Pb E 57 (1995):317-335

DESAIS, (S B) F3, R 216 DESAIS, Wb, v v

H D Z Ew w B

L B Lw, Bw, 2002

Ep U C R2003/555 26 J 2003 Ep U,B, 2003

C F I P- P P R A L A L P G J A E 51 (2002): 396-404

B G US C P L P Dp A R E W Pp,WP 02-02 Uv M,C P, M, 2002

H G Aw Epp v Az

EU-G G J A E 51 (2002): 389-395

B K Gw W W w OM A L V? AJ A E 85(2003):744-752

C H F S Hw Dp Dp P? Ev I EC 4 (2005): 30-35

H A Hp D B Bp, Bpb Aw E Gvz BV, K, 1985

F I W Eppv Ep K Abb FAL 1/2003, B Lw, Bw, 2003

C Lpp Z Aw vPz, b P

pb P Pp Uv M, M, 2001

References

6


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M L E, L V DDp App E,Uv M, S P D I: p:///, J 2007

N Lw, B2006/2007 Sp I, 2007

OECD (Oz E Cp Dvp) Ep U, Spp E OECD, P, 2007

C v A L P D I: www//L/L0016, M 2007

R K A D WF M Cb Uv P,Cb, 1992

USDA/ERS (U S Dp A, E R Sv),C R E, 2004/05, W D I: wwwv/D/CA

R/p, 07 J 2007USDA/ERS (U S Dp A, E R Sv), MjL U, D S USDA, W, DCD I: p://wwwv//j/, J 2007

USDA/NASS (U S Dp A, N A S),Sv, L V C R SUSDA, W, DC, v v

H v Wz S Npp DbvE D P G A Nw C A P Ep U A Rp GM F U S B, 2006

H v Wz U H P E M R

A P P Spp: A Rv I A Cpv R R (), D, A 1997

J Z V EU-Ap Ap Lw L9/2003: 2-5


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Effects of the EU Common Agricultural Policy and U.S. Farm Policy on Agricultural Land Markets