Ex ante evaluation of policy impacts: The proposed methodology allows the estimation of various developments such as price changes or policy changes on the cost function of EU farms utilising only FADN data. It was tested on several commodities and in three different European countries. It is a valid methodology for scenario analysis and the ex ante evaluation of likely policy impacts. In the current CAP context, the method could assess the ex ante effects of the CAP Strategic Plans on productivity and farm viability. It may also support the ex ante assessment of future CAP reforms.
The cost production model (GECOM) is a valuable source of information for competitiveness analysis. FADN data is the basis for product-level data so that evaluators can show the gross margin of one product or unit cost for another product. In the case of gross margin, they can allocate variable costs to different products, and in the case of unit cost, they need to allocate the total cost to different products. A sophisticated methodology is needed for this procedure, and the cost production model is such a methodology. The data can also be used for agricultural policymaking (ex ante stage). For instance, gross margin and total cost data in Hungary have been used to build the income stabilisation policy.
The tool describes the ‘general cost of production model’ (GECOM) methodology and the rationale for setting up the econometric model based on FADN variables to fit and test the model and interpret the results. The model requires only econometric skills and access to FADN farm-level data and can be adapted and used to evaluate policy and other impacts on various products and for all Member States.
