Effects of a flat rate introduction: shifts in farm activity and impact on farmers' income

Current thoughts on CAP changes, e.g. the "Health Check", emphasize the necessity to move away from payments based on historical receipts towards a "flatter rate" system. The aim of current research is to simulate the impact of a flat rate system (equal payments per hectare of cultivated land) compared to the current historical system (payments based on individual historic entitlements). Impact on production and income of arable, dairy and cattle farms of two different flat rate scenario's, is assessed with a farm-based sector model for Flanders. The model maximizes income at farm level, calibrated to observed farming behavior in 2001-2003. Farm data can be selected by farm type, size and region, simulations could be run for specific sub sectors, size classes or regions. In the two simulated flat rate scenario's subsectors will gain subsidies at the expense of other subsectors. However, farms can compensate a substantial part of their income loss by changing activity choice.