The Economic Effects of Common Agricultural Policy Trends on Montado Ecosystem in Southern Portugal

The decoupling of CAP payments leads production decisions and resources allocation to be dependent only on market prices and competitive advantages. The objective of this paper is to assess the effects of CAP trends on the montado ecosystem in southern Portugal in terms of land, labour and capital allocation and farm income. A positive mathematical supply model disaggregated by the main montado agro-forestry production system in the Alentejo region is developed. The results show that decoupling payments of CAP have important economic effects and the foreseen increases in prices do not compensate the loss of the Agenda 2000 area payments.