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Impact of the War in Ukraine on Farm Profitability and the Attractiveness of Environmental Measures in Germany

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  • Ellßel, Raphaela
  • Wüstemann, Friedrich
  • Offermann, Frank
  • de Witte, Thomas

Abstract

The war in Ukraine has led to massive price increases for agricultural inputs and products. This paper examines the effects on farm profitability and the consequences for the adoption of eco-schemes on arable farms. We use the large farm sample of the German Farm Accounting Data Network (FADN) to identify the average income effects and to highlight the heterogeneity of the effects and their drivers. Building on these results, we analyse farms’ adaptation strategies with a focus on changes in nitrogen input intensity and participation in environmental measures (“eco-schemes”) of the new Common Agriculture Policy (CAP). Our results suggest that income effects are heterogeneous and subject to considerable uncertainty about the near future, and that many farms are likely to benefit from the short-term price effects of the war in Ukraine. Against this background, the efficiency of financial assistance under the EU crisis reserve would have benefited from a stronger focus on liquidity loans and ex-post hardship support. Our analysis also shows strong implications for participation in eco-schemes. The results cast significant doubts on the effectiveness and efficiency of the eco-schemes introduced by the new CAP, beyond the observed impact of the war in Ukraine.

Suggested Citation

  • Ellßel, Raphaela & Wüstemann, Friedrich & Offermann, Frank & de Witte, Thomas, 2022. "Impact of the War in Ukraine on Farm Profitability and the Attractiveness of Environmental Measures in Germany," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 71(03), January.
    • Handle: RePEc:ags:gjagec:343315
    DOI: 10.22004/ag.econ.343315
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    References listed on IDEAS

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    1. Meyer-Aurich, Andreas & Karatay, Yusuf Nadi, 2019. "Effects of uncertainty and farmers' risk aversion on optimal N fertilizer supply in wheat production in Germany," Agricultural Systems, Elsevier, vol. 173(C), pages 130-139.
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    4. Glauben, Thomas & Svanidze, Miranda & Götz, Linde Johanna & Prehn, Sören & Jaghdani, Tinoush Jamali & Djuric, Ivan & Kuhn, Lena, 2022. "The war in Ukraine exposes supply tensions on global agricultural markets: Openness to global trade is needed to cope with the crisis," IAMO Policy Briefs 44e, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    5. Andre Deppermann & Harald Grethe & Frank Offermann, 2014. "Distributional effects of CAP liberalisation on western German farm incomes: an ex-ante analysis," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(4), pages 605-626.
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