Analysing the impact of decoupling at a regional level in Ireland: A farm level dynamic linear programming approach

In Ireland, all direct payments made to farmers were completely decoupled from production in January 2005. A single payment is paid to the farmers based on payments they received in a historical reference period. There have been earlier studies on possible impacts of decoupling on Irish farms (Breen et al., 2005; Breen and Hennessy 2003). The results from these studies showed that decoupling was likely to accelerate the pace of structural change in Irish farming for instance, thirtytwo percent of dairy farms were projected to exist the sector and ten percent of cattle farms are likely to become entitlement farmers that is using their land to claim the decoupled payment but not actually produce any tangible products. However, these studies took a generalized view of farms in Ireland and didn’t address the regional differentiation that may arise as a result of decoupling. It is fair to say that the impact of a policy change may be different at different regional levels. Any possible changes especially land use and milk quota structures are highly depended on geographical location of farms. For example, milk quota trade in Ireland is restricted within a region or a co-operative. This paper describes a methodology that was used in a study to determine impacts of decoupling of farm payments at the regional level in Ireland and provides an example with the results from one of the regions.