Analysis of the impact of decoupling on the behaviour of dairy farmers in Lithuania

This paper is based on the MSc thesis report which investigates the potential impact of decoupling of CAP and national payments on the production behaviour of Lithuanian dairy farmers. The author argues that the impact of decoupling on the farm production in Lithuania can differ from that in the old EU member states. Mainly that is related to the phasing-in of CAP payments, a non-binding quota, and the unique qualities of Lithuanian agriculture, dairy farming in particular. The thesis hypothesis is that the direct impact of decoupling on the farm production in Lithuania is negligible whereas the indirect positive impact incurred through farm investments is significant. A farm survey was conducted to research the topic. The design of the questionnaire survey is based on the economic theory which serves as a background and a theoretical justification for the study. Thirty-one farmers with six or more cows per farm were interviewed. The analysis of the survey results confirms the thesis hypothesis. Here, the key outcome of the research is that the potential positive impact of decoupling on the farm production is possible in the long-run due to on-farm investments. Other interesting findings high-light that the capital constraint does not prevent farmers from making investments that farmers are apprehensive about the future quota constraints, even though currently the quota is not binding, i.e. no super-levy for overproduction is imposed, and that the milk quota seems to have a more likely impact on the farm production than decoupling. It should be noted that the research results apply to the sample of the interviewed farmers. However, the research gives a good insight into the dairy farming in Lithuania as a whole and the potential impact of the EU policies on the economic behaviour of the farmersVytauto Didžiojo universitetasŽemės ūkio akademij