Common Agricultural Policy of the European Union on the Market with Milk and Dairy Products

The Common Agricultural Policy (CAP) was created in 1958 as one of the first policies of the European Economic Community. It is, however, also one of the most problematic ones. In this thesis I first address its creation, principles and targets. Then I describe reforms which had the goal of reducing some of the costs imposed by this policy on the society. As the main part of the thesis is devoted to the Czech farmers producing milk, I sum up the development of the Czech agricultural sector and in a great detail describe the regulation and subsidies connected with the production of milk and milk products. Using a simple microeconomic model, I analyze impact of various instruments of the CAP on domestic and foreign producers and consumers. In spite of many reforms, the biggest beneficiaries of the CAP are still the big producers of agricultural products -- support of small farmers is very limited. The costs of the CAP are born mainly by poor consumers and agricultural producers from non-EU countries. With a unique dataset obtained from the Czech State Agricultural Intervention Fund I describe the structure of subsidies utilized by Czech milk producers and its development in the period 2005--2008. Even though a substantial inequality in subsidy incomes is also evident among Czech milk quota holders, it is smaller than in the case of all farmers