THE ROLE OF CAP PAYMENT IN SUPPORTING FARMS INCOME IN LITHUANIA AND THE EUROPEAN UNION AS A WHOLE

Previous researches on effects of CAP payments as farm income support measure in Lithuania were applying the family farms (or individual farmers farms) approach only. Lithuanian authors were using farm gross margin (with and without subsidies) as an indicator. However, the indicator is not included in system of standard indicators of the EU's Farm Accountancy Data Network (EU FADN), and cannot be calculated according data of the EU FADN database, therefore, it cannot be compared between farms in the EU countries. In this paper indicator of farm net value added per annual work unit (FNVA/AWU) is applied. The decomposition analysis of farm income reveals the differences in the role of the CAP payments (excluding subsidies on investments) in supporting of the farm income across Lithuania and the European Union detailed the farm groups by economic size and covering all legal forms of farms. In this research, the farms that are included in the EU FADN are classified into four groups by economic size: 1) very small farms (with a standard output (SO) from 2 000 to 8 000 €), 2) small farms (8000 - <25 000 € SO), 3) medium farms (25 000 - <SO € 100,000) and 4) large farms (100 000 € SO and more). The effect of the direct support from CAP I and II pillars (otherwise as current subsidies) on farm income was estimated and a contribution of the support in reducing income disparities between different economic size of farms in Lithuania and the European Union was evaluated. The payments, or otherwise current subsidies received by farms, has increased the income of the both economically very small and small farms in Lithuania, and of the average size farms in the EU. It was found that since the accession of the Lithuania to the EU the CAP payments had reduced the lag of Lithuanian farms’ income compared to EU average. DOI: https://doi.org/10.15544/ssaf.2014.3