EU SUGAR POLICY REFORM: QUOTA REDUCTION AND DEVALUATION

The research presented is part of a larger study aiming at the analysis of reform options for the EU sugar policy regime. This paper focuses on the effects of quota reduction and support price cuts. A thorough theoretical analysis investigates the implications of farm heterogeneity for aggregate supply modeling purposes under the current sugar regime. It can be shown that the treatment of sugar quantities produced under the different quotas and without quota can be treated as different products in an aggregate profit function analysis. Marginal and discrete price and quota effects are derived. Subsequently, the derived behavioral characteristics are implemented in the framework of the agricultural sector model CAPSIM to provide a broader policy evaluation. Preliminary simulation results are presented for the EU at aggregate level