CALCULATING THE RATE OF DECOUPLING FOR CROPS UNDER CAP OILSEEDS REFORM/

The model presented in this paper measures the rate of decoupling achi eved by the compensatory payments package provided under 'CAP/Oilseeds Reform' legislation. Results from the model suggest that, contrary to expectations, we may view the compensatory payments as 'effectively f ully decoupled' from production of wheat, rapeseed and soybeans. Three factors drive this result. First, when compared with base period retu rns, the compensatory payments 'skew' crop revenue per hectare. Second , the set-aside and 'Blair House accord' area restrictions on the mode l ensure effective full decoupling for rapeseed and soybeans. (Without these restrictions, the payments package is only partially decoupled from production of these crops.) Finally as currently designed, the mo del does not allow land to leave crop production; thus, if area in one crop decreases in response to changes in prices and/or payments, area in at least one other crop must increase. For coarse grains and sunfl ower the model generates decoupling rates of 80 per cent and 70 per ce nt respectively suggesting partial decoupling of the payments package from production of these crops.