Impact of the 2003 CAP reform on organic farming in Germany

Summary

The financial performance of organic and conventional farming is highly influenced
by the EU direct payment policy. While organic farms receive considerable support from agrienvironmental programmes, the design of the first pillar put organic farming at a disadvantage in the past. The 2003 CAP reform has changed this situation particularly by decoupling direct payments and reducing price support. This paper has therefore the aim to identify and assess the impact of the CAP reform on the relative profitability and production structure of organic farms in Germany. The statistical analysis of FADN data from the years 2003/04 and 2006/07 suggests that differences in payments from the first pillar decreased, affecting positively the relative profitability of organic farms. A survey among German organic farmers revealed however that only a minority attributes substantial changes in profits to the CAP reform and decoupling, respectively. The outcomes of this investigation suggest that organic farmers still require more specific information and advice in order to use the new possibilities given through decoupling.