Lietuvos mokslų akademijos Leidybos skyrius

The impacts of CAP Reform and differing exchange rate developments are evaluated with a dynamic, partial-equilibrium model of the main agricultural sub-sectors in Lithuania. The model was developed under the 5th framework funding, and this analysis was conducted under the 6th framework reseach project with analysts from 24 other EU countries. Agricultural policy assumptions to 2015 are jointly determined with the project team, and the Lithuanian macroeconomic outlook is based on national and Eurostat forecasts. The baseline outlook shows a growth in production of most products and a significant growth in exports for wheat, barley, rapeseed, and cheese. Gross agricultural income is projected to more than double over 10 years, and in the last five years, subsidies and payments comprise about 25 percent of this. The CAP Reform scenario (full decoupling) has a little effect on the baseline results, since the planned Lithuanian SFP programs are already mostly decoupled. However, exchange rate alternatives make a significant difference. If the Euro weakens to equal one US dollar, prices would be higher and gross agricultural incomes about five percent higher. At the other extreme, if the Euro strengthens to 1.4$ = 1 Euro for the whole period, domestic prices would be lower and gross agricultural incomes more than five percent lower than in the baseline.

Keywords: agricultural income, agricultural products, CAP Reform, exchange rate

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