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Farmer income and decoupled direct payments in North Macedonia














FAO. 2023. Farmer income and decoupled direct payments in North Macedonia. FAO Agricultural Development Economics Policy Brief, No. 64. Rome.



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    Decoupling direct payments in North Macedonia
    Impacts on farmer income
    2023
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    North Macedonia’s ambition to join the European Union requires reforms of the agricultural sector and subsidy system. One major reform is the alignment to the rules of the Common Agricultural Policy (CAP) of the European Union on direct payments, including the “decoupling” of direct payments from production quantities. The decoupling of direct payments is likely to have significant impacts on production decisions, prices and therefore on farmer income. This paper identifies four possible scenarios for North Macedonia to align the direct payment scheme to the regulations of the European Union and subsequently analyses the impact of each scenario on farmer income, using an ex ante analysis method in the form of a static microsimulation approach and the farm accountancy data network (FADN) data at individual farm level. The results show that, on average, farmer income increases when direct payments are decoupled in North Macedonia. We further test for heterogeneity and identify different effects along farm types and economic farm size – and find that some farmers would exhibit income losses as a result of the reform (i.e. specialist cattle, mixed crops and livestock farmers). The document was developed as a key deliverable in the context of TCP/MCD/3703 “Strengthening of Agriculture and Rural Development Policy Analysis and Programming”.
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    Exploring the decoupling of direct payments to farmers in North Macedonia
    FAO Agricultural Development Economics Policy Brief 30
    2020
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    North Macedonia’s ambition to join the European Union (EU) makes it necessary to reform the agricultural sector, such that it aligns with the EU Common Agricultural Policy (CAP). This involves the “decoupling” of farm subsidies, i.e. a shift to payments that are not linked to area and production levels of specific commodities, livestock numbers, and input use. The decoupling of direct payments has significant impacts on production decisions, prices and therefore on farmer’s income. The study underlying this policy brief identifies five possible scenarios for North Macedonia to align their direct payment scheme with EU regulations and analyses the impact on farmer’s income. The results show that on average farmer’s income increases through the decoupling of direct payments in North Macedonia, with small farmers having a positive effect on income while bigger farmers experience a negative impact. To allow for a smooth alignment with the CAP in North Macedonia, a gradual phase-in of direct payments measures is recommended.
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    Comprehensive analysis of disaster risk reduction and management system for agriculture in North Macedonia
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    This report aims to highlight the current strengths of the institutional disaster risk reduction (DRR) system for agriculture in North Macedonia as well as indicate existing gaps and capacity needs to further enhance it. A comprehensive assessment is conducted, which includes a general overview of the country’s agriculture sector and outlines the most frequent natural hazards impacting it. It is followed by an analysis of the existing legal, policy, and institutional structure and discusses various components of the system, including the functioning of early warning systems, assessments of disaster risks, post-disaster needs assessments, including damage and loss assessments, and the availability of agricultural insurance for farmers. It concludes by providing recommendations for capacity-building interventions to strengthen the current system to reduce the adverse impacts of natural hazards, in particular, floods, landslides and droughts, and climate change on agriculture in North Macedonia.

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