Risk and Producer Compensation in the Agenda 2000 Cereal Reforms: A Note

This note takes view that existing studies of the impact of the Agenda 2000 cereal reform package have mis-specified the impact of this package on a producer's price distribution. It is argued that an accurate assessment of this package requires use of the methodology outlined in Fraser (1991), and that use of this methodology highlights the central role of expected world prices in determining whether producer perceptions of this impact are favourable of unfavourable. A numerical analysis in the context of wheat producers generates nit estimate for expected world prices of 111-112 Euros/tonne above which producers will perceive the package favourably. This estimate is found to be robust with respect to the key parameters of the analysis.