Impacts of EU Direct Payments on Agricultural Enterprises in HungaryDirect payments are a controversial issue in the accession negotiations. While the EU proposes reduced payments the accession countries claim that they should be equally treated as the present EU members.The present study, based on micro-simulations on the farm level, shows impacts of various policy options (ranging from non-accession to the granting of full direct payments) on the production structure and profitability of Hungarian agricultural enterprises.For most products prices are expected to be higher in 2004 than in the reference year, 2001. EU accession will have an additional positive effect on the prices of all products. Direct payments would further increase farm profits. In particular crop producers would benefit (due to the increase in the price of corn) while profits in animal production would be affected in a negative way due to increased opportunity costs of forage area and higher labour cost.The presented figures are based on data collected in 14 typical model farms selected from the Hungarian Farm Accountancy Data Network and they cannot be regarded perfectly representative. However, in accordance with other sector studies the figures allow two conclusions. First, the majority of Hungarian agriculture (with respect to the share in total farm area as well as the share in total standard gross margins) would suffer no economic harm from an EU accession without direct payments. Second, direct payments would increase farm profits in Hungary considerably.
