The impact of the Single Farm Payments on the expenditure on fertilizers and crop protection inputs: a comparative study of the Italian agriculture

The Mid Term Review (MTR) of the European Common Agricultural Policy (CAP) in 2003 sped up the process of policy reforms toward decoupled payments in order to urge agricultural production to respond to market signals. However, since the elimination of coupled subsidies could produce a shift in commodity relative prices and decoupled payments could generate ‘‘coupled’’ effects on production, it remains questionable how Single Farm Payment (SFP) alters agricultural intensification. Therefore, through a comparative statistical analysis applied on Italian FADN regional data, this article aims at evaluating whether the MTR had positive impacts on the aggregate expenditure on fertilizers and crop protection inputs. From the results, it is observed that the expansion of profitable crops like vegetables, flowers, and vineyards, along with the receipt of SFP increased the expenditure of fertilizers and crop protection inputs. Such findings suggest that the MTR has been so far effective in terms of aligning agricultural production to markets’ signals, but with the unintended consequence of higher intensification. We deduce that farmers may allocate higher proportions of SFP to purchase fertilizers and crop protection inputs whenever the opportunity for higher profits is found in those cropping activities requiring a higher intensive use of production’ factors. The results indirectly highlight the need to improve the environmental crosscompliance controls and to allocate more CAP funds to agro-environmental measures in order to create the right incentive to farmers for reducing input use and mitigating agricultural intensification.