On the milk side, the analysis showed that the decision to decouple dairy compensation payments from production from 2005 will lead to a more gradual restructuring of milk quota and more dairy farmers in the long term. Less efficient dairy farmers will have the option to exit the sector while retaining their payments and this will leave a larger pool of milk quota for dairy farmers with the means and the initiative to expand. The analysis shows milk prices falling by a further 5% on top of the cuts agreed in the institutional prices as part of the Agenda 2000 agreement. Increased efficiency and scale should result in the incomes of dairy farmers keeping ahead of inflation in the period to 2012. The analysis also shows that while the national sheep flock was set to decline substantially under existing policies, the introduction of decoupling will accelerate the decline. However, this decline will be offset by increased prices, leading to a slight increase in the value of sheep output by 2012.