An attempt to modelling revenue insurance schemes at the farm level by means of Positive Mathematical Programming

Farmers face increasing income uncertainty and the debate is growing on the role of insurance schemes and of public support in this field. This paper applies a PMP modelling approach that takes into explicit consideration risk aversion behaviour to test its applicability to evaluating the potential impact of insurance schemes. This is done by introducing a revenue insurance scheme into a model developed on a small group of crop farms in Italy. The paper represents a preliminary assessment of the soundness of the proposed approach. It identifies some limitations that should be overcome to improve the proposed approach. Despite these limitations, it seems a useful tool to investigate the impact of insurance schemes and policy relevant parameters such as premium and coverage rates. Indeed, it permits the assessment of how this affects production choices, farm profitability and the impact of public support to reduce the net premium paid by farmers.Insurance schemes, PMP, Farmers’ behaviour, Risk aversion, Agricultural and Food Policy, Q12, C61, Q18,

Modeling farmer participation to a revenue insurance scheme by means of Positive Mathematical Programming

European farmers face increasing income uncertainty and the debate is growing on the role of insurance schemes and of public support in this field. This debate is further stimulated by the perspective of introducing instruments to cope with risk also in the Common Agricultural Policy. Therefore, there is a need for empirical analysis and tools aimed at providing empirical evidences on this subject. This paper applies a PMP modelling approach that takes into explicit consideration risk aversion behaviour to test the possibility to use it to assess the implications of participating in a insurance scheme. This is done by introducing a revenue insurance scheme into a model developed on a small group of crop farms in Italy. In particular, a quadratic mix integer programming approach has been developed in order to model the choice of participating or not in the proposed insurance scheme. The model has been than used to conduct simulations considering changes in the level of the insurance premium. The paper tries to assess the soundness of the proposed approach and to identify its limitations. The obtained results suggest that this could be a useful tool to investigate the impact of participating in insurance schemes on production patterns and farm profitability and the role of public support in this field.insurance schemes, PMP, farmers’ participation, risk aversion, non-linear mix-integer programming, Farm Management, Risk and Uncertainty, Q12, C61, Q18,

Evaluating Changes in Cropping Patterns due to the 2003 CAP Reform. An Ex-post Analysis of Different PMP Approaches Considering New Activities

Replaced with revised version of paper 02/22/08.ex-post policy evaluation, positive mathematical programming, CAP reform, Agricultural and Food Policy, Crop Production/Industries, Research Methods/ Statistical Methods,

Possible Impacts of Climate Change on Mediterranean Irrigated Farming Systems

In the agricultural sector, climate change (CC) affects multiple weather variables at different stages of crop cycles. CC may influence the mean level or affect the distribution of events (e.g., rainfall, temperature). This work evaluates the economic impact of CC-related changes in multiple climatic components, and the resulting uncertainty. For this purpose, a three-stage discrete stochastic programming model is used to represents farm sector of an irrigated area of Italy and to examine the influence of CC on rainfall and on maximum temperature. These variables affect the availability of water for agriculture and the water requirements of irrigated crops. The states of nature, and their change, are defined more broadly than in previous analyses; this allows examining the changes of more climatic variables and crops cultivation. The effect of CC is obtained by comparing the results of scenarios that represent the climatic conditions in the current situation and in the future. The results show that the agricultural sector would seek to lower costs by modifying patterns of land use, farming practices and increasing the use groundwater. The overall economic impact of these changes is small and due primarily to the reduced availability of water in the future. The temperature increase is, in fact, largely offset by the effects of the increase in CO2 levels, which boosts the yield of main crops of the irrigated zone. Therefore, availability and water management becomes a crucial factor to offset the increase of evapotranspiration and of water stress resulting from the increase of temperature. However, the costs of CC are very high for some types of farming, which suffer a large reduction in income.discrete stochastic programming model, climate change, water availability, irrigation requirements, Farm Management, Resource /Energy Economics and Policy,

The impact of reforming the Common Agricultural Policy on the sustainability of the irrigated area of Central Italy. An empirical assessment by means of a Positive Mathematical Programming model

The Common Agricultural Policy (CAP) is a major driver of the environmental and social sustainability of the agriculture in the European Union (EU). Under the 2003 CAP reform, most direct payments to agricultural producers were decoupled from production. This work assesses the possible impact of the CAP reform on the sustainability of an irrigated area of Central Italy with particular attention being paid to decoupling. The analysis has been conducted using the Positive Mathematical Programming (PMP) method that directly estimates the cost function parameters by imposing the first-order conditions of the farm model under consideration. The analysis assesses the impact of the CAP reform on farm cropping patterns, water and chemical use, labour use and economic results. By referring to this set of indicators it is possible to investigate the likely effect of the CAP reform on the environmental, social and economic sustainability of the considered farming systems. The results of the empirical analysis mainly show a reduction in water and chemical input use, an increase in the economic results of farms, but also a reduction of the labour.Common Agricultural Policy, Sustainability, Positive Mathematical Programming, Farmers’ behaviour, Irrigated agriculture, Decoupling, Agricultural and Food Policy, Consumer/Household Economics, Crop Production/Industries, Demand and Price Analysis, Farm Management, Land Economics/Use,

Common Agricultural Policy and climate variability changes: an impact assessment of the first-pillar reform on an agricultural area of Grana Padano in different climate scenarios

The reform of the Common Agricultural Policy it started in 2015 with several innovative aspects. Regarding the first pillar, such aspects are especially the convergence of the basic payments, the green payments and the coupled payments. In this regard seems interesting carry out analysis about to evaluate the policy impact considering the risks and opportunities due to climate change.In this study the impact of the convergence of basic payments, the introduction of the green payments and the coupled payments has been evaluated on dairy cattle farms in the Grana Padano area. The impact has been evaluated in different climate scenarios by economic, social and environmental indicators. The methodology used is the mathematical programming and especially a model of Discrete Stochastic Programming has been used to represents farms of the FADN database.The main results show that a significant part of the farms is affected by the diversification constraint that reduces the land devoted to corn silage. Farmers could cultivate corn silage after a principal crop (e.g. ryegrass) in order to avoid the diversification constraint, however, determining a negative impact on the use of environmental resources. To consider also that in the future there is an increase of corn silage yields with long cycle.Another result to underline is that which concerns the possibility of soybean cultivation in the ecological focus areas. In fact, considering the coupled payment provided for this crop, the ecological focus areas seem to be an important source of income for the farms.Finally, the analysis shows that the convergence of the basic payment will result in a reallocation of direct payments between farms with a significant impact on farm incomes

Integrating the impact of climate change, price changes and recent CAP orientation on Mediterranean farming systems

It is of interest to compare the possible impact of climate change (CC) on agriculture with thepossible effects of changes in the agricultural policies and regulations, as well as marketconditions. In this regard, recent studies show that the impact of changes in the policies,regulations and market conditions may be even larger than that of the CC and may determinethe changes in land use and livelihood strategies of farms in highly vulnerable areas to CC. Newtechnologies could compensate for the adverse impacts of increased occurrence of negativeconditions. On the other hand, changes in the ratios between commodity and factor pricesinteract with CC, in some cases balancing its impacts, in other cases accentuating them. Inaddition, new market regulation such as the abolishment of the milk quota and many measuresoriginating from the recent orientation of the CAP may contribute to improved adaptation to theCC.In this paper we review the analysis of the impact of CC in the Oristano MACSUR study area, tointegrate the influence of elements, other than CC, on the management and adaptationstrategies of local farming systems. We focus on milk quota abolition, CAP reform, with new directpayments, new price conditions and technological improvements as provided by the CAPRInetwork. The study represents the productive conditions of the area with a discrete stochasticprogramming model specified for its main farms types, irrigated and rainfed. This version of theOristano model allows adjustment of herd and flock characteristics, acreage of tree crops andother structural elements. The assessment verifies the relationship between impact of CC and theinfluence of policy, and of new technological and market conditions

Assessing the role of CAP for more sustainable and healthier food systems in Europe:A literature review

Today, the European food system is characterized by unhealthy dietary trends, environmentally unsustainable production, and a dependency on an ageing farming population. The ongoing reform of the Common Agricultural Policy (CAP) represents an opportunity to redress these issues. This literature review highlights trends in how academic and grey literature have received CAP attempts in addressing the (i) environmental issues, (ii) nutritional outcomes, and (iii) rural livelihoods. Additionally, future policy and research directions relating to the CAP have been identified from the selected literature. The reviewed literature varies in approach and perspective. In particular, since the environment and rural development are already part of the CAP, the reviewed studies analyze and propose improvements to existing mechanisms. While for nutrition, the reviewed studies assessed possible policy strategies for integrating this sphere within the CAP, highlighting both the complexity of this task as well as its potential benefits. Despite these differences, a clear commonality emerged from the policy recommendations: the CAP should promote the European Union (EU) policy integration and multi-disciplinary and participatory research as key strategies to meet food system sustainability targets.</p

Income Impacts of Climate Change: Irrigated Farming in the Mediterranean and Expected Changes in Probability of Favorable and Adverse Weather Conditions

EU rural development policy (RDP) regulation 1305/2013 aims to protect farmers’ incomes from ongoing change of climate variability (CCV), and the increase in frequency of adverse climatic events. An income stabilization tool (IST) is provided to compensate drastic drops in income, including those caused by climatic events. The present study examines some aspect of its application focussing on Mediterranean irrigation area where frequent water shortages may generate significant income reductions in the current climate conditions, and may be further exacerbated by climate change. This enhanced loss of income in the future would occur due to a change in climate variability. This change would appreciably reduce the probability of weather conditions that are favourable for irrigation, but would not significantly increase either the probability of unfavourable weather conditions or the magnitude of their impact. As the IST and other insurance tools that protect against adversity and catastrophic events are only activated under extreme conditions, farmers may not consider them to be suitable in dealing with the new climate regime. This would leave a portion of the financial resources allocated by the RDP unused, resulting in less support for climate change adaptation

An evaluation of the economic impact of Climate Change through a three-stages Discrete Stochastic Programming model

The climate change in the agricultural sector acting on multiple weather variables at different times of the various crop cycles. In several cases by changing the mean level of variables (rainfall, temperature, etc..), in other cases by changing the distribution of events. This work provides an evaluation of the economic impact due to changes in multiple events, and to the associated uncertainty. For this reason, a classical two-stage stochastic programming model was extend into a three-stages model. The model is specified for an area of Sardinia, and examines the impact of climate change on rainfall and hence on the availability of water for agriculture, and on maximum temperatures and, therefore, on the requirements of some irrigated crops relevant to the agricultural economy of the area. The effect of climate change is obtained by comparing the results of scenarios that represent the climatic conditions in the current situation and in the future, obtained by projecting to 2015 the climate trends of the last fifty years. The results show that the agricultural sector of the area adapt itself with a low cost by use of land and cultural practices. This cost, however, is very high for some farms that suffer a significant reduction of the income. There is also an increase of the use of natural resources, in particularly groundwater. The economic impact of these changes is due primarily to the decreased of water availability in the future. The availability of water becomes the crucial factor to adapting to climate change, because the effects of temperature can be compensate by increased the use of water resources.Discrete Stochastic Programming Model, climate change, water availability, irrigation requirements, Crop Production/Industries, Environmental Economics and Policy, Farm Management, Land Economics/Use, Research Methods/ Statistical Methods,