Employing Real Options Methodology for Decision Making in Greenhouse Technology

Latest developments in investment analysis offer a number of valuable insights into how to evaluate investment opportunities encountering the weaknesses of net present value criterion. More specific, irreversibility, uncertainty and the choice of timing are conditions that net present value does not include but they alter the investment decision in critical way. Employing contingent claims analysis in tangible investments several assumptions made by discount cash flow method are concerned and better assessment results can be derived. In this work, an attempt is made to apply real options methodology in agricultural investments. Many agricultural investors face a growing uncertainty environment with high sunk investments and net present value criterion has been extensively used that may be lead to incorrect decisions. Both discount cash flow method and real options approach are employed to evaluate the effectiveness of a new technology project under uncertainty returns in agriculture. Discount cash flow approach indicates that the adoption of a new technology project under uncertainty is feasible while real options approach differentiates the results. The corollary is that real options approach can be proved conducive in assessing projects with uncertainty and irreversibility and it can furnish a new way of examining agricultural investment decisions.real options, irreversibility, option value, agriculture, investment, policy, Crop Production/Industries,

Risk and Income Risk Management Issues for Organic Crops in Greece

Drawing upon a comparative case study of organic and conventional farming in Western Greece, the aim of this study is threefold: firstly, to explore the organic and conventional farmers’ profile through a factor analysis. Secondly, to assess the economic viability of organic cultivation with respect to profitability and risk behaviour, through a Monte Carlo stochastic simulation model. Thirdly, to discuss the necessity for additional income insurance schemes. Research findings indicate that the organic cropping system currently stands out as the most economically viable alternative under the assumption of the existing payments; without payments, however, conventional agriculture would be preferred by all farmers, regardless of their degree of risk aversionorganic crops, income variability, risk analysis, SERF, agricultural policy,

Assessing economic incentives for dairy sheep farmers: A real options approach

New policy measures have been introduced to transform Greece’s agriculture into a more modern and environmentally friendly agriculture. Adopting new technology and environmentally friendly production systems involves risk and uncertainty, which in turn stress the need for well designed policy schemes. This study attempts to examine the effects of income variability upon the decision to adopt new technology and environmentally friendly production systems by introducing the real options analysis to dairy sheep farming in Greece. The real options procedure revealed that the investment in new technology in dairy sheep farms under organic scheme is profitable. Attractive economic incentives that are offered by the applied agricultural policy to young farmers compensate for the risk and uncertainty of the activity.agricultural policy, organic sheep farming, real options, Livestock Production/Industries,

Policy implementations for organic agriculture: A real options approach

Organic farming has experienced a vast increase within the EU, despite the fact that it implies greater risk and uncertainty than that of conventional farming. This is the result of the increased environmental concern and the rising demand for quality food, which led to the implementation of the organic policy scheme. Nevertheless, the production of organic fruits, including cherries, is still limited in the EU. Farmers will adopt this alternative farming system only if the support provided by the existing policy regime out weights the increased risk and uncertainty. This study explores the effectiveness of the current policy measures for the production of organic cherries in Greece, using the real options methodology. The framework of real options analysis is an appropriate form of analysis so as to examine the investment’s profitability under risk and uncertainty and assess the economic incentives offered to organic farmers. The results indicate that the economic incentives provided by the existing policy regime, compensate for the risk and the uncertainty that farmers are undertaking. Furthermore, this study reveals that the profitability of the economic activity explored, lies mainly on the subsidies organic farmers receive.Keywords: organic agriculture, real options, agriculture policy, uncertainty, Agricultural and Food Policy, D81, Q14, Q18,

Assessing agricultural policy incentives for Greek organic agriculture: A Real options approach

The adoption of organic agriculture or livestock involves risk and uncertainty, and to overcome this, well designed schemes are required. Are the current support measures attractive for farmers who wish to convert to organic? At first, this study tries to assess the optimal investment trigger for a new comer into organic dairy sheep farming system and secondly, to evaluate the investment profitability of an existing organic farmer in his attempt to improve his farm. Results indicate that the framework of real options analysis is an appropriate form of analysis if the question of investment profitability is examined under risk and uncertainty and the role of economic subsidies offered to organic farmers is assessed.organic agriculture, dairy sheep farming, real options, agriculture policy, Agricultural and Food Policy, Farm Management, Land Economics/Use,

MODELLING ECONOMIC ALTERNATIVES FOR TOBACCO PRODUCERS: THE CASE OF SHEEP FARMING

After the introduction of the new tobacco regime, many regions in Greece, formerly specialized in tobacco cultivation, are now facing serious threats of economic and social decline. Sheep farming is considered by many analysts as a viable alternative to tobacco. This study analyses the financial performance of sheep production and the risk that producers are taking. Through a stochastic efficiency analysis with respect to a function we explore the economic viability of conventional and organic sheep farming; key factors determining the economic outcome of these activities are also investigated. Both organic and conventional sheep farming appear as viable alternatives. The viability of organic farming lies, mainly, in organic payments. Conventional farming generates a slightly lower but less uncertain net return.organic farming, dairy sheep, risk analysis, SERF, agricultural policy, Agricultural and Food Policy, Farm Management, Livestock Production/Industries, Risk and Uncertainty,

European farmer perspectives and their adoption of ecological practices

Delivering an agricultural policy which meets ecosystem and climatic pressures and addresses weaknesses in our current food system presents complex challenges for food producers. Adoption of ecological practices will reduce the dependence on imports into the farm and is one way to meet some of these policy ambitions. Understanding why farmers do or don’t adopt these practices is key to enabling this transition. This study outlines a series of investigations into the key barriers, values and perceptions towards ecological practice adoption across European farming.We find that personal, technical and institutional forces influence the adoption of more sustainable practices but these forces have varying levels of influence. The tensions between environmental, compared to purely production orientated motivations, may be a key barrier to ecological practice adoption. We also find a strong influence of commodity supply chains which may either encourage or limit adoption of these approaches. Promoting efforts for co-ordinated approaches between the public and private sectors may mitigate some of the dissonance in messaging towards these practices and alleviate these tensions. We also identify a great deal of heterogeneity within the European farming community and argue for a more targeted approach that would encourage adoption of ecological approaches and promote the scaling up of these practices

European farmer perspectives and their adoption of ecological practices

Delivering an agricultural policy which meets ecosystem and climatic pressures and addresses weaknesses in our current food system presents complex challenges for food producers. Adoption of ecological practices will reduce the dependence on imports into the farm and is one way to meet some of these policy ambitions. Understanding why farmers do or don’t adopt these practices is key to enabling this transition. This study outlines a series of investigations into the key barriers, values and perceptions towards ecological practice adoption across European farming. We find that personal, technical and institutional forces influence the adoption of more sustainable practices but these forces have varying levels of influence. The tensions between environmental, compared to purely production orientated motivations, may be a key barrier to ecological practice adoption. We also find a strong influence of commodity supply chains which may either encourage or limit adoption of these approaches. Promoting efforts for co-ordinated approaches between the public and private sectors may mitigate some of the dissonance in messaging towards these practices and alleviate these tensions. We also identify a great deal of heterogeneity within the European farming community and argue for a more targeted approach that would encourage adoption of ecological approaches and promote the scaling up of these practices. <br/

Report on the Workshop on Transversal Variables. (Linking economic and biological effort data (call) design). 19th -23rd January 2015

The Workshop on the Transversal Variables took place in Zagreb from the 19th to 23rd of January, 2015 mainly to tackle the issues related to the increasing need of having fisheries fleet economic data and fisheries biologic data on a level of disaggregation that would allow a proper interoperability between datasets to underpin bioeconomic modelling. For that, several analyses were carried out and conclusions taken. These analyses were : 1. comparison of economic and biological effort data calls both with respect to their level of resolution and the landings and effort values obtained from equivalent aggregations was performed. This was compared to what would be needed in order to undertake bioeconomic modelling for a chosen management plan. 2. The description of how MS are calculating effort variables and a proposal on the way forward to harmonize approaches, 3. Conclusions on how to harmonize levels of resolution, the variable definitions and the codification in use amongst data calls, in order to make them comparable and based on coherent standard codifications.JRC.G.3-Maritime affair

Advancing the contributions of European stakeholders in farming systems to transitions to agroecology

The concept of a ‘just transition’ is gaining traction in international policy discourses. It has particular significance in relation to achieving net zero greenhouse gas emissions and the need for ensuring rights and responsibilities of all actors in transitions to agroecological farming systems. Research plays an important role in accompanying this transformation. It explores pathways for more sustainable and fair food systems, barriers to them being achieved, and where and what risks arise for communities of interest and of place. Researchers and practitioners across levels and sectors were brought together in H2020 projects LIFT and UNISECO using processes of stakeholder engagement. Both projects analysed the perceptions of actors towards agroecological farming, and their active involvement in the transitions required. This article summarises lessons learnt regarding multi‐actor engagement in different participatory settings in both projects, including a Multi‐Actor Platform approach, Q method, DELPHI and Hybrid forum workshops. The interactions involved several hundred actors from 18 countries across Europe. The article reflects on implications of the Covid‐19 pandemic on the processes and effectiveness of multi‐actor engagement, and assessments of the impacts on the empowerment of the actors. The findings are contextualised by contemporary European Union and national policy objectives of tackling climate change, the loss of biodiversity, and inequalities