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

The Health Check (HC) of the European Common Agricultural Policy 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 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 paper aims at evaluating whether the HC reform had positive impacts on the aggregate expenditure on fertilizers and crop production 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 HC reform 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 of higher profits is found in those cropping activities requiring a higher intensive use of production’ factors.input use, agricultural intensification, CAP Mid Term Review, Single Farm Payments, cross-compliance., Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Farm Management, Health Economics and Policy, Land Economics/Use, Production Economics,

THREE PERSPECTIVES ON INNOVATION IN EUROPEAN AGRICULTURE: FROM PUBLIC RESEARCH TO THE CIRCULAR ECONOMY

The dissertation examines the idea that current and future challenges faced by the European agricultural sector call for a multidimensional approach combining the classical path of productivity growth with more stringent commitments to environmental protection, and more incisive mitigation and adaptation actions to mitigate climate change, all within a policy context of a transition toward the cyclical management of resources (inputs, outputs and wastes) inspired by the circular economy concept. The three essays of the dissertation aim to show: that agricultural productivity in Europe is supported by complementarities between public and private investments in agricultural research with remarkable results in terms of rates of return; that the processes of knowledge-based innovation adoptions improve the economic performance of farms, especially by focusing on higher quality and value-added of agricultural production; and that an innovative approach, based on a combination of policy coherence and targeted technological solutions, can trigger the circularity of water use across urban and agricultural economic sectors, providing a valid solution for improving the allocative efficiency of irrigation water, while safeguarding the status of the aquifers and the river basins. The reading key for the dissertation is, innovation conditioned by policy priorities, and the three essays provide a perspective on the evolution of the role of agricultural innovation over time in the context of the changing policy priorities of the European Union. Since the 1950s innovation in agriculture has always been an engine of economic growth in Europe. Over time, patterns of the creation and diffusion of agricultural innovation in Europe changed notably, from improving farm productivity and intensification in the first periods, then to sustainable intensification and natural resource (environmental) protection in a second period, and most recently a new focus on implementing a more circular economy. The dynamics that lead from research to innovation, and from innovation to economic growth are changing as well. Europe is assisting a switch from the old linear transmission of knowledge approach (research-extension-farmer) to a more modern network-type agricultural knowledge and innovation system (AKIS) (Klerkx et al., 2009), as well in making transitions from the linear paradigm of economic growth to a more circular economy system by closing the loop and guaranteeing productivity improvement without impairing natural resources (EC, 2015). The objective of this dissertation is threefold: i) macro – to assess the economic impact of public investments in agricultural research on agricultural productivity in Europe through analysis of aggregate rates of return; ii) micro – to assess the impact of information, research in primis, at the farm level through the analysis of the effects of innovation adoption on individual farm profitability in one region of Italy; and, iii) environmental – to explore theoretical application of the circular economy concept to the reuse of water and irrigation management. The first essay provides an evidence-based assessment of the impacts of publicly supported R&D and innovation of agriculture in Europe. A panel model framework is applied to 16 European countries. The impacts of R&D investments and agricultural patents on agricultural productivity (TFP) were estimated, and rates of return (RoR) from public expenditures have been computed. The results vary according to the length of the imposed lags, showing a positive but decreasing pattern of effects both on TFP and return rates. Although preliminary, the values are deemed consistent with the evolution of research productivity over the last three decades in Europe, which has been characterized by a shift of the CAP from productivity enhancing investments, to a public commitment to improving environmental sustainability. The second essay aims at analyzing the determinants of farmers’ adoption of innovations and studying their effect on profitability. Different from existing literature, beyond examining adoption behavior, I investigate whether the source of information and the connection of agricultural research with an adopted innovation influences the economic performance of farms. Relying on primary data collected in the Bologna province (Italy), an econometric analysis is conducted in order to assess determinants of adoption and to estimate the impacts of such decisions on farm profitability. The results indicate that a farmer having a connection to scientific research, although not determinant for the adoption decisions, triggers significant improvements in profitability, in terms of value-added and quality of production, but does not affect other profitability-related parameters. The third essay proposes a framework for the Circular Economy (CE) concept to be applied to the water sector. The European Green Deal and the CAP post-2020 challenge the European agricultural sector by imposing stricter environmental cross-compliance measures linked to a strong demand for improved competitiveness, all within an overarching policy framework that pursues: the circularity of resources, climate neutrality, and economic growth decoupled from resource use. Although the agricultural sector has been excluded from the direct application of the CE concept, it remains highly subject to various requirements to pursue sustainable intensification, with frequent risks of: prosecution for environmental noncompliance, and of production and income losses, due to market volatility and climate change, especially related to the scarcity of water resources. However, a possible solution might be found in the proposal of a CE framework that is able to provide for a combined set of policy measures, coordinated across the urban and the agricultural sectors, and that mainly deal with specific technological improvements aimed at producing safe additional irrigation water from urban treatment plants and at optimizing the irrigation use, seemingly without consequences on levels of current water tariffs

Index based compensation for weather risk in the Italian agriculture. A feasibility study based on actual historic data

The paper explores the feasibility of the use of weather index based derivatives for farms' risk management in an Italian province. Based on a combination of detailed local weather data and of data on farms' yields, various possible weather indexes are found that are highly correlated with yields of the major crops in the area. Simulations show that hedging through such index based derivatives can be effective in protecting the stability of farms' incomes, at a cost that is likely to be much lower than that of the current system of subsidized crop insurance and ex-post compensation.Agricultural risk management, weather derivatives, index based yield insurance., Production Economics, Risk and Uncertainty,

The circular economy and agriculture: new opportunities for re-using Phosphorus as fertilizer

The increasing demand of phosphorus (P) worldwide is posing important challenges on the market stability of fertilizers. Extracting more P would not guarantee high P quality and low prices. Globally, only the European Commission, in a recent document about the Circular Economy strategy, has begun to address the challenge of the dependence on phosphate rock. Based on a simple circular economy theoretical framework, this paper proposes an impact analysis of the use of recycled P as a substitute of chemical P fertilizers. Two new technologies applied to retrofit existing wastewater treatment plants (WWTP) are considered: Moving-Bed Bio-Reactors and Struvite Crystallization Modules. The analyses indicate that the introduction of these technologies prove to be economically sustainable for specific levels of inhabitant equivalent (IE) and that the profitability of struvite, as a substitute of chemical P, increases with increasing levels of P fertilizer prices and for increasing sizes of WWTPs

The circular economy and agriculture: new opportunities for re-using Phosphorus as fertilizer

The increasing demand of phosphorus (P) worldwide is posing important challenges on the market stability of fertilizers. Extracting more P would not guarantee high P quality and low prices. Globally, only the European Commission, in a recent document about the Circular Economy strategy, has begun to address the challenge of the dependence on phosphate rock. Based on a simple circular economy theoretical framework, this paper proposes an impact analysis of the use of recycled P as a substitute of chemical P fertilizers. Two new technologies applied to retrofit existing wastewater treatment plants (WWTP) are considered: Moving-Bed Bio-Reactors and Struvite Crystallization Modules. The analyses indicate that the introduction of these technologies prove to be economically sustainable for specific levels of inhabitant equivalent (IE) and that the profitability of struvite, as a substitute of chemical P, increases with increasing levels of P fertilizer prices and for increasing sizes of WWTPs

Willingness-to-Pay for New Products in a University Foodservice Setting

A dairy products manufacturer wishing to expand into university foodservice operations collaborated with a graduate marketing class to research student preferences regarding the Company’s products. Baseline and follow-up stated choice surveys and conditional logit analyses were conducted at a land-grant university where the Company’s products were introduced. Brand awareness grew but remained low during the study period. Average WTP estimates for the Company’s most popular product approximated the retail price and resembled WTP for a competing brand. Average WTP for the Company’s other products, however, was considerably lower than the retail price. Significant WTP differences existed among some consumer segments.Willingness-to-Pay, Consumer Segment, University Foodservice, Conjoint analysis, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Research Methods/ Statistical Methods,

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

The Health Check (HC) of the European Common Agricultural Policy 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 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 paper aims at evaluating whether the HC reform had positive impacts on the aggregate expenditure on fertilizers and crop production 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 HC reform 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 of higher profits is found in those cropping activities requiring a higher intensive use of production’ factors

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 \u2018\u2018coupled\u2019\u2019 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\u2019 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\u2019 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