DEALING WITH RISK IN AGRICULTURE: A CROP LEVEL ANALYSIS AND MANAGEMENT PROPOSAL FOR ITALIAN FARMS

Risk management plays a critical role in agriculture, which is particularly exposed to multiple and heterogeneous risk factors. In addition to the traditional basic risks that generally characterize any business venture, agriculture faces external factors, generally difficult to control and with a strong impact on farm profitability. These are firstly environmental (pests and diseases) and climatic conditions that affect the quantity and quality of agricultural production, but also the structural constraints of the agricultural market, which is characterised by a high degree of supply rigidity, price volatility and inelasticity of demand. This leads to the need to implement risk management tools, some of which aimed at income stabilization (already in place by many years in other countries, i.e. the USA and Canada) and requiring the active participation of the farmer on the one hand and of the institutional system on the other. In order to suggest risk management solutions to Italian farmers, this thesis makes efforts in simulating the feasibility of a risk management tool introduced in the EU with Regulation (EU) No 2017/2393 but not yet implemented: the sector-specific Income Stabilization Tool. This is based on a public-private partnership and is managed by a mutual fund steered by associated farmers. These latter pay an annual contribution to become eligible for receiving indemnities when experiencing a severe income drop. Unlike others that are limited to covering specific types of risk, this tool makes it possible to look at the farmer's entire income risk considering the correlation among several sources of risk (particularly between production level and prices). This thesis provides first a theoretical background on risk analysis and risk management in agriculture (concepts, classification, literature and methodology). Second, the role of policies within the European Union framework and, Italy, in particular, has been viewed by analysing the normative framework and the reference context of insurance instruments in agriculture. Subsequently, since assessing farm profitability and economic risk is important to support farmers’ decisions about investments and whether or not to join the insurance instruments, an explorative analysis on profitability and riskiness of a perennial crop in Italy, such as hazelnut, has been done. Finally, the implementation of a sector-specific 3 Income Stabilization Tool for the crop investigated has been suggested by following this structure: - assessment of the profitability and risk of hazelnut production, in the four main production areas in Italy; - assessment of the most important parameters generating risk; - simulation of the feasibility of using an income risk management tool to make supply and demand able to interact and its impact on the level and riskiness of farm income; - assessment of the geographical scale at which the Income Stabilization Tool scheme could be implemented. Using data from the Italian Farm Accountancy Data Network on hazelnut producing farms, a downside risk analysis showed that riskiness is distributed in different ways on the entire country with sensitivity on yield risk affecting farmers' income level and economic risk. The simulation implemented in this study demonstrates the tool could reduce substantially the risk faced by hazelnut farmers in Italy. The additional public support is essential in case of joining the tool. In addition, in view of the differences within the Italian territory, the farmers’ payments should be differentiated based on the requisites and the specific climatic and environmental characteristics of each region. Concurrently, recourse to a national mutual fund would make it possible to benefit from the principle of risk pooling

A ricardian analysis of the impact of climate change on permanent crops in a mediterranean region

This is the first study which explores the impact of climate change in Sicily, a small Mediterranean region of Southern Europe. According to research, Mediterranean area has shown large climate shifts in the last century and it has been identified as one of the most prominent "Hot-Spots" in future climate change projections. Since agriculture is an economic activity which strongly depends on climate setting and is particularly responsive to climate changes, it is important to understand how such changes may affect agricultural profitability in the Mediterranean region. The aim of the present study is to assess the expected impact of climate change on permanent crops cultivated in Sicilian region (Southern Italy). By using data from Farm Accountancy Data Network and Ensembles climatic projections for 2021-2050 period, we showed that the impact of climate change is prominent in this region. However, crops respond to climatic variations in a different manner, highlighting that unlike the strong reduction in profitability of grapevine and citrus tree, the predicted average Net Revenue of olive tree is almost the same as in the reference period (1961-1990)

Integrated Assessment of the Sustainability and Resilience of Farming Systems : Lessons from the Past and Ways Forward for the Future

This chapter assessed sustainability and resilience of eleven farming systems in their current situation, as well as in hypothetical future systems, using qualitative and quantitative methods. The assessment shows that current farming systems address sustainability dimensions in an unbalanced way and are characterized by poor resilience. Future resilient systems are imagined to promote environmental and social functions in the long term

D5.6 Impacts of improved strategies and policy options on the resilience of farming systems across the EU

Resilience is the ability to deal with shocks and stresses, including the unknown and previously unimaginable, such as the Covid19 crisis. The aim of this paper is to assess responses of farming systems (FS) to this crisis and to assess them from the perspective of resilience thinking. We build on a resilience framework developed in the SURE‐Farm project and on ongoing resilience assessments in 11 FS across Europe through which we have an in‐depth understanding of the ‘pre‐Covid19 situation’ in each FS. This includes insights whether an FS has an enabling (or constraining) environment, who are the relevant system actors beyond farms, and what are the social, economic and ecological functions to be delivered by the system. The analysis allows us to understand which resilience resources and strategies were mobilised in different FS and thereby to explain differences in the ability of FS to cope with and respond to the crisis. Furthermore, the approach enables us to put crisis responses in a broader resilience perspective and to assess whether responses might enhance (or constrain) future resilience. Thus, our analysis allows to draw policy and industry relevant conclusions how to increase resilience of farming systems

EU income stabilization tool: potential impacts, financial sustainability and farmer’s risk aversion

The Income Stabilization Tool, a risk management scheme introduced within the Common Agricultural Policy (CAP) 2014–2020, could help European Union farmers manage the income risks they face. This study assesses the potential impact of implementing this tool through the maximum level of contribution to the fund which determines an indifference to participate in the fund and its financial sustainability. The study relies on an expected utility approach and assesses the variability of loss ratios over time using a sample of Italian hazelnut farms as a case study. The participation depends on the level of farmers’ contributions and their degree of risk aversion. However, the CAP public support makes the scheme financially sustainable.n

THE SUCCESS FACTORS OF A SICILIAN MARKET-ORIENTED WINE COOPERATIVE

Wine cooperatives have a long tradition in Sicily, as well as in Italy and in Europe. The objective of this paper is to reconstruct the general framework of the Sicilian wine cooperatives that still account for nearly 80% of the regional wine grapes production. In this context we examine the productive, organizational and commercial strategies of a case study: Cantine Settesoli. Founded in Menfi (Western Sicily, Italy) in 1958 on the initiative of a group of wine grape-growers, the Cantine Settesoli has developed over the decades and now represents the major bottled wine cooperative in Sicily, whose 2,135 members own 5% of Sicilian vineyards. With its four wine-making plants, a volume of grapes processed in the last three-year financial period (2011-13) of more than 43,000 tons of grapes per year, an average annual turnover of €47.7 million, and a constant attention to environmental and social issues, Cantine Settesoli stands out as the protagonist in the wine scene, both national (especially with the brands Settesoli and Mandrarossa) and international (with the brand Inycon). It effectively implements traditional and innovative tools of productive, commercial and strategic management, thus representing a model of successful firm in a regional context of cooperatives generally pegged to productive and commercial strategies product-oriented

Alternative systems and strategies to improve future sustainability and resilience of farming systems across Europe: from adaptation to transformation

According to stakeholders, many European farming systems are close to critical thresholds regarding the challenges they face (e.g., droughts, price declines), functions they deliver (e.g., economic viability, biodiversity and habitat) and attributes required for resilience (e.g., social self-organization). To accelerate a transition process towards sustainable and resilient agriculture, this study aimed to identify actor-supported alternative systems across 10 European farming systems, and to identify associated future strategies that contribute to strengthening resilience attributes, using a backcasting approach. This paper synthesizes 1) the participatory identification of desired alternative systems and their expected performance on sustainability and resilience, 2) the participatory identification of strategies to realize those alternative systems, 3) the contribution of identified past and future strategies to 22 resilience attributes, and 4) the compatibility of the status quo and alternative systems with different future scenarios, the Eur-Agri-SSPs. Many identified alternative systems emphasized technology, diversification and organic and/or nature friendly farming, while in some farming systems also a focus on intensification, specialization, better product valorization, collaboration, or creating an attractive countryside could increase sustainability and resilience. Low economic viability limited farming system actors to pay attention to environmental and social functions. Further, most alternative systems were adaptations rather than transformations. Many stakeholders had difficulty to envisage systems without the main products (e.g., starch potato in NL-Arable, sheep in ES-Sheep and hazelnut in IT-Hazelnut), but in few cases transformative systems were designed (e.g. local organic farming in PL-Horticulture and RO-Mixed). Sustainability and resilience can be enhanced when alternative systems and strategies are combined, thereby improving multiple functions and attributes at once. In particular, production and legislation need to be coupled to local and natural capital. Identified alternative systems seem only compatible with Eur-Agri-SSP1 ‘agriculture on sustainable paths’. This requires policies at EU-level that stimulate macro-level social, institutional, economic, and technological developments that strengthen this scenario. We conclude that to get stakeholders along, incremental adaptation rather than radical transformation should be sought. The identification of alternative systems is only a start for the transition process. Their analysis, along with the strategies identified, need to trigger the involvement of farmers and other ‘enabling actors’ inside and outside the farming systems to make a change, and where needed, systems can evolve into more transformative systems

Participatory assessment of critical thresholds for resilient and sustainable European farming systems

Farming systems in Europe are experiencing multiple stresses and shocks that may push systems beyond critical thresholds after which system change is expected to occur. These critical thresholds may lie in the economic, environmental, social and institutional domain. In this paper we take a participatory approach with involvement of farming system stakeholders to assess the presence of critical thresholds in 11 European farming systems, and the potential consequence of surpassing those with regard to system sustainability and resilience. First, critical thresholds of the main challenges, key system variables and their interactions in the studied farming systems were assessed. Second, participants assessed the potential developments of the key system variables in case critical thresholds for main system challenges would be exceeded. All studied systems were perceived to be close, at or beyond at least one identified critical threshold. Stakeholders were particularly worried about economic viability and food production levels. Moreover, critical thresholds were perceived to interact across system levels (field, farm, farming system) and domains (social, economic, environmental), with low economic viability leading to lower attractiveness of the farming system, and in some farming systems making it hard to maintain natural resources and biodiversity. Overall, a decline in performance of all key system variables was expected by workshop participants in case critical thresholds would be exceeded. For instance, a decline in the attractiveness of the area and a lower maintenance of natural resources and biodiversity. Our research shows that concern for exceeding critical thresholds is justified and that thresholds need to be studied while considering system variables at field, farm and farming system level across the social, economic and environmental domains. For instance, economic variables at farm level (e.g. income) seem important to detect whether a system is approaching critical thresholds of social variables at farming system level (e.g. attractiveness of the area), while in multiple case studies there are also indications that approaching thresholds of social variables (e.g. labor availability) are indicative for approaching economic thresholds (e.g. farm income). Based on our results we also reflect on the importance of system resources for stimulating sustainability and resilience of farming systems. We therefore stress the need to include variables that reflect system resources such as knowledge levels, attractiveness of rural areas and general well-being of rural residents when monitoring and evaluating the sustainability and resilience of EU farming systems