Agriculture in dry land Mediterranean areas faces considerable level of production risk as result
of the unpredictable weather. Governmental income stabilisation instruments have had a major impact
on Mediterranean farms in changing land allocation, and changing income levels and variability.
Using a mathematical programming model, the impact of the 2003 CAP reform on land allocation
and on income variability is evaluated for a Portuguese Mediterranean farm. The results show an
increase of extensification of production activities. They also show an increase in total farm income, a
reduction in relative total income variability and an increase in relative production income variability