Managing the Risk in Agriculture Production: The Role of Government (original) (raw)

Financing risk management in agriculture in the light of the Common Agricultural Policy

2016

1. The paper discusses issues connected with supporting risk management instruments in agriculture. These issues are highly important as an agricultural producer is exposed to an immense amount of insecurity. Despite the progress in agricultural production owing to mechanisation, innovation and the introduction of the most beneficial plant varieties and animal breeds, an agricultural producer is not able to predict the production outcome, which is subject to factors beyond a farmer’s control which he can neither predict nor prevent. The source of the risk in question may be of a production or a market character. The former relates to the level of crops, healthy growth of animals, as well as the occurrence of unexpected and often swift changes of the weather like hail, drought, and ground frosts. The latter, in turn, is a consequence of changes within the agricultural market itself, which can be exemplified by the prices fluctuation and, as a result, the production profitability. The...

Analysis of the Factors used by Farmers to Manage Risk. A Case Study on Italian Farms

American Journal of Applied Sciences, 2016

The study analyses the strategies Italian farmers use to cope with the risks that face their production. We develop cross-sectional and longitudinal analyses as well as analyses of correlation that underline the main differences between the way farms adapt their structure and management towards risk. The expected output is an analysis of farms' approach to risk management in relation to the risk exposure. The present study is the result of research conducted by INEA "Research and technical support on natural disasters, climatic and phytosanitary risks in agriculture and related policies", funded by the Italian Ministry of Agricultural Food and Forestry Policies. The main aim of this analysis is to explore the potential and the limitations of economic tools for climatic risk management in agriculture of new CAP 2013-2020 in relation to farms' needs, possible or necessary policies and future directions in the context of the Italian experience (National Solidarity Fund for natural disasters in agriculture, legislative decree n. 102/2004). The chosen approach for the analysis of demand considers the climatic risk at the level of farms' approach to hedging risks in terms of the use of technical tools (agricultural practices, pesticides, fertilizers, irrigation) and economic/financial instruments (insurances, etc.). The results show a preference of technical tools and a strong need of a more integrated policy scheme, arising also from a new system and the potential synergies between risk management tools and other rural development measures of a more structural and management nature. The latter can contribute to a reduction of risk exposure and of the farms' vulnerability, first and foremost through agro-climatic-environmental measures, production diversification, irrigation infrastructures, technological and management innovations and formation-information-consultancy.

Risk management in agriculture under climate changes

Ekonomika poljoprivrede

Agricultural production is exposed to the effects of various risks, of which the production risks represent its specificity, given that they stem from the fact that the production is done outdoor and that it encompass management of living beings. Climate changes directly affect the production risks of agricultural production. In the literature, climate change are relatively sufficient researched but there are scarce studies that deal with the theme of risk management in agricultural production and in particular the management of risks under climate changse. With this in mind as the goal of the paper we have determined the need to point out on the importance and forms of agricultural risk management under climate changes. In an effort to achieve the goal, in the paper we first point out to the basic characteristics of agricultural production risk management and then we point to the application of preventive measures, the role of the state as well as the comparative role of insurance. As the impact of climate changes have strongly negative impact on insurance companies that provide insurance for agricultural risks, we consider the issue of wheatther the conclusion of agricultural insurance contracts should be mandatory or voluntary.

The Risk Management in Agriculture

2013

The worldwide agricultural production is facing numerous risks. The farmers can suffer major losses, every year, upon global warming impact. In this paper we will discuss about the principal risks in agriculture, and also about the management and some solutions to minimalize the negative financial impact over the farmers. Â Here we will be able to describe some protection modalities against the nature phenomena. In order to elaborate this paper a various number of books and some articles regarding the risk management was consulted. After analyzing and processing the data we could contour some conclusions and also to draw some recommendations regarding the potential solutions in view of diminuate the risks in agriculture.

D 2.6 Report on state and outlook for risk management in EU agriculture

2020

The SURE-Farm project aims to analyse, assess and improve the resilience and sustainability of farming systems in Europe. Farming systems face a whole range of social, ecological, economic and political disturbances and changes, such as sharp market fluctuations, severe weather events, climate change, new technologies, changes in consumer preferences and in governance structures and so forth, operating at a range of scales (local, regional, national and global). Some stresses on the farm system can be predicted (e.g. retirement of farmers), while other shocks are more uncertain and unpredictable (e.g. flooding, sudden price drop, illness). Project’s WP2 aims to comprehensively understand farmers’ risk behaviour and risk management (RM) decisions, and to develop and test RM strategies and decision support tools that farmers can use to cope with increasing economic, environmental and social uncertainties and risks. WP2 contributes to the development of RM in EU farming systems by unde...

MANAGEMENT OF CLIMATIC RISKS AND ITS EFFECTS ON AGRICULTURAL PRODUCTIVITY: EVALUATING THE IMPACTS OF GOVERNMENT POLICY

2019

Risk management has virtually become increasingly important in all the aspects of the economy, including agriculture, Every country that considers agriculture a strategically significant economic sector strives for effective public climatic risk management in agriculture. We distinguish two major types of risk in agriculture. First, business risk includes production, market, institutional and personal risks. Second, financial risks result from different methods of financing the farm business. The nature of climate risk is supposed increasing uncertainty which impacts agriculture productivity. This has contributed to the development and acceptance of forms of public intervention aiming to reduce income variability. In particular, subsidized crop insurance is a widely used tool. The significance of this issue has grown in parallel with the growth in the importance of the collective role of agriculture sector that has addressed the recent guidelines in many developed countries. To examine the effects of public risk management programs on agricultural productivity in case of climatic risks, this study carries out an empirical analysis by developing an econometric application in American and European countries over the period 2000-2015.

The New Instruments of Risk Management in Agriculture in the European Union

Procedia Economics and Finance, 2014

The specific character of farming was perceived since the beginning of the creation of the European Community. Initiation and systematic evolution of Common Agricultural Policy aim at harmonious development farmstead. Any negative events, especially catastrophic, don't allow to execute plans and it can be a cause of abandonment of farms by farmers. This can upset the situation on food market. European Community, in its regulations, allows and even recommends the use of various support instruments. In response to Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products, subsidized crop and animal insurance were introduced in Poland. Much larger opportunities are offered by solution which are financed by assets derived from the mechanism of modulation and defined by Council Regulation (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers. That can be wider range of subsidized crop, animal and plant insurance or mutual funds. Mutual fund is a mechanism that allows affiliated farmers pay compensation for economic losses incurred as a result of animal and plant diseases and environmental incidents. This regulation defines the financial rules of the fund and the possible use of this mechanism in the public and the EU. At the same time, there are many concerns about the practical implementation of this solution. Mutual fund can be a complementary tool for the protection of risks, which cannot be accepted by the insurance market. Experiences of Member States with regard to its use are small, but the examples of countries in which it operates (in this article indicates the Italian example) suggest that it may be a simple in its design but highly effective tool. And it will allow for more complete protection of agricultural production The paper tries to identify the organizational and financial solutions to the mutual fund concept and proposed the establishment of specific solutions for this mechanism in Poland. This paper will present a discussion of the benefits from the introduction of this solution on the Polish and European market for agricultural insurance.

Report on state and outlook for risk management in EU agriculture

2020

The aim of this deliverable is to find the opportunities to improve risk management to enhance the resilience of EU farming systems. Three specific objectives are defined: 1) Providing an outlook of the risk management strategies in the EU farming systems; 2) Defining the ways to improve risk management strategies; and 3) Assessing the ways through which risk management contributes to resilience. The focus of the resilience analysis is on the farming system, i.e. the resilience assessment considers not only farmers but also the other actors in the farming systems such as farmers' associations and cooperatives, value chain actors, financial institutions and the public administrations. To reach this end, a multi-stakeholder approach is followed considering two different regional scales: i) at local level to involve stakeholders with experience and knowledge at farming system level; for that purpose focus groups are held in 11case study (CS) regions across Europe; and ii) at Europe...

Expectations of the Participants of the Crop Insurance System and Their Implementation

Agriculture

The manufacture of agriculture production products is the most sensitive to meteorological conditions. The main risks caused by adverse climate factors that Lithuania’s farmers confront are winterkill, hail, storms, and droughts. The aim of the study is to analyze the expectations of crop insurance system participants and to reveal the reasons for encouraging/discouraging farms in insuring their crops in Lithuania. All additional means (optimization of crop structure, changes in growing technologies) reduce the reliable harm of extreme climate change, but only technical, organizational means (crop insurance) can mostly reduce the loss of production. The investigation was underway using the analysis of scientific literature. Crop producers’ expectations of risk mitigation are influenced by a variety of factors: age, farm size, farming duration, locality, and farming practice. Farmers assess the government’s given support by way of compensation insurance fees. Farmers analyze the risk...

Risk and Crisis Management in the Reformed European Agricultural Policy

Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, 2007

Currently there is ample discussion among EU Institutions (European Commission, European Parliament, and Member States' governments) on the opportunity for setting up a comprehensive EU-wide framework on risk and crises in agriculture. In the meantime, within the limits of the WTO rules on agriculture, national governments are allowed to intervene through direct compensation to farmers in case of exceptional events that cause damages to farming operations and through subsidies to crop insurance programs. Such schemes are quite expensive for domestic budgets and some Member States are trying to switch some of their cost to the Community's budget, although an expansion of financial resources devoted to agriculture in Europe is rather unlikely. Moving from the recently emanated proposal of the European Commission, this paper discusses the main issues related to public intervention for risk and crises management in agriculture. Actuellement, les institutions européennes (Commission européenne, Parlement européen et gouvernements des pays membres) discutent intensément de l'opportunité d'élaborer un cadre général pour l'ensemble de l'Union européenne sur les crises et les risques dans le secteur agricole. Entre-temps, selon les règles de l'OMC sur l'agriculture, les gouvernements nationaux peuvent intervenir en accordant des compensations financières directes aux agriculteurs en cas de circonstances exceptionnelles causant des dommages aux exploitations agricoles ainsi que des subventions aux programmes d'assurance récolte. Ces interventions amputent considérablement les budgets nationaux, et certains pays membres tentent de transférer une partie de leurs coûts au budget de l'Union européenne, bien qu'il soit peu probable que les ressources financières consacréesà l'agriculture en Europe augmentent. A la lumière de la récente proposition de la Commission européenne, le présent article traite des principaux thèmes liésà l'intervention publique dans la gestion des risques et des crises dans le secteur agricole.