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ABSTRACT
Due to the increasing price and income volatility that affect the agricultural sector, nowadays the reformed CAP 2014-2020 puts new emphasis on risk management in agriculture, especially to cope farmer income risk, with the introduction of the new income stabilization tool (IST). Althought it has been applied in Italy, still any experience exists. In order to contribute to the growing debate around the feasibility of IST implementation, this paper aims at investigating factors that affect the probability of income loss for italian farms specialised in viticulture. The analysis consideres the farm value added to measure income volatility and, in particular, it focuses on some strategies that are commonly adopted by farmers as sef-coping tools. Results show that such strategies do not reduce income risk actually as they merely increase farm productivity. It follows that the adoption of specific risk management tools as IST can represent a possible solution.
KEYWORDS
Risk management policy, risk assessment, Income Stabilization Tool, Common Agricultural Policy, Rural Development, farm income.
INTRODUCTION
Over the last ten years, agricultural yields have been quite stable in Europe, whereas prices showed considerable fluctuations (Hill and Bradley, 2015). Agricultural commodities' markets, by nature, tend to be volatile as a consequence of shifts in supply and demand, with period of sharp increases of prices followed by severe depressions. Mainly due to both unpredictable weather conditions linked to climate change (Antón et al., 2012) and market developments that have an incidence on the return from farming (OECD, 2009), volatility at farm level shows itself as the variability of input costs, output prices and crop yields (Berentsen and Asseldonk, 2016). These inherently unpredictable variations address some long-term negative consequences related to farmers' economic sustainability and viability, as worsening farm income levels, high uncertainty and a weakened propensity to invest in more sustainable farming, not to mention the impact on farmer declining living conditions due to unprofitable farming activities. As mentioned within the Treaty of Rome (1957), one of the central aims of Common Agricultural Policy (CAP) has historically been to ensure a fair standard of living for agricultural communities all over Europe.
In Italy, risk management's roots lie in the creation of the National Solidarity Fund in 1970 (Law n. 364), then reformed in 2004 (Legislative Decree...