Summary

In a framework of changing agricultural risks, an enlarging European Union, changing views about eligible forms of income support, changing attitudes towards ad hoc disaster relief and continuing developments at private risk management markets, this project analyses the opportunities of different risk management tools for stabilising farm incomes.

We first quantify the risk exposure of farm households in a selection of established and new Member States of the European Union. Individual farm data are analysed as well as data on off-farm incomes. Next, we study the impact of future CAP and WTO scenarios on farmers’ risk exposure and (allowed forms of) risk management. A farm-level simulation model illustrates the impact of various scenarios on income volatility and crisis risk. Thirdly, the project reviews successes and failures of historic and current risk management instruments, both within EU Member States as well as in non-EU countries. The review is based on reported results in literature completed with up to date views from experts. Next, we deal with farmers’ perceptions. (New) risk management instruments may fail if there is little interest of farmers, for instance because they perceive risks to be small, believe governments to intervene, or just find the instrument too costly. The economic impact of prospective risk management instruments, both at farm level and in terms of budgetary consequences, is quantified with a risk-programming and a simulation model respectively.

Given a synthesis of the project’s results and a last fine-tuning in a closing workshop, the project concludes by providing the Commission with a list of viable risk management instruments, including recommendations for the design and implementation of such instruments.