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

Abstract

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.

Advantageous Selection in Crop Insurance: Theory and Evidence

“…(), a better understanding of informational asymmetries in crop insurance, which include adverse selection, moral hazard and advantageous selection behaviours, is a necessary first step to introduce public interventions aimed at increasing participation in the programme. Furthermore, insights from studies that look at these behaviours could help in development of integrated policy schemes that combine crop insurance with other risk‐mitigating mechanisms (like programmes to encourage adoption of good agricultural practices), which in turn can help reduce overall farm risk exposure (See Pontrandolfi et al ., ).…”

Assessing the risk profile of dairy farms: application of the Income Stabilisation Tool in Italy

“…irrigation), the share of owned land, the level of feed self-sufficiency, the quality of feed diet and livestock productivity. Irrigation, pesticides and fertilisers (Pontrandolfi et al , 2016) represented some major examples of self-covering strategies. Enjolras et al (2014) and Trestini, Pomarici and Giampietri (2017) found that input intensification is associated with more risky production.…”

Building the resilience of Italy’s agricultural sector to drought

“…Building the agricultural sector's resilience to drought, then, requires effective short-term hazard management improvements, but also investments that will improve the sector's capacity to manage or adapt to these types of events in the long-term. Amongst other challenges, the government must find the most effective balance between investing in preparedness and prevention versus hazard response; more effectively manage water resources amongst competing uses; and incentivise improved farm-level capacity 2 The degree to which this is the case depends on whether farmgate prices increase versus wholesale or retail prices, as the value of an increase only in wholesale or retail prices will largely be captured elsewhere in the value chain. to manage drought and adapt to changing conditions.…”

“…This case study examines how governance arrangements and policy measures help to build the resilience of Italy's farmers and agricultural sector to natural hazard-induced disasters (NHID). It is one of seven case studies 1 prepared for the joint OECD-FAO project on Building Agricultural Resilience to Natural Hazard-Induced Disasters: Insights from Country Case Studies (OECD-FAO, 2021 [2]). This project examines Disaster Risk Management (DRM) frameworks in selected OECD and developing countries to identify what governments and agricultural sector stakeholders can do to build resilience to NHIDdefined here as the ability of farmers to prepare and plan for, absorb, respond, recover from, and more successfully adapt and transform in response to natural hazards (OECD, 2020 [3]).…”