IDEAS home Printed from https://ideas.repec.org/a/ags/erdnra/309063.html
   My bibliography  Save this article

Development of risk management instruments in the EU

Author

Listed:
  • Kovačević, Vlado
  • Jeločnik, Marko

Abstract

The paper aims at reviewing the EU 2014-2020 CAP with regard to the risk management provisions in the agricultural sector and analyses the potential future CAP developments related to risk management in order to manage more effectively agricultural production risk, income uncertainties and market volatility. Currently, the EU farmers covered by CAP 2014-2020 have different types of risk management instruments at their disposal: insurances, mutual funds, savings accounts, hedging strategies, fiscal-tax measures and ad-hoc payments. The EU has a flexible regulatory framework to support risk management instruments, which allows coping with very diverse and heterogeneous agricultural risks faced across Member States. This framework is delineated by the CAP as well as by the rules applicable to State aids in the agricultural sector. Major weakness of the CAP 2014-2020 risk management policy is the ample margin of flexibility and optionality permitted in Pillar II that might lead to an uneven application, not only among but also within Member States. As a consequence, it can be noted that the EU does not take account of the harmonized EU-wide agricultural risk management scheme. The types of and extent to which risk management tools have been adopted differ widely across Member States. The EU support in development of agricultural risk management instruments has huge perspective, mainly based on two factors. Firstly, climate change is expected to continue and affect the agricultural production even more severely. Secondly, the World Trade Organization, under certain conditions, allows for support of risk management, providing an opportunity for long-term government support. Under the new CAP, the EU risk management policy should be more harmonized among the Member States.

Suggested Citation

  • Kovačević, Vlado & Jeločnik, Marko, 2019. "Development of risk management instruments in the EU," Rural Areas and Development, European Rural Development Network (ERDN), vol. 16.
    • Handle: RePEc:ags:erdnra:309063
    DOI: 10.22004/ag.econ.309063
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/309063/files/2019-RAD-16-06-KOVACEVIC-JELONCIK_71-95.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.309063?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Miller, Alan & Dobbins, Craig L. & Pritchett, James G. & Boehlje, Michael & Ehmke, Cole, 2004. "Risk Management For Farmers," Staff Papers 28640, Purdue University, Department of Agricultural Economics.
    2. Nadja El Benni & Robert Finger & Miranda P.M. Meuwissen, 2016. "Potential effects of the income stabilisation tool (IST) in Swiss agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(3), pages 475-502.
    3. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economic Reports 34081, United States Department of Agriculture, Economic Research Service.
    4. Vincent H. Smith & Joseph W. Glauber, 2012. "Agricultural Insurance in Developed Countries: Where Have We Been and Where Are We Going?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(3), pages 363-390.
    5. Jean Cordier & Fabio Santeramo, 2020. "Mutual Funds and the Income Stabilisation Tool in the EU: Retrospect and Prospects," EuroChoices, The Agricultural Economics Society, vol. 19(1), pages 53-58, April.
    6. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications - Books, The World Bank Group, number 15025.
    7. Matthews, Alan & Salvatici, Luca & Scoppola, Margherita, 2017. "Trade Impacts of Agricultural Support in the EU," Commissioned Papers 252767, International Agricultural Trade Research Consortium.
    8. Unknown, 2008. "Institute of Agricultural Economics," Economics of Agriculture, Institute of Agricultural Economics, vol. 55(3).
    9. Smith, Vincent, 2017. "The US Federal Crop Insurance Program: A Case Study in Rent-Seeking," Working Papers 06899, George Mason University, Mercatus Center.
    10. Tiwari, Sweta & Coble, Keith & Harri, Ardian & Barnett, Barry, 2017. "Hedging the Price Risk of Crop Revenue Insurance Through the Options Market," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 253081, Southern Agricultural Economics Association.
    11. Castañeda-Vera, Alba & Garrido, Alberto, 2017. "Evaluation of risk management tools for stabilising farm income under CAP 2014-2020," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 17(01), June.
    12. Theuvsen, Ludwig, 2013. "Risks and risk management in agriculture," Problems of World Agriculture / Problemy Rolnictwa Światowego, Warsaw University of Life Sciences, vol. 13(28), pages 1-13, December.
    13. Jesús Antón & Shingo Kimura & Roger Martini, 2011. "Risk Management in Agriculture in Canada," OECD Food, Agriculture and Fisheries Papers 40, OECD Publishing.
    14. Motamed, Mesbah & Hungerford, Ashley & Rosch, Stephanie & O’Donoghue, Erik & MacLachlan, Matthew & Astill, Gregory & Cessna, Jerry & Joseph Cooper, 2018. "Federal Risk Management Tools for Agricultural Producers: An Overview," Economic Research Report 276229, United States Department of Agriculture, Economic Research Service.
    15. McDowell, Howard & Kramer, Randall A. & Price, J. Michael, 1989. "An Analysis Of U.S. Farm Income Policies: Historical, Marketing-Determined, And Sector-Wide Stabilization," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 21(2), pages 1-11, December.
    16. McDowell, Howard & Kramer, Randall A. & Price, J. Michael, 1989. "An Analysis of U.S. Farm Income Policies: Historical, Market-Determined, and Sector-Wide Stabilization," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 21(2), pages 1-11, December.
    17. Vincent H. Smith & Joseph W. Glauber, 2012. "Agricultural Insurance in Developed Countries: Where Have We Been and Where Are We Going?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(3), pages 363-390.
    18. Ernst N Csiszar, 2007. "An Update on the Use of Modern Financial Instruments in the Insurance Sector," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 32(3), pages 319-331, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kovačević, Vlado & Jeločnik, Marko, 2019. "Development of risk management instruments in the EU," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 309063, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    2. Trestini, Samuel & Giampietri, Elisa & Smiglak-Krajewska, Magdalena, 2018. "Farmer behaviour towards the agricultural risk management tools provided by the CAP: a comparison between Italy and Poland," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 271978, European Association of Agricultural Economists.
    3. Simone Severini & Cinzia Zinnanti & Valeria Borsellino & Emanuele Schimmenti, 2021. "EU income stabilization tool: potential impacts, financial sustainability and farmer’s risk aversion," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-21, December.
    4. Peter Slade, 2021. "The impact of price hedging on subsidized insurance: Evidence from Canada," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(4), pages 447-464, December.
    5. Glauber, Joseph W., 2017. "Agricultural insurance and the WTO:," IFPRI book chapters, in: Bouët, Antoine & Laborde Debucquet, David (ed.), Agriculture, development, and the global trading system: 2000– 2015, chapter 10, International Food Policy Research Institute (IFPRI).
    6. Luigi Biagini & Simone Severini, 2021. "The role of Common Agricultural Policy (CAP) in enhancing and stabilising farm income: an analysis of income transfer efficiency and the Income Stabilisation Tool," Papers 2104.14188, arXiv.org.
    7. Mauro Vigani & Jonas Kathage, 2019. "To Risk or Not to Risk? Risk Management and Farm Productivity," American Journal of Agricultural Economics, John Wiley & Sons, vol. 101(5), pages 1432-1454, October.
    8. Simone Severini & Giuliano Di Tommaso & Robert Finger, 2019. "Effects of the Income Stabilization Tool on farm income level, variability and concentration in Italian agriculture," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 7(1), pages 1-22, December.
    9. Giampietri, Elisa & Yu, Xiaohua & Trestini, Samuele, 2020. "The role of trust and perceived barriers on farmer’s intention to adopt risk management tools," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 9(1), April.
    10. Fabio G., Santeramo & Ilaria, Russo & Emilia, Lamonaca, 2022. "Italian subsidised crop insurance: what the role of policy changes," MPRA Paper 115299, University Library of Munich, Germany.
    11. Peter Slade, 2020. "Business risk management programs under review," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(3), pages 263-270, September.
    12. Popp, Thies R. & Feindt, Peter H. & Daedlow, Katrin, 2021. "Policy feedback and lock-in effects of new agricultural policy instruments: A qualitative comparative analysis of support for financial risk management tools in OECD countries," Land Use Policy, Elsevier, vol. 103(C).
    13. Francis Tsiboe & Jesse Tack, 2022. "Utilizing Topographic and Soil Features to Improve Rating for Farm‐Level Insurance Products," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 52-69, January.
    14. Vilhelm, V. & Špička, J. & Valder, A., 2015. "Public Support of Agricultural Risk Management – Situation and Prospects," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 7(2), pages 1-10, June.
    15. William M. Fonta & Safietou Sanfo & Abbi M. Kedir & Djiby R. Thiam, 2018. "Estimating farmers’ willingness to pay for weather index-based crop insurance uptake in West Africa: Insight from a pilot initiative in Southwestern Burkina Faso," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-20, December.
    16. Wagener, Andreas & Zenker, Juliane, 2018. "Decoupled but not neutral: The effects of stochastic transfers on investment and incomes in rural Thailand," TVSEP Working Papers wp-008, Leibniz Universitaet Hannover, Institute for Environmental Economics and World Trade, Project TVSEP.
    17. Noy, Ilan & Kusuma, Aditya & Nguyen, Cuong, 2017. "Insuring disasters: A survey of the economics of insurance programs for earthquakes and droughts," Working Paper Series 20250, Victoria University of Wellington, School of Economics and Finance.
    18. Ashimwe, Olive, 2016. "An Economic Analysis Of Impact Of Weather Index-Based Crop Insurance On Household Income In Huye District Of Rwanda," Research Theses 265675, Collaborative Masters Program in Agricultural and Applied Economics.
    19. Owusu, V., 2018. "Credit-Constraints and Preferences for Crop Insurance in Ghana: Implications of Attribute Non-Attendance in Discrete Choice Experiments," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276967, International Association of Agricultural Economists.
    20. Buchholz, Matthias & Musshoff, Oliver, 2014. "The role of weather derivatives and portfolio effects in agricultural water management," Agricultural Water Management, Elsevier, vol. 146(C), pages 34-44.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:erdnra:309063. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/erdnnea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.