WILL FARM INCOME RISK CHANGE UNDER THE NEW CAP REFORM?

Abstract

Investments in public goods, price stabilisation schemes, compensatory payments, farm insurance and calamity assistance programs are some examples of public intervention to reduce risk in agriculture. Using discrete stochastic programming associated with a Minimisation of Total Absolute Deviations framework, the impact of the 2003 Common Agricultural Policy Reform on income risk of a typical Mediterranean farm was analysed. The introduction of the single payment scheme leads to increase in total farm income and to a decrease in the total income risk. However, the relative production risk increases.