IDEAS home Printed from https://ideas.repec.org/a/caa/jnlage/v55y2009i4id17-2009-agricecon.html
   My bibliography  Save this article

The role of subsidies in managing the operating risk of agricultural enterprises

Author

Listed:
  • J. Špička

    (Institute of Agricultural Economics and Information, Prague, Czech Republic)

  • J. Boudný

    (Institute of Agricultural Economics and Information, Prague, Czech Republic)

  • B. Janotová

    (Institute of Agricultural Economics and Information, Prague, Czech Republic)

Abstract

The paper examines the relationship between the farmers' operating risk and current subsidies. Focused at the commodity level, the analysis is based on a sample survey of costs and yields of two crops (winter wheat and rapeseed) and two livestock commodities (cow milk and fattening cattle) carried out in 2005-2007 in the Czech Republic. The risk analysis relates to the growing conditions, crop yields and the livestock productivity. The future role of the subsidies as the risk management tool in the farming business, as well as the position of this instrument against the other risk management instruments is analysed. The break even analysis and the Monte Carlo simulation are used as analytical tools. The results indicate that the current subsidies have an impact on the stability of the farmers' income. Partially or fully decoupled payments serve as a "financial pillow" increasing the level of the farmers' income and extending the farmers' decision-making possibilities. Furthermore, the current subsidies reduce the variability of the farmers' income. The current subsidies are a suitable complement to other commonly used risk management tools primarily designed to reduce the farmers' and farm income variability.

Suggested Citation

  • J. Špička & J. Boudný & B. Janotová, 2009. "The role of subsidies in managing the operating risk of agricultural enterprises," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 55(4), pages 169-180.
    • Handle: RePEc:caa:jnlage:v:55:y:2009:i:4:id:17-2009-agricecon
    DOI: 10.17221/17/2009-AGRICECON
    as

    Download full text from publisher

    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/17/2009-AGRICECON.html
    Download Restriction: free of charge
    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/17/2009-AGRICECON.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.17221/17/2009-AGRICECON?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert Holzmann & Steen Jørgensen, 2001. "Social Risk Management: A New Conceptual Framework for Social Protection, and Beyond," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 529-556, August.
    2. G. Michalski, 2008. "Operational risk in current assets investment decisions: Portfolio management approach in accounts receivable," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 54(1), pages 12-19.
    3. M. Svatoš, 2007. "Specific aspects of globalization," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 53(2), pages 65-68.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tomas Hlavsa & Jindrich Spicka & Marie Stolbova & Zuzana Hlouskova, 2020. "Statistical analysis of economic viability of farms operating in Czech areas facing natural constraints," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(5), pages 193-202.
    2. Milan Cizek & Miroslav Mimra & Miroslav Kavka & Jaroslav Humpal, 2019. "Analysis of economic risk in potatoes cultivation," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(7), pages 331-339.
    3. Michal Chocholousek & Zuzana Hlouskova & Tereza Simova & Jan Huml, 2021. "Agriculture farms product differentiation assessment in the Czech Republic," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(3), pages 81-89.
    4. Karel ŠRÉDL, 2010. "Behaviour of subjects in risk markets," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 56(5), pages 224-230.

    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. Breen, Benjamin & Hennessy, Thia & Donnellan, Trevor & Hanrahan, Kevin, 2013. "Tools and polices for agricultural risk management," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158686, Agricultural Economics Society.
    2. Tóth, M. & Lančarič, D. & Piterková, A. & Savov, R., 2014. "Systematic Risk in Agriculture: A Case of Slovakia," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 6(4), pages 1-9, December.
    3. Goundan, Anatole & Faye, Amy & Henning, Christian H. C. A. & Collins-Sowah, Peron A., 2020. "Investing in risky inputs in Senegal: Implications for farm profit and food production," Working Papers of Agricultural Policy WP2020-07, University of Kiel, Department of Agricultural Economics, Chair of Agricultural Policy.
    4. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo.
    5. Firdu Gemech & Sushil Mohan & Alan Reeves & John Struthers, 2011. "Market-Based Price-Risk Management: Welfare Gains for Coffee Producers from Efficient Allocation of Resources," Oxford Development Studies, Taylor & Francis Journals, vol. 39(1), pages 49-68.
    6. Brent A. Gloy & Timothy G. Baker, 2002. "The Importance of Financial Leverage and Risk Aversion in Risk-Management Strategy Selection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1130-1143.
    7. Isaac B. Oluwatayo, 2004. "Income Risk and Welfare Status of Rural Households in Nigeria: Ekiti State as a Test Case," WIDER Working Paper Series RP2004-61, World Institute for Development Economic Research (UNU-WIDER).
    8. Deane, Paul & Malcolm, Bill, 2006. "Do Australian woolgrowers manage price risk rationally?," AFBM Journal, Australasian Farm Business Management Network, vol. 3(2), pages 1-7.
    9. Kim, Tae-Hun, 2008. "The measurement of farmers' risk attitudes using a non-structural approach," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 31(2), pages 1-18, May.
    10. Raghbendra Jha & Tu Dang, 2010. "Vulnerability to Poverty in Papua New Guinea in 1996," Asian Economic Journal, East Asian Economic Association, vol. 24(3), pages 235-251, September.
    11. Mingsong Hao & Chuntian Lu & Xi Zhou & Jing Xu, 2023. "How Agricultural Farmers Respond to Risks during the COVID-19 Pandemic: An Exploration through the Dual Social Capitals Approach," Agriculture, MDPI, vol. 13(2), pages 1-18, February.
    12. Ashok Mishra & Barry Goodwin, 2006. "Revenue insurance purchase decisions of farmers," Applied Economics, Taylor & Francis Journals, vol. 38(2), pages 149-159.
    13. Thorne, Fiona S. & Hennessy, Thia C., 2006. "The Role of Risk in the Decision to Produce Post-Decoupling - A Stochastic Budgeting Example," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25415, International Association of Agricultural Economists.
    14. Bitsch, Vera & Harsh, Stephen B., 2004. "Labor Risk Attributes in the Green Industry: Business Owners' and Managers' Perspectives," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(3), pages 731-745, December.
    15. Acs, Szvetlana & Berentsen, Paul B.M. & Huirne, Ruud & van Asseldonk, Marcel, 2009. "Effect of yield and price risk on conversion from conventional to organic farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), pages 1-19.
    16. Barham, E. Hart Bise & Robinson, John R.C. & Richardson, James W. & Rister, M. Edward, 2011. "Mitigating Cotton Revenue Risk Through Irrigation, Insurance, and Hedging," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(4), pages 529-540, November.
    17. Aymeric Ricome & Arnaud Reynaud, 2022. "Marketing contract choices in agriculture: The role of price expectation and price risk management," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 170-186, January.
    18. El Benni, Nadja & Finger, Robert, 2014. "Where is the risk? Price, yield and cost risk in Swiss crop production," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 95(3).
    19. Richard P.C. Brown & Eliana V. Jimenez, 2008. "Remittances and Subjective Welfare in a Mixed-Motives Model: Evidence from Fiji," Discussion Papers Series 370, School of Economics, University of Queensland, Australia.
    20. Ingrid Groessl & Ulrich Fritsche, 2006. "The Store-of-Value-Function of Money as a Component of Household Risk Management," Macroeconomics and Finance Series 200606, University of Hamburg, Department of Socioeconomics.

    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:caa:jnlage:v:55:y:2009:i:4:id:17-2009-agricecon. 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: Ivo Andrle (email available below). General contact details of provider: https://www.cazv.cz/en/home/ .

    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.