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Riskier product portfolio under decoupled payments

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  • Maurice J. Roche

Abstract

The new payment regime for the European Union's Common Agricultural Policy adopted in June 2003 will decouple from production all direct payments made to farmers. The potential implications of this policy change for producers' land allocation decisions are analysed using a mean-variance portfolio optimisation framework. We demonstrate theoretically how the opportunity set of a farmer, which offers the highest return for a given risk, will be changed by the presence of a decoupled payment. The new policy will induce those farmers who choose to produce to allocate more land to riskier products than previously. As an illustration, we apply the model to the land allocation decisions facing specialist British and Irish grain producers. Copyright 2004, Oxford University Press.

Suggested Citation

  • Maurice J. Roche, 2004. "Riskier product portfolio under decoupled payments," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(2), pages 111-123, June.
  • Handle: RePEc:oup:erevae:v:31:y:2004:i:2:p:111-123
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    Cited by:

    1. Maria Garrone & Dorien Emmers & Alessandro Olper & Jo Swinnen, 2018. "Subsidies and Agricultural Productivity: CAP payments and labour productivity (convergence) in EU agriculture," Working Papers of LICOS - Centre for Institutions and Economic Performance 634340, KU Leuven, Faculty of Economics and Business (FEB), LICOS - Centre for Institutions and Economic Performance.
    2. Pavel Ciaian & Edoardo Baldoni & d'Artis Kancs & Dusan Drabik, 2020. "The Capitalization of Agricultural Subsidies into Land Prices," EERI Research Paper Series EERI RP 2020/09, Economics and Econometrics Research Institute (EERI), Brussels.
    3. Lee, Heera & Bogner, Christina & Lee, Saem & Koellner, Thomas, 2016. "Crop selection under price and yield fluctuation: Analysis of agro-economic time series from South Korea," Agricultural Systems, Elsevier, vol. 148(C), pages 1-11.
    4. Knoke, Thomas & Paul, Carola & Härtl, Fabian & Castro, Luz Maria & Calvas, Baltazar & Hildebrandt, Patrick, 2015. "Optimizing agricultural land-use portfolios with scarce data—A non-stochastic model," Ecological Economics, Elsevier, vol. 120(C), pages 250-259.
    5. von Witzke, Harald & Noleppa, Steffen & Schwarz, Gerald, 2010. "Decoupled Payments to EU Farmers, Production, and Trade: An Economic Analysis for Germany," Working Paper Series 59853, Humboldt University Berlin, Department of Agricultural Economics.
    6. Petr Havlik & Geoffroy Enjolras & Jean-Marie Boisson & Florence Jacquet & Michel Lherm & Patrick Veysset, 2008. "Environmental good production in the optimum activities portfolio of a risk averse-farmer," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 86(1), pages 9-33.
    7. Britz, Wolfgang & Gocht, Alexander & Domínguez, Ignacio Pérez & Jansson, Torbjörn & Grosche, Stephanie-Carolin & Zhao, Na, 2012. "EU-Wide (Regional and Farm Level) Effects of Premium Decoupling and Harmonisation Following the Health Check Reform," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 61(01), pages 1-13, February.
    8. Marian Rizov & Jan Pokrivcak & Pavel Ciaian, 2013. "CAP Subsidies and Productivity of the EU Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(3), pages 537-557, September.
    9. Marius Rădulescu & Constanta Rădulescu & Gheorghiţă Zbăganu, 2014. "A portfolio theory approach to crop planning under environmental constraints," Annals of Operations Research, Springer, vol. 219(1), pages 243-264, August.
    10. Petr Havlik & Geoffroy Enjolras & Jean-Marie Boisson & Florence Jacquet & Michel Lherm & Patrick Veysset, 2008. "Environmental good production in the optimum activities portfolio of a risk averse-farmer," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 86(1), pages 9-33.
    11. Mitter, Hermine & Heumesser, Christine & Schmid, Erwin, 2014. "Modelling robust crop production portfolios to assess agricultural vulnerability to climate change," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182702, European Association of Agricultural Economists.
    12. Ondřej Dvouletý & Ivana Blažková, 2019. "The Impact of Public Grants on Firm-Level Productivity: Findings from the Czech Food Industry," Sustainability, MDPI, Open Access Journal, vol. 11(2), pages 1-24, January.
    13. Britz, Wolfgang & Gocht, Alexander & Domínguez, Ignacio Pérez & Jansson, Torbjörn & Grosche, Stephanie-Carolin & Zhao, Na, 2012. "EU-Wide (Regional and Farm Level) Effects of Premium Decoupling and Harmonisation Following the Health Check Reform," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 61(1).

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