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Actuarial evaluation of the EU proposed farm income stabilisation tool

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  • Pigeon, Mathieu
  • Frahan, Bruno Henry de
  • Denuit, Michel

Abstract

Recently, the European Commission proposed to introduce several risk management tools in the rural development pillar 2 of the CAP. One of them consists in providing co-financing support to mutual funds compensating farmers who experience a severe drop in their farm income. This paper analyses this new farm income stabilization tool for the Walloon region in Belgium, considering separately three groups of farms (crop, dairy and cattle farms). Relying on FADN data from 1997 to 2007, this analysis focuses on estimating the probability that such regional mutual funds would need to intervene to compensate farm net incomes and, in that case, the expected amount of each farm income compensation and the total expected amount of compensation. The budgetary compensation that would be required if an income insurance scheme was implemented to compensate Walloon farmers for their income losses is evaluated. Particular attention is paid to the cyclical pattern as well as to additional requirements that could be imposed to the EU income stabilisation tool.

Suggested Citation

  • Pigeon, Mathieu & Frahan, Bruno Henry de & Denuit, Michel, 2012. "Actuarial evaluation of the EU proposed farm income stabilisation tool," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122485, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa123:122485
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    References listed on IDEAS

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    1. Roderick M. Rejesus & Keith H. Coble & Thomas O. Knight & Yufei Jin, 2006. "Developing Experience-Based Premium Rate Discounts in Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 409-419.
    2. Chambers, Robert G., 2007. "AJAE Appendix: Valuing Agricultural Insurance," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 89(3), August.
    3. Robert G. Chambers, 2007. "Valuing Agricultural Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 596-606.
    4. Jeffrey R. Stokes & William I. Nayda, 2003. "The Pricing of Revenue Assurance: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 1066-1069.
    5. Olivier Mahul & Brian D. Wright, 2003. "Designing Optimal Crop Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 580-589.
    6. Coble, Keith H. & Dismukes, Robert & Thomas, Sarah E., 2007. "Policy Implications of Crop Yield and Revenue Variability at Differing Levels of Disaggregation," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9759, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Barry K. Goodwin & Alan P. Ker, 1998. "Nonparametric Estimation of Crop Yield Distributions: Implications for Rating Group-Risk Crop Insurance Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 139-153.
    8. Jesús Antón & Shingo Kimura & Roger Martini, 2011. "Risk Management in Agriculture in Canada," OECD Food, Agriculture and Fisheries Papers 40, OECD Publishing.
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    More about this item

    Keywords

    agricultural risk management; income stabilisation; Belgium; European Union; Risk and Uncertainty; D81; Q12; Q18.;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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