Analysis of indemnification of income risk at sector level: the case of Slovenia

Abstract

Using Monte Carlo simulations, the impact of diff erent levels of risks on indemnification through an income stabilisation tool is investigated at the sector level. The presented approach, using the IACS database, allows analyses of diff erences across farms with respect to farm type and farm size, applying average-based approaches. Such preliminary information is useful for policy makers responsible for the design and introduction of measures to tackle income risk issues and to identify potential beneficiary groups among farmers. The analysis shows that on average 25 per cent of farms would be indemnified annually, the majority in fruit production, the dairy sector and hop production. Mixed farm types, with a share of 34 per cent, receive only 15 per cent of the total sum of indemnity. However, if EUR 12,000 of average income is set as the threshold for participation in such a tool, only 6 per cent of farms participate and only 13.3 per cent of them would be indemnified. Indemnity at farm level would range between EUR 82 and 40,870. Taking into account all farms in the sector, the average indemnity is EUR 918 per farm and almost EUR 13,500 for the second case.