Abstract
Research background: Risk in agriculture is a difficult concept to recognize, because farmers are exposed to different types of risks that influence their agricultural activity. The stability of farmer´s income is threatened by various factor interconnected to each other, such as market risks (price volatility, market shocks), financial risks (indebtedness, loans and credits), production risks (climate change, pests and diseases, biosecurity), technological risk (digitization, technological progress), institutional risk (regulations, environment and tax policy), and human resource risk (physical and mental health). Therefore, for the farmers it is very challenging to implement appropriate and effective risk management tools, in order to stabilize their income. Purpose of the article: Risk management offers a variety of strategies and instruments on the farm or aggregate level to copy with the risk. Also in the Pillar II of CAP 2014-2020 were introduced new risk management tools, as a response to greater price and yield variability among European countries. In the paper, we decided to analyse and compare several public risk management tools that can farmers use to increase their welfare and stabilize income. Methods: The national agricultural policies, as well as CAP are aimed at compensating farmers for the negative effects, however it is not so easy to govern and implement the tools on the farm level. The paper provides a comparative analysis of selected tools that are the most suitable for Slovak agricultural producers. Findings & Value added: The results of the paper can give the farmers ability to compare and choose between public risk management tools that could be used for risk exposure.
Highlights
Managing risk in farming is basically aimed at stabilizing the farmersincome situation, reducing the negative consequences of adverse events, and preventing farmers from potential threats; individual or market
The actual risk management tools for agricultural producers are defined in the CAP 2014 – 2020 under the Pilar II in the Regulation (EU) n°1305/201, Article 36 – 39
The Regulation allows the subsidising of ‘administrative costs of setting up the mutual fund’ and ‘the amounts paid by the mutual fund as financial compensation’
Summary
Managing risk in farming is basically aimed at stabilizing the farmersincome situation, reducing the negative consequences of adverse events, and preventing farmers from potential threats; individual or market. Farmers vary in their ability to address risky situations or their attitude to risk, the process of risk management cannot be viewed within a “one size fits all” approach. Income stabilisation in European agriculture: design and economic impact of risk management tools.
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