Abstract
In the European Union legislative proposals for the next Common Agricultural Policy (CAP) the income support remains an essential part of the CAP. This paper analyses agricultural income levels, the role of EU aids in ensuring fair levels of income and how different socio-economic and structural characteristics affect farms’ economic viability. Italian Farm Accountancy Data Network (FADN) data have been processed and economic viability has been assessed by comparing Farm Net Income to a reference income and by estimating a profitability index to check whether the agricultural activities remunerate factors owned by the farmer and his/her family. After an explorative analysis, two multinomial logit models have been estimated to evaluate how structural and socio-economic characteristics affect the likelihood of a farm to be viable with and without EU aids. Both structural farm characteristics and farmer’s production strategies explain the likelihood of a farm to be viable in the short and in the medium-long term. Farms are more likely to be viable as the size increases and the higher the capital intensity, while viability likelihood decreases with the farmer’s age, when the holder is a woman, and the farm is localized in Southern Italy. CAP payments do not modify the factors that affect farm viability but can change their weight.
Highlights
In 2018, the European Union (EU) Commission presented the legislative proposals on the Common Agricultural Policy (CAP) beyond 2020
As the viability of farms is determined by both income levels and income fluctuations [1], to take account of income fluctuations, the analysis considered holdings that were included in the Farm Accountancy Data Network (FADN) sample for the three consecutive years 2015, 2016, and 2017 and the average data for the three-year period
In relation to the role played by EU income payments, the viability area is not affected by aids when farms have less than 5 hectares, while farms with more than 40 hectares with Farm Net Income (FNI) equal to or higher than the reference income decrease from 72% to 47% when EU aids are subtracted (Table 2)
Summary
In 2018, the European Union (EU) Commission presented the legislative proposals on the Common Agricultural Policy (CAP) beyond 2020. Income support will still remain an essential part of the EU policy, but under the new EU approach intervention needs to be more focused to those who are actively farming to earn their living In this context, a key issue is how to identify which incomes should be taken into account and what weight agricultural and non-agricultural activities should have on total income. A profitability index was used, with and without CAP aids, to check whether farms remunerate their resources and guarantee an adequate income for agricultural households in the medium-long term. Income and profitability levels have been the basis for assessing the viability of farm in the short and medium-long term, both with and without CAP payments, and for estimating the extent to which different farm and farmer characteristics influence the probability of a farm to be viable
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