Evaluation of risk management tools for stabilising farm income under CAP 2014-2020





Crop insurance, direct payments, diversification, income stabilisation fund, income volatility


Guaranteeing farm income stability is an objective of the European Union’s and the Spanish agricultural policies. In this paper, CAP direct payments, diversification, crop insurance and an Income Stabilisation Tool (IST) were compared considering (i) their effect on farm income and income stability, (ii) the expected farmers’ willingness for adoption, and (iii) the efficiency of public expenditure invested in supporting them. Main conclusions point at direct payments and  crop diversification as the most effective measures in decreasing income variability. Nevertheless, using crop  insurance or an IST has potential for both improving farm resilience to income variability and limiting public expenditure.


Download data is not yet available.

Author Biographies

Alba Castañeda-Vera, Universidad Politécnica de Madrid

Research Centre for the Management of Agricultural and Environmental Risks (CEIGRAM).
Agricultural Systems Group, Dpto. Producción Vegetal: Fitotecnia.

Alberto Garrido Colmenero, Universidad Politécnica de Madrid

Research Centre for the Management of Agricultural and Environmental Risks (CEIGRAM).


Agrosynergie. (2011). Evaluation of income effects of direct support. Brussels: European. Commission.

Bardají, I. & Garrido, A. (2016). State of play of risk management tools implemented by MS during the period 2014-2020: National and European frameworks. Brussels: European Parliament.

Bielza, M., Conte, C.G., Gallego, F.J., Stroblmair, J., Catenaro, R. & Dittmann, C. (2009). Risk Management and Agricultural Insurance Schemes in Europe. Luxembourg: Joint Research Centre European Commission.

Bielza, M., Garrido, A. & Sumpsi, J.M. (2004). "Revenue Insurance as an Income Stabilization Policy: An Application to the Spanish Olive Oil Sector". Cahiers d'Economie et Sociologie. Rurales, 70, 5-27.

Bielza, M., Garrido, A. & Sumpsi, J.M. (2007). "Finding optimal price risk management instruments: The case of the Spanish potato sector". Agricultural Economics, 36, 67-78. https://doi.org/10.1111/j.1574-0862.2007.00177.x.

Castañeda-Vera, A., Leffelaar, P.A., Álvaro-Fuentes, J., Cantero-Martínez, C. & Mínguez, M.I. (2015). "Selecting crop models for decision making in wheat insurance". European Journal of Agronomy, 68, 97-116. https://doi.org/10.1016/j.eja.2015.04.008.

Cordier, J. (2014). Comparative study of risk management tools supported by the 2014 Farm Bill and the CAP 2014-2020. Brussels: Agriculture and Rural Development. European Parliament. IP/B/AGRI/IC/2014-044.

Donoghue, E.J.O. (2014). The Effects of Premium Subsidies on Demand for Crop Insurance. Economic Research Report, Number 178405. United States Department of Agriculture, Economic Research Service.

El Benni, N., Finger, R. & Mann, S. (2012). "Price volatility and farm income stabilization. Modelling Outcomes and Assessing Market and Policy Based Responses". Presented in: 123rd European Asociation of Agricultural Economics. Dublin, 1-16.

O'Donoghue, E. (2014). The Effects of Premium Subsidies on Demand for Crop Insurance. USDA-ERS Economic Research Report Number 169. Available at SSRN: http://dx.doi.org/10.2139/ssrn.2502908.

Escribano Rodríguez, J.A., Hernández Díaz-Ambrona, C.G. & Tarquis Alfonso, A.M. (2014). "Selección de índices de vegetación para la estimación de la producción herbácea en dehesas". Pastos, 44, 6-18.

FAO. (2011). The State of Food Insecurity in the World. How does international price volatility affect domestic economies and food security? Rome.

FEGA. (2016). Nota informativa sobre el establecimiento de los valores medios regionales definitivos y otros parámetros utilizados en el proceso de asignación de los derechos de pago básico. Madrid.

Finger, R. (2012). "Biases in Farm-Level Yield Risk Analysis due to Data Aggregation". German Journal of Agricultural Economics, 61, 30-43.

Finger, R. & El Benni, N. (2014). "A Note on the Effects of the Income Stabilisation Tool on Income Inequality in Agriculture". Journal of Agricultural Economics, 739-745. https://doi.org/10.1111/1477-9552.12069.

Garrido, A., Brümmer, B., M'Barek, R., Meuwissen, M. & Morales-Opazo, C. (Eds.). (2016). Agricultural Markets Instability. Revisiting the Recent Food Crises. Oxford: Earthscan Food and Agriculture series. Routledge. https://doi.org/10.4324/9781315676265

Garrido, A. & Zilberman, D. (2008). "Revisiting the demand for agricultural insurance: The case of Spain". Agricultural Finance Review, 68, 43-66. https://doi.org/10.1108/00214660880001218.

Goodwin, B.K., Roberts, M.C. & Coble, K.H. (2000). "Measurement of Price Risk in Revenue Insurance: Implications of Distributional Assumptions". Journal of Agricultural and Resource Economics, 25, 195-214.

Górski, T. & Górska, K. (2003). "The effects of scale on crop yield variability". Agricultural Sysems, 78, 425-434. https://doi.org/10.1016/S0308-521X(03)00036-2.

INE. (2014). Encuesta sobre la Estructura de las Explotaciones Agrícolas 2013. Madrid: Notas de prensa.

JCyL. (2014). Anuario de estadística agraria de Castilla y León. Anu. estadística. Available in: http://www.jcyl.es/web/jcyl/AgriculturaGanaderia/es/Plantilla100/1284228463984.

Lobell, D.B., Ortiz-Monasterio, J.I. & Falcon, W.P. (2007). "Yield uncertainty at the field scale evaluated with multi-year satellite data". Agricultural Systems, 92, 76-90. https://doi.org/10.1016/j.agsy.2006.02.010.

Machetti Bermejo, I. (2015). "El sistema de seguros agrarios combinados en España". Consorcio de Compensación de Seguros - Revista Digital. Available in: http://www.consorsegurosdigital.com/es/numero-02/portada-02/el-sistema-deseguros-agrarios-combinados-en-espana.

MAGRAMA. (2015). Estudios de Costes y Rentas de las Explotaciones Agrarias (ECREA). Available in: http://www.magrama.gob.es/es/ministerio/servicios/analisisyprospectiva/ECREA_Informes-Agricolas.aspx.

Marra, M.C. & Schurle, B.W. (1994). "Kansas Wheat Yield Risk Measures and Aggregation: A Meta-Analysis Approach". Journal of Agricultural Resource Economics, 19, 69-77. Available at: http://www.jstor.org/stable/40986829.

Mary, S., Santini, F. & Boulanger, P. (2013). An Ex-Ante Assessment of CAP Income Stabilisation Payments using a Farm Household Model. Presented in: 87th Annual Conference of the Agricultural Economics Society. Warwick, United Kingdom, 1-27.

Meuwissen, M.P.M., Asseldonk, M.A.P.M. & van Huirne, R.B.M. (2008). Income stabilisation in European agriculture. Design and economic impact of risk management tools. Wageningen: Wageningen Academic Publishers. https://doi.org/10.3920/978-90-8686-650-2

Morales, C., Garrido, A. & Pálinkás, P. (2008). "Risks Perceptions and Risk Management Instruments in the European Union: Do farmers have a clear idea of what they need?" Presented in: 12th Congress of the European Association of Agricultural Economists - EAAE. Ghent. Palisade Corporation. (2011). @RISK: A Hands-On Tutorial.

Rudstrom, M., Popp, M., Manning, P. & Gbur, E. (2002). "Data Aggregation Issues for Crop Yield Risk Analysis". Canadian Journal of Agricultural Economics, (2), 185-200. https://doi.org/10.1111/j.1744-7976.2002.tb00427.x.

Santeramo F.G., Goodwin B.K., Adinolfi F. & Capitanio F. (2016). "Farmer Participation, Entry and Exit decisions in the Italian Crop Insurance Program". Journal of Agricultural Economics, 67(3), 639-657. https://doi.org/10.1111/1477-9552.12155.

Shaik, S., Coble, K.H., Knight, T.O., Baquet, A.E. & Patrick, G.F. (2008). "Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach". Journal of Agricultural Applied Economics, 40(3), 757-766. https://doi.org/10.1017/S1074070800002303