TOOLS TO REDUCE PRICE VOLATILITY IN AGRICULTURE MARKETS HOW WE ARE - - PowerPoint PPT Presentation

TOOLS TO REDUCE PRICE VOLATILITY IN AGRICULTURE MARKETS

HOW WE ARE CURRENTLY DEALING WITH VOLATILITY?

Felice ADINOLFI

OUTLINE

Volatility drivers Factors affecting farmers income risk How we are currently dealing with volatility? European framework Canadian framework US framework EU and US approach in supporting farmers EU option for manage volatility

VOLATILITY DRIVERS

CO-MOVEMENT FINANCIALISATION STOCK LEVEL EXCHANGE RATE WEATHER SHOCKS AD HOC POLICY MEASURES INCREASED CONSUMPTION CONCENTRATE AND TINY

MARKET

NO-FOOD PRODUCTION CLIMATE CHANGE

SHORT-TERM LONG-TERM

Drought in Australia Export restriction Increasing stock Wildfires in Russia Oil price

AGRI PRICE INDEX

FACTORS AFFECTING FARMERS INCOME RISK

MARKET FAILURE INSTITUTIONAL CHANGES

NO EFFECTIVE COVER BY FINANCIAL MARKET . LIMITED PROTECTIONS PROVIDED BY FOOD MARKET

MARKET RISK

GUARANTEED PRICE

LACK OF INFORMATION COSTS

MISSING

FUTURE MARKET FOR SOME PRODUCTS

DECOUPLED PAYMENTS IMPERFECT PRICE TRANSMISSION

INCOME STABILITY

HOW WE ARE CURRENTLY DEALING WITH VOLATILITY?  Supporting income through direct

payments

 Managing crises through market

instruments

 Promoting ex ante strategy to cope

risk (diversification, training) and investments trough RDp

 Insurance premium subsidy  Mutual funds

INCOME STABILIZATION TOOL

1

EUROPEAN UNION

HOW WE ARE CURRENTLY DEALING WITH VOLATILITY?  AgriInsurance - to cover production losses

caused by natural hazards

 Agrirecovery – to help producers recover

from natural disasters

AgriInvest – Government

contribution to producer’s account

Agristability – to assist

producers who experienced large margin decline

AGRIRISK

To develop and adopt new private sector or producer-funded agricultural risk management tools

2

CANADA

HOW WE ARE CURRENTLY DEALING WITH VOLATILITY?

COMMODITY PROGRAMS

Price Loss Coverage (PLC) Dairy Margin Protection (DMP)

AGRIRISK COVERAGE PROGRAM (ARC)

3

UNITED STATES

CROP INSURANCE Revenue Protection Yield Protection AGR + AGR Lite

100% RISK MANAGEMENT 20% SAFETY NETS

60% 1%

INCOME SUPPORT

40% 39% 39%

EU AND US APPROACHES IN SUPPORTING FARMERS

DECUPLED PAYMENTS RISK MANAGEMENT TOOL KIT

CROP INSURANCE MUTUAL FUNDS INCOME STABILISATION TOOL

SAFETY NET MEASURES DEPOSIT SCHEMES COUNTERCYCLICAL SUPPORT DEVELOP INSURANCE TOOL

• IMPROVED LEGITIMACY
• BUFFER TO PRICE FLUCTUATION
• CONNECTION WITH SAFETY

NETS AND RISK MANAGEMENT TOOLS

• EU BUDGET IS FIXED AND

CONSTRAINED BY THE MFF

• LOW MARKET SIGNAL IN

COUNTERCYCLICAL SUPPORT

EU REFORM OPTION FOR MANAGE PRICE VOLATILITY