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 SHORT-TERM LONG-TERM  INCREASED CONSUMPTION  CO-MOVEMENT  CONCENTRATE AND TINY  FINANCIALISATION  STOCK LEVEL MARKET  EXCHANGE RATE  NO-FOOD PRODUCTION  WEATHER SHOCKS  CLIMATE CHANGE  AD HOC POLICY MEASURES Drought in Wildfires Australia in Russia AGRI PRICE INDEX Increasing Export stock Oil price restriction

FACTORS AFFECTING FARMERS INCOME RISK  LACK OF LIMITED INFORMATION IMPERFECT NO EFFECTIVE  COSTS PROTECTIONS COVER BY PRICE  MISSING PROVIDED BY FINANCIAL TRANSMISSION FOOD MARKET FUTURE MARKET MARKET . FOR SOME PRODUCTS MARKET FAILURE INSTITUTIONAL CHANGES GUARANTEED DECOUPLED PRICE PAYMENTS INCOME MARKET STABILITY RISK

EUROPEAN 1 HOW WE ARE CURRENTLY UNION 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 INCOME subsidy STABILIZATION TOOL  Mutual funds

CANADA 2 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 AGRIRISK contribution to producer’s account To develop and adopt new private sector or producer-funded  Agristability – to assist agricultural risk management tools producers who experienced large margin decline

UNITED STATES 3 HOW WE ARE CURRENTLY DEALING WITH VOLATILITY? COMMODITY PROGRAMS  Price Loss Coverage (PLC)  Dairy Margin Protection (DMP) CROP INSURANCE  Revenue Protection AGRIRISK COVERAGE PROGRAM ( ARC )  Yield Protection  AGR + AGR Lite

EU AND US APPROACHES 100% IN SUPPORTING FARMERS 20% 40% 39% 39% 60% 1% SAFETY NETS INCOME SUPPORT RISK MANAGEMENT

EU REFORM OPTION DECUPLED FOR MANAGE PRICE VOLATILITY PAYMENTS COUNTERCYCLICAL SAFETY NET SUPPORT MEASURES RISK MANAGEMENT DEPOSIT TOOL KIT SCHEMES DEVELOP CROP INSURANCE INSURANCE MUTUAL FUNDS TOOL INCOME STABILISATION TOOL • • IMPROVED LEGITIMACY EU BUDGET IS FIXED AND • CONSTRAINED BY THE MFF BUFFER TO PRICE FLUCTUATION • • CONNECTION WITH SAFETY LOW MARKET SIGNAL IN COUNTERCYCLICAL SUPPORT NETS AND RISK MANAGEMENT TOOLS