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This book focuses on the use of farm level, micro- and macro-data of cooperative systems and networks in developing new robust, reliable and coherent modeling tools for agricultural and environmental policy analysis. The efficacy of public intervention on agriculture is largely determined by the existence of reliable information on the effects of policy options and market developments on farmers' production decisions and in particular, on key issues such as levels of agricultural and non-agricultural output, land use and incomes, use of natural resources, sustainable-centric management, structural change and the viability of family farms. Over the last years, several methods and analytical tools have been developed for policy analysis using various sets of data. Such methods have been based on integrated approaches in an effort to investigate the above key issues and have thus attempted to offer a powerful environment for decision making, particularly in an era of radical change for both agriculture and the wider economy.



Risk Management and Pricing Issues in Agricultural Policy Analysis


Chapter 1. VAR Models for Dynamic Analysis of Prices in the Agri-food System

An adequate understanding of the dynamics that characterize the agri-food market is fundamental for the development of really efficient economic policies, especially after the two recent hikes in the prices of food commodities. The econometric literature provides today advanced analysis tools such as VAR models: these models are based on a system of equations in which each variable is regressed on a set of deterministic variables, on a number of lags related to each covariate in the model. To test the effectiveness of this analytical tool at dealing with the issues related to agri-food economy, we applied a VAR analysis on prices of major food and energy commodities (oil and biodiesel) referring to the period January 2000–December 2012. Our results identified statistically significant intertemporal relationships between the price of corn, soybean oil, rapeseed and oil, and suggested the direction of these relationships; we could conclude that the price of corn and soybeans are influenced mainly in the energy market. Moreover, we focused on the United States market and we set as variables the share of commodities used for the production of biofuels: we could observe that important alterations on the food market are due to the convenience in producing ethanol and biodiesel, since the portion of the crops used for energy is in direct competition with that devoted to the feeding. This kind of model, therefore, deals adequately with data and issues of the agri-food system and provides an analytical basis to develop economic policies that can take into account the complexity of the global food system.
A. C. Leucci, S. Ghinoi, D. Sgargi, V. J. Wesz Junior

Chapter 2. Irrigation Water Resource in a Rice-Growing Area: Economic Evaluation under Different Pricing Conditions

Water scarcity is an increasing phenomenon affecting all sectors of economic interest. This problem is stressing agriculture as well, and in particular primary activities that use huge amounts of the resource to maintain their productions at sufficiently high levels. A way to contrast scarcity is the improvement of the efficiency of water allocation and the reduction of its losses, through the adoption of political instruments and pricing aimed to a more aware use of the resource itself. In this context, the Water Framework Directive, in order to assign an appropriate cost to irrigation water, urges member states to introduce the concept of full cost, and to apply a volumetric supply fee promoting the rationalization of the resource, thus playing a role in addressing emerging and future problems of water scarcity. However, several studies have already demonstrated through modeling approaches that these interventions could strongly affect farms’ choices and performances, resulting in consequences that would have repercussions on the whole agricultural system. The study aims to evaluate economic performances of farms in a typical rice-cultivated area in Lombardy, Northern Italy, under different supply tariff levels. A simple programming model has been used to run a scenario analysis. Structural features of farms, their productive inputs and performances are reported in current conditions, under different pricing and progressively increasing fee levels, in order to evaluate their effects on farms’ economic performances and operative strategies. The obtained results allow for a first identification of critical points in the water management of the area and hypothesize interventions for a better resource allocation, as a useful instrument for supporting future policies on water resources.
Guido Sali, Federica Monaco

Chapter 3. Stochastic Partial Equilibrium Modelling: An Application to Crop Yield Variability

Market volatility is of increasing concern within the agricultural sector of the EU and consequently the FAPRI-UK and EU-GOLD partial equilibrium modelling system is being developed to produce stochastic projections, which reflect underlying uncertainties. This chapter describes the underlying methodology. In the initial simulations, only one source of uncertainty, namely crop yield variability within the EU, is examined. Positive correlations among crop yield deviates amplify variations in crop production. This is supported by our results of the experimental simulations in which correlations among crop yield deviates are taken into account and compared to results where they are not addressed. Variability in output value varies widely depending on the aggregation level under consideration. In particular, at levels below where prices are determined, output value variability is larger than either production variability or price variability alone, supporting the potential need for risk management policy.
Siyi Feng, Julian Binfield, Myles Patton, John Davis

Estimating Income and Performance Levels

Chapter 4. Alternative Specifications of Reference Income Levels in the Income Stabilization Tool

In this chapter, different approaches for the specification of reference income levels in the income stabilization tool (IST) are analyzed. The current proposal of the European Commission suggests a 3-year average or a 5-year Olympic average to specify the farm-level reference income that is used to identify if and to what extent a farmer is indemnified in a specific year. Using Monte Carlo simulations, we investigate the impact of income trends on indemnification if these average-based methods are used in the IST. In addition, we propose and investigate a regression-based approach that considers observed income trends to specify reference income levels. Furthermore, we apply these three different approaches to farm-level panel data from Swiss agriculture for the period 2003–2009. We find that average-based approaches cause lower than expected indemnification levels for farmers with increasing incomes, and higher indemnifications if farm incomes are decreasing over time. Small income trends are sufficient to cause substantial biases between expected (fair) and realized indemnification payments at the farm level. In the presence of income trends, average-based specifications of reference income levels will thus cause two major problems for the IST. First, differences between expected and realized indemnification levels can lead to significant mismatches between expected and real costs of the IST. Second, indemnity levels that do not reflect farm-level income losses do not allow achieving the actual purpose of the IST of securing farm incomes. Our analysis shows that a regression-based approach to specify reference income levels can contribute to bound potential biases in cases of decreasing or increasing income levels.
Robert Finger, Nadja El Benni

Chapter 5. Developing of Modelling Tool for Policy and Economic Rent in Agriculture

In this chapter, a completely original microeconomic model of the producer’s choice is presented. To capture the impact of agricultural policy on the agricultural producer’s income two main sources of income growth were included in the model, namely efficiency of production (economic rent) and funds obtained from solutions under the CAP agricultural policy (policy rent). In this chapter, the micro-level (plant, animal, and mix production types) and macro-level agricultural data were used. The agricultural producer optimises his choices, i.e. reaches equilibrium when it comes to these two sources of income for the objective function (income maximising). Therefore, the purpose of the article was to show a certain range of substitution between these sources of producer’s revenue. We have observed that the rate of substitution of these two sources of income growth is not equal to one, which means that replacing one with the other is not without any effect on the level of income. We find it important to assess not only the substitution between the two sources of income which are in our case production efficiency and political rent, but also to study to what extent investment decisions (which create a basis for future income) depend on political rent.
A. Bezat-Jarzębowska, W. Rembisz, A. Sielska

Chapter 6. Performance Evaluation of Rural Governance Using an Integrated AHP-VIKOR Methodology

The objective of this study is to provide an assessment of the performance of the development process of the Leader Approach in the Rural Development Programme 2007–2013 in Calabria. In particular, on one hand, it measured and evaluated the application of the ‘Good Governance’ criteria by the identification and selection of an appropriate set of process indicators, procedures and actions practiced by Local Action Groups (LAG) in the planning phase of the Local Development Plans. On the other hand, those indicators have been employed to construct an evaluation tree through which the performance of each LAG is tested and compared to an ideal model of ‘Good Governance’. To this end, it used an integrated multicriteria model, which combines two techniques: the Analytic Hierarchy Process (AHP) and VlseKriterijumska Optimizacija the Kompromisno Resenje (VIKOR). The results deal with the definition of a possible model for assessing the quality of the integrated planning process of rural governance. The results can be useful to policy makers at the regional level and also to the LAGs in highlighting eventual elements of criticism and possible virtuous behaviours of their own planning process that can be considered in the future EU programming period of 2014–2020.
Giuseppa Romeo, Claudio Marcianò

Surveying and Experimental Designs in Agricultural Policy Analysis


Chapter 7. Consumers’ Perception of Wastewater Usage in Agriculture: Evidence from Greece

The need for wastewater usage is increasing, especially in coastal regions with limited freshwater supply. In Greece, the only applications of water reuse projects concern irrigation purposes in the agricultural sector. One of the key issues concerning the adaptation of such projects and further expansion of such initiatives is consumer perceptions. To that end, the aim of this chapter is to explore consumer awareness about the reuse of wastewater for agricultural purposes in order to accept such policies. The study reveals a positive attitude of the public towards recycled water reuse in agriculture. Education is positively correlated with higher awareness regarding agricultural and landscape irrigation. However, the study reveals several obstacles for a wider acceptance of similar practices, especially for older people.
Foivos Anastasiadis, Fragiskos Archontakis, Georgios Banias, Charisios Achillas

Chapter 8. Modelling Structural Change in Ex-Ante Policy Impact Analysis

Model-based ex-ante policy impact analyses are nowadays widely used in agricultural policy consulting. However, so far very few existing applications try to assess the impact on farm numbers and the re-allocation of resources between farms. Due to data availability, these studies generally use normative or ad hoc decision rules on farm exits. In this chapter, we fill this gap, combining an empirically-based estimation of profit-dependent farm exit probabilities with prospective modelling of farm adjustments and selected factor markets. This study combines farm-individual information from farm-structural surveys for 1999, 2003 and 2007, and economic information from farm accountancy data for Germany. The estimated model explains farm exit probabilities depending on current and expected future profits, the expected development of competitors (e.g., neighbouring farms competing on the land market) and farm and regional structural characteristics influencing farms’ strategic decision-making. The econometric exit model is iteratively coupled to a representative farm group model for Germany, facilitating the ex-ante analysis of complex policy reforms. A first application on dairy market reform scenarios highlights the diverging impacts these may have on the developments of the number of dairy farms of different size or region, and their income and output.
Frank Offermann, Anne Margarian

Chapter 9. Public Preferences for Climate Change Adaptation Policies in Greece: A Choice Experiment Application on River Uses

Climate change is a multidimensional issue with serious environmental and socio-economic implications. Mountain areas, in particular, show high vulnerability to climate change. Among others, alterations in temperature and precipitation can severely affect freshwater ecosystems, in terms of both quality and quantity. As a result, services provided by river ecosystems will deteriorate, affecting economic activities and social welfare. This study comprises one of the first attempts to monetize non-market benefits of adaptation to climate change impacts on mountainous rivers. In this direction, a choice experiment was conducted using a face-to-face survey to examine the preferences of Konitsa’s residents, a mountain settlement located in the Prefecture of Ioannina (Greece). Simple and extended Conditional Logit models were calibrated in order to analyze trade-offs of choices and to estimate the welfare effects of climate change adaptation measures. The resulting values and reliability considerations indicate that people support adaptation actions, being willing to pay for all river services.
Dimitrios Andreopoulos, Dimitrios Damigos, Francesco Comiti, Christian Fischer

Chapter 10. The Stakeholder Analysis: A Contribution Toward Improving Impact of Rural Policy

Since more than a decade agricultural economists pay more attention to CAP’s effects evaluation as a consequence of a larger social request for understanding what impacts are generated by the adoption of Rural Development Policy. The EU 2020 strategy fosters a political shift from the market liberalization processes toward policies promoting stability and equity, in addition to environment protection and social inclusion. Thus, CAP will have to be better evaluated by both quantitative and qualitative tools in order to understand the role of local communities in RDP implementation. In studying the role of wine tourism, in particular the successful case of Young Wines Exhibition of Sardinia and the failure of the “Verdicchio di Matelica” Wine Road (Ancona), the use of stakeholder analysis has shown positive contribution in evaluating the role of social actors in success/failure of RDP implementation. This work aims at discussing the necessity to use a more holistic evaluation method, mainly focusing on possibilities and difficulties of involving local social actors and policymakers.
G. Benedetto, D. Carboni, G. L. Corinto

The Influence of Climate Change and Constraints


Chapter 11. Impacts of Climate Change on Agriculture Water Management: Application of an Integrated Hydrological-Economic Modelling Tool in a Semi-Arid Region

An integrated hydrological-economic modelling tool—applied to the Apulia region (southern Italy)—is proposed to define water balance components and water use in the agricultural sector. The hydrological model allows assessing the crop irrigation requirements and the water availability, expressed in terms of river flow, groundwater recharge and abstraction, while the integration with the economic model allows simulating the real farmers’ decision process in response to any changes both in the constraints and in the boundary conditions. The tool provides a comprehensive information framework including water balance components, crop irrigation requirements, farmers’ choices in terms of land use and irrigation techniques, economic results (costs and incomes), and environmental impacts. Climate, land cover and soil datasets have been implemented as thematic maps into a GIS-based model, and integrated with the main economic parameters at the farm and crop level. Future scenarios of climate change have been simulated and their impacts on water balance taken into account. The aim of the results is optimizing the use of water resources and addressing the policies for an efficient water management under severe drought conditions that are likely to occur in the region according to climate change projections.
A. Scardigno, D. D’Agostino, D. El Chami, N. Lamaddalena

Chapter 12. Expanding Agri-Food Production and Employment in the Presence of Climate Policy Constraints: Quantifying the Trade-Off in Ireland

This chapter explores the trade-off between competing objectives of employment creation and climate policy commitments in Irish agriculture. A social accounting matrix (SAM) multiplier model is linked with a partial equilibrium agricultural sector model to simulate the impact of a number of GHG emission reduction scenarios, assuming these are achieved through a constraint on beef production. Limiting the size of the beef sector helps to reduce GHG emissions with a very limited impact on the value of agricultural income at the farm level. However, the SAM multiplier analysis shows that there would be significant employment losses in the wider economy. From a policy perspective, a pragmatic approach to GHG emissions reductions in the agriculture sector, which balances opportunities for economic growth in the sector with opportunities to reduce associated GHG emissions, may be required.
Ana Corina Miller, Trevor Donnellan, Alan Matthews, Kevin Hanrahan, Cathal O’Donoghue

Chapter 13. Development and Application of Economic and Environmental Models of Greenhouse Gas Emissions from Agriculture: Some Difficult Choices for Policy Makers

This chapter describes how economic models designed to examine agricultural policy can be adapted to explore environmental applications such as the greenhouse gas (GHG) emissions from agriculture to a 2050 time horizon. The tensions between environmental policy aimed at reducing GHG emissions, and policies promoting agricultural production to increase food security are explored. Ireland is a major net exporter of beef and milk products, with agriculture representing a high share of non-Emissions Trading Scheme (non-ETS) GHG emissions. Ireland is used to illustrate an issue which has wide-scale global implications. The feasibility of achieving emission reductions is examined in the absence of technical abatement measures. Instead, to reduce emissions the size of the suckler herd is limited. However, it is found that even eliminating the suckler herd would leave emissions well short of achieving a 20 % reduction target. Even a 10 % GHG emissions reduction, while possible under this approach, is likely to be politically unfeasible. The tension between environmental and food security is likely to be replicated at a global level, given the significant contribution of agricultural production to anthropogenic climate change. The chapter highlights the importance of detailed modelling of future emissions in advance of setting feasible emissions reduction targets.
Trevor Donnellan, Kevin Hanrahan, James P. Breen

Regulatory Changes and Management of Emissions


Chapter 14. Economic Incentives and Alternative Nitrogen Regulation Schemes: A Spatial Sector Economic Modelling Approach

The objective of this chapter is to investigate economic incentives associated with changes in nitrogen regulation, including the distribution between farm types and geographically. The analysis is carried out on a partial equilibrium simulation model of the Danish agricultural sector—ESMERALDA. The model is based on farm-level production and economic data for all Danish farms, which allow the analysis of spatial aspects related to the alternative regulations, in terms of environmental (in terms of nitrogen use) and economic effects. Results of the model analyses suggest that replacing the current flat-rate quota on nitrogen input on all farms with a more differentiated quota on nitrogen leaching will in particular be binding for crop and pig farms in environmentally sensitive areas.
Jørgen D. Jensen, Jens E. Ørum

Chapter 15. Conservation Agriculture as a Driving Force to Accumulate Carbon in Soils: An Analysis of RDP in Lombardy

Carbon Dioxide (CO2) emission credits and C-sequestration are measures that are largely applied to limit the rising concentration of CO2 in the Earth’s atmosphere. In this context an increasing role is played by conservation agriculture (CA). This chapter aims to present the policies pursued in Lombardy and to calculate, with the soil CN-cycle model ARMOSA, the potential of C-storage in soils with the adoption of CA measures for 20 years. The analysis is performed on 600 farms (24,550 ha), and it is implemented here taking into account the economic incentive provided by the 2007–2013 Rural Development Program (RDP) of Lombardy. The results show that C-accumulation in soils by CA can contribute to achieve Kyoto targets, but it needs a significant economic effort. Suggestions for policy-makers are here briefly outlined in relation to similar policies applied at the international level.
Stefano Corsi, Stefano Pareglio, Marco Acutis, Andrea Tosini, Alessia Perego, Andrea Giussani

Assessing Differences in Policy Implementation Across Countries and Sectors


Chapter 16. Cross-Atlantic Differences in Biotechnology and GMOs: A Media Content Analysis

Different regulations about the permission and approval rate of biotechnology and genetically modified organisms (GMOs) between the USA and Europe have been controversial for decades. While there is a wide scientific coverage of what may be the cause of this divergence, little is known about the role that popular media play in the related political discourse. We analyzed the media coverage of biotechnology topics in both the USA and UK from 2011-2013 by examining two opinion-leading newspapers. We test the hypothesis that the respective media content reflects differences in transatlantic policies towards biotechnology. The two newspapers differed in reporting intensity but were alike in their content about GMOs: with the central actors being scientists and NGOs, arguing mostly in the field of the agricultural sector, the debate seems to be locked in a stalemate of potential risks re-iterated against potential benefits, with none of the two positions clearly dominating the discourse.
Lena Galata, Kostas Karantininis, Sebastian Hess

Chapter 17. Examining the Evolution of Agricultural Production of Three SAARC Countries: Bangladesh, India, and Pakistan

This chapter examines the issue of trends, cycles, and irregular components in the per capita agricultural production of three countries—Bangladesh, India and Pakistan—which are members of the South Asian Association for Regional Cooperation (SAARC). SAARC countries constitute about 23 % of the world population, and have 15 % of the world’s arable land. The selection of the aforementioned countries is based on their agricultural economic importance to the region, as they possess about 80 % of the agricultural economy. This chapter uses the unobserved components model to decompose the per capita agricultural production of each country, and investigates the relationship of each component among these countries. The time period for the study is 1961–2010, and the FAO’s statistical dataset is used. The smooth trend plus stochastic cycle methodology of Koopman et al. (2009) is used to estimate the model by maximum likelihood. Primarily, the residual diagnostics will validate the model with good fit. Diagnostics of normality, auxiliary, prediction, and forecast also show that there is no deficiency in the model. Empirical results clearly demonstrated that India is positively correlated with Bangladesh in irregular components, but moderately correlated with Pakistan in growth. Finally, there is an evidence of a stronger correlation between the three countries in short cycles than in long cycles.
Anthony N. Rezitis, Shaikh Mostak Ahammad

Chapter 18. Assessing the Evolution of Technical Efficiency of Agriculture in EU Countries: Is There a Role for the Agenda 2000?

One of the major goals of the Agenda 2000 for EU agriculture was to increase its market orientation and improve the competitiveness level of the primary sector of member states. In order to evaluate if this goal has been reached, both Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA) models have been applied. This research focuses on the 2003–2011 period. Inputs include agricultural land, labour and fixed capital consumption, and output is the total agricultural output of each country. Both models prove that there is an increasing trend on mean efficiency levels of the primary sector of member states of the EU. The application of the Mann-Whitney U-test prove that eastern European countries, which recently became EU members, are significantly less efficient, compared with the older member states. This finding applies for both efficiency measurement methodologies, strengthening in this way the validity of the results.
G. Vlontzos, S. Niavis

Chapter 19. Agriculture Commodity Prices Forecasting Using a Fuzzy Inference System

The objective of this chapter is to present a forecasting model of agricultural commodity prices using a Fuzzy Inference System. Recent studies have addressed the problem of commodity prices forecasting using different methods including artificial neural network and conventional model-based approaches. In this chapter, we proposed the use of a hybrid intelligent system called the Adaptive Neuro Fuzzy Inference System (ANFIS) to forecast agri-commodity prices. In ANFIS, both the learning capabilities of a neural network and reasoning capabilities of fuzzy logic are combined in order to provide enhanced forecasting capabilities compared to using a single methodology alone. Point accuracy of four agri-commodity prices (wheat, sugar, coffee, and cocoa) is appraised by computing root-mean-squared forecast errors and other well-known error measures. In terms of forecasting performance, it is clear from the empirical evidence that the ANFIS model outperforms over a feedforward neural network and two other conventional models (AR and ARMA).
George S. Atsalakis

Greening Criteria for Agricultural and Rural Policy Management


Chapter 20. Assessment of CAP Reform 2014–2020 in the Emilia-Romagna Region

The aim of this contribution is to evaluate the impacts of the European Commission proposals on rural areas of the Emilia-Romagna Region in Italy. The model considers the three main characteristics of the CAP 2014–2020 reform, and in particular measures the impact of greening criteria on land allocation in different farm systems and economic effects on rural areas. It will show which rural systems and types of farm will be favored or penalized by the reform. The model will also provide results on dynamics in land use. The assessment is made using an “integrated” regional model based on Positive Mathematical Programming (PMP).
R. Gigante, F. Arfini, M. Donati

Chapter 21. Measuring Biodiversity of Cropping Structure with the Use of FADN Data

Greening of the Common Agricultural Policy as proposed by the European Commission for the 2014–2020, CAP reform raised interest in measuring crop diversity. Based on a sample of the 12,258 farms recorded in the Polish 2009 FADN (FADN—Farm Accountancy Data Network—an instrument for evaluating the income of agricultural holdings and the impacts of the Common Agricultural Policy. For details see http://​ec.​europa.​eu/​agriculture/​rica/​ (FADN 2013)), the authors verify the suitability of the most popular biodiversity indices for measuring the level of diversification of cropping structure for assessing fulfillment of CAP greening criteria. None of the most known biodiversity indicators provided a possibility of a proper delimiting of “green” farms based on FADN data. Modification of the Simpson index was proposed to allow proper distinguishing of “not-green” farms within FADN records. Using biodiversity indices for measuring crop diversification on large areas is related to spatial aggregation. Different indices have been calculated for Polish NUTS 2 (Nomenclature of Units for Territorial Statistics—geocode standard for referencing the subdivisions of countries for statistical purposes. The standard is developed and regulated by the European Union, and thus only covers the member states of the EU in detail. Poland consists of 16 NUTS 2 regions called voivodeships.) regions, based on FADN single-farm records as well as official statistical data on cropping structure for NUTS 2 regions. Results show that there is a very small correlation between regional indices calculated based on aggregated crop structure data and the share of “not-green” farm area in the regions. This suggests that biodiversity indices calculated using regional data are strongly biased and should not be used for verification of fulfilling the EC crop diversification criteria.
Adam Was, Paweł Kobus

Chapter 22. Economic Efficiency of Production Systems in the Gharb Irrigated Area (Morocco) Affected by Access to Water Resources

The aim of this work is to calculate and compare the economic efficiency indices of irrigated farms and the level of optimisation of irrigation water used for the main crops of the Gharb area. To this end, a Data Envelopment Analysis (DEA) model was used to calculate efficiency indices. The survey covered 49 farms with different crop systems (vegetables, citrus crops, cereals, forage, sugar beet and sugar cane) and different irrigation systems (drip, sprinkler and gravity-fed). The results show that the most efficient farms are both those affected by water stress and those with “unlimited” access to water resources (private pumping). On the other hand, 73 % of the farms are inefficient, indicating that the majority of farmers do not have a good grasp of the available technology.
R. Harbouze, Ph. Le Grusse, A. Bouaziz, J. C. Mailhol, P. Ruelle, M. Raki
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