Sharing risks in agriculture; principles and empirical results

AbstractThe risk environment of farmers is changing. For example, price and production risks are increasing and governments increasingly encourage agriculture to find private market solutions for catastrophic risks like floods and epidemic diseases. We studied risk management strategies like insurance — in which risks are shared with others - to find out whether such strategies provide opportunities for farmers to deal with the new risks with which agriculture is confronted. We concluded, on both theoretical and empirical grounds, that risk-sharing strategies do provide such opportunities. From a theoretical perspective, because risk-sharing tools are in principle advantageous to both individual farmers and society as a whole, and from an empirical perspective, because farmers already perceive risk-sharing, especially insurance, as an important strategy to manage risks. The empirical results are based on a questionnaire survey among Dutch livestock farmers. Areas are identified for further research, amongst other things, with respect to risk-sharing strategies for price risks and epidemic livestock disease risks