Feasibility of the Income Stabilisation Tool in Finland

Whole-farm income insurances are promoted in the new post-2013 Common Agricultural Policy (CAP). The current Crop Damage Compensation (CDC) scheme in Finland covers crop failure for farmers who have suffered losses and applied for the payments. This paper analyses the use of the Income Stabilisation Tool (IST) and compares it to the current CDC scheme in Finland. The Finnish Farm Accountancy Data Network (FADN) is used to simulate the costs of IST compensation payments. Special attention is paid to pig farms and their possibilities to manipulate the IST. Results show that the IST is triggered with a high frequency on Finnish farms. The IST would be more costly than the current CDC programme. The results also suggest that the IST would act as an income transfer policy if farmers could influence their annual income. However, the efficiency of the IST as an income transfer policy is questionable due to its large transaction cost