The Role of area-yield crop insurance program face to the Mid-term Review of Common Agricultural Policy

the largest possible area, because it is the crop activity with the largest subsidy value by
hectare (Table 3.1).

Table 3.1 - Farm Characteristics

Descriptions	Farm 1	Farm Farm Farm Farm		Farm 6	Farm 7	Farm 8	Farm 9
Descriptions	Farm 1	2	3 4 5	Farm 6	Farm 7	Farm 8	Farm 9
			Agricultural Area
Total area	1200	660	180 570 600	200	260	1020	550
Cultivated area	1160	360	150 300 480	200	260	620	550
Pastures areas	40	300	30 270 120	-	-	400	-
Good Soils		60					150
			Livestock Production
Beef cattle	400	150	90			450
Sheep_________			________100 600
			Farm Income
The best	150.0	100.0	40.0 100.0 100.0	30.0	50.0	125.0	60.0
Normal	75.0	50.0	20.0 25.0 15.0	5.0	10.0	75.0	25.0
The worst______	-100.0	-50.0	-20.0 -50.0 -75.0	-25.0	-40.0	-75.0	-35.0
Notes: Areas in hectares, Livestock production in animal units and farm income in thousands of Euros.
Source: Data collected by inquiries.

This paper considers that the calculation of the premium rate is equal to the expected
value of the indemnity insurance. For the calculation of the premium rate, it was
considered the whole Alentejo region as constituting a single area in terms of insurance.
It was considered that the average production is the production of the state of nature 3,
where the level of critical production is of 90% of the average production and the farmers
choose a cover level of 100% (Miranda, 1991).

Table 3.2 - Premium rates and Indemnities

Durhum	Common Wheat	Barley for brewing	Common Barley	Oats Tricale Sunflower
Wheat	Common Wheat	Barley for brewing	Common Barley	Oats Tricale Sunflower
Production - State 1 1050	1250	1250	950	900 ÏÔÔÔ 300
Production - State 2 1050	1250	1250	950	900 1000 600
Average Production 2100	2500	2500	1900	1800 2000 600
Critical Production 1890	2250	2250	1710	1620 1800 540
Indemnified Prod -St 1 840	1000	1000	760	720 800 240
Indemnified Prod -St 2 840	1000	1000	760	720 800_______0
Probability of Loss 0.37333	0.37333	0.37333	0.37333	0.37333 0.37333 0.18667
Premium rate 0.07148	0.08510	0.08510	0.06468	0.06127 0.06808 0.01021
Notes: Production in kilos per hectare and premium rate in thousands of euros per hectare Source: Authors’ calculations

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