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

premium. Model results of the Portuguese government’s proposal are presented in Table
4.2, which shows that the farms 4 and 5 have different results when the partial decoupling
of income payments from agricultural production is introduced. Crop production reduces
and pastures areas and sheep production increase for those farms. The decoupling of
income payments of 50% has positive effect in the maintenance of the number of cow’s
heads and increases sheep herds as the Portuguese Government intended. Model results
agree to the Portuguese Government's proposal .

The analysis of the introduction of the area-yield crop insurance program in the Alentejo
dryland region, together with other issues of the mid-term review of the Common
Agricultural Policy, seems interesting because it allows the Alentejo farmers to have an
alternative for making face to the agricultural production variability. Some farmers don't
produce in soils of medium quality or lower, if some subsidies for cereals linked to
agricultural production don't continue to be paid. However, this insurance program can
constitute a form of motivating the agricultural production in those soils. The impact of
the introduction of the insurance program with the full decoupling of income payment
from agricultural production in the Alentejo dryland region is presented in the table 4.3.
These results include the maximum values that the farmers are willing to pay for the
premium rate.

The value of the selected agricultural activities is very similar to the results obtained
without insurance, except for farm 1 that increases the pastures areas and substitute oats
production for barley production. The farms 6 and 7 don't sign the insurance program and
the farm 9 starts to sow barley in the low productivity soils.

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