and stochastic programming model, where the set of constraints describes the crop and
livestock farms in their productive, financial, and commercial and taxes components.
Model results show that the full decoupling of income payment from agricultural
production lead to the abandonment of the durum wheat production. The farms without
livestock production have tendency to abandon the agricultural production except for the
good soils. The beef cattle farms keep their production, increasing the level of the animal
feeding due to the increases of the forages and pastures areas. The sheep farms reduce
their herds drastically.
The introduction of 50% of sheep premium, proposed by the Portuguese government,
raises sheep production, accompanied of the increase of the pasture area. These results
permit to conclude that the Portuguese government's proposal is sufficiently cautious
because, on the one hand, when associating to 100% of suckler cow premium allows the
use of the shares negotiated with European Union in 2003 and when associating to 50%
of sheep premium increases sheep production. On the other hand, the Portuguese
government's proposal of crpo subsidies not linked to production forces the farmers to
choose alternative agricultural activities in the bad soils.
Finally, the introduction of the area-yield crop insurance program with the full
decoupling of income payments from agricultural production shows that the selected
agricultural activities by farmers are very identical to the agricultural activities without
the insurance program. The purchasing of the area-yield crop insurance originates an
increase of crop production in the medium soils and an increase in sheep production. This
insurance program has the Alentejo farmers’ preference. The new Agricultural Policy
guarantees a minimum farm income, while the area-yield crop insurance program allows
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