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As our principal source of food, fibre & feedstocks, the agricultural sector if of vital importance but it faces increasing challenges. With the current global recesssion, public funding austerity, policies need to use farm real incomes as a key indicator of policy progress. The efficiency and effectuiveness of policies in promoting real incomes growth requires well designed incentive mechanisms.

The European Union is faced with the challenge of using public financial resources more effectively both in the European Union's agricultural sector as well as in its pre-accession programmes and international aid efforts in low income countries which often target agricultural and rural development.

AgroInfoSys is reviewing how advancing information technologies and techniques can contribute to higher performance Agricultural Information Systems to support more effective decision analysis and enhanced performance in the supply chains of the EU and low income regions such as ACP country agricultural sectors.

Because of the specific conditions that face agriculture, and its relative complexity1 the "simple solution" of subsidy payments has encouraged a widespread sense of entitlement by farmers to this source of income. However, government budgets are increasingly stretched and ways to reduce the burden of subsidy are of increasing concern. Improving producer resilience can help improve their wellbeing through improved productivity and real incomes. The alteration of subsidies into a means of encouraging better productivity so as to earn higher income for the farmer can be a basis for providing an incentive for a change in behaviour. In order to bring about this type of change in policy approach the farming community needs to be convinced that actions on their part can result in improved real incomes and family wellbeing. This can only be achieved if the policy planning phase involves the farmers in a participatory basis, preferably through farmer associations or sub-groups who are specialised in types of production.

The direct involvement and sharing of information on benchmarking, for example, can help identify gaps in productivity and the reasons. Performance ranges provide evidence of what is feasible as well as what is required by way of investment as well as changes in technology and/or techniques to secure higher productivity. Where policy objectives fall within the "feasible range" of demonstrable performance and these are used as policy indicators then farmers can respond with some confidence by trting to introduce the necessary changes becasue they understand the direct benefits.

Farmers, worldwide, are as a group, risk-averse and cautious. Quite often farmers will understand the potential benefits of change but don't respond to incentives because of uncertainty of climatic conditions affecting yields and market conditions affecting purchase prices. These risks are real and expecting low income farmers to take risks is unreasonable. Therefore policy-makers would be advised to acknowledge this fact and work out a self-financing compensation package that aims to smooth out incomes over time while yields and market prices vary in accordance with normal variance. This is not the same as a subsidy but acts more as a financial reserve that is replenished in good years and drawn upon in bad years and, if well designed, would be sustainable.

1  The agricultural sector complexity is the result of several structural and natural interactions including:
  • the impact of biolclimate on production creating unertainty of yields and production
  • largely a buyer's market and subject to price instability creating uncertainty as to unit prices, gross margins and net incomes
  • different farm sizes
  • diffferent soil conditions
  • a large range of production options
  • a large range of distances of production units from markets/li>
  • wide range of practice (levels of productivity)

The Decision Analysis Initiative 2010-2015
George Boole Foundation