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: