Simulation of a mutual fund to stabilise the income of farms belonging to a dairy cooperative

Abstract

In the last years, the high volatility of the dairy market has exposed farmers to a strong income risk, which is expected to increase. In this context, with the reg. (EU) 1305/2013, European Union tried to encourage the adoption of risk management tools such as insurance, mutual funds and the Income Stabilisation Tool (IST). The IST is a mutual fund that compensates farmers for severe income losses, but nowadays it is still very little applied. The reform of reg. (EU) 1305/2013 by the so-called Omnibus Regulation, introduced relevant innovation allowing for sector-specific IST, a reduced threshold (20%) and the use of indexes. The simulation of a sector-specific IST under Omnibus Regulation is performed on 167 farms belonging to a dairy cooperative in Veneto Region (Italy).