Tsion Taye Assefa

Supporting insurance in European agriculture; experience of mutuals in the Netherlands

The Common Agricultural Policy currently allows the support of agricultural insurance, with a particular focus on mutuals. This article analyses the experience of mutuals in the Netherlands over the past 20 years. A total of nine mutuals are reviewed, some operating on a purely private basis, others receiving some form of public support. Results illustrate that mutuals are well equipped to insure risks that are uninsurable in the commercial market. This is especially true for animal and crop disease risks. Mutuals are furthermore able to fulfil the EU conditions for receiving premium support hence opening up the opportunity for farmers to insure against multi-peril weather risks. Experience has however demonstrated that mutuals are not always successful, even with substantial public support. Lack of members caused several mutuals to be discontinued only a few years after their foundation. In order to secure the benefits of mutuals, it is shown that there is a need to carefully balance size of risk, affordability of premiums, financial robustness and solidarity. These issues are even more important in the case of mutuals providing income stabilisation tools as these have the added responsibility of data and (classified) market information management.

Price and Volatility Transmission and Market Power in the German Fresh Pork Supply Chain

We investigate the relationship between the transmission of price volatility and market power in the German fresh pork supply chain. We use a theoretical model underpinning this relationship followed by an empirical application that uses monthly farm, slaughterhouse and retail pork price data for the period 2000–2011. We examine both the relationships of market power with price level transmission and price volatility transmission in the chain. We use a vector error correction model and least squares regressions to analyse price transmission and price volatility transmissions, respectively. Results show that retail market power limited both types of transmissions. Competition inducing policy measures coupled with measures that support price risk management initiatives of chain actors are suggested.