Evaluation of Economic Diversification and Risk on Farms in Bulgaria

Abstract

Risk management in agriculture is particularly important in a deep crisis. Lack of risk management has a direct negative impact on the income of farmers and market stability in the sector. Diversification of production in many cases it may be a good strategy to reduce risk and sometimes replace the need for insurance. The article looks at the main types of diversification has clarified the nature of economic risk is considered in two stages, and analyzes some results of a survey within the project “Risk Management”, developed at the Institute of Agricultural Economics. One of the objects of scientific research is horizontal diversification, which involves expansion of the production of additional types of crops and livestock to include in the production of more profitable products. The purpose of this paper is to assess the degree of diversification of farms in Bulgaria, to determine the level and impact of the Common Agricultural Policy (CAP) on the economic risks and the strength of the relationship between the levels of production diversity and economic risk. Given that in the scheme of measuring farm income is included in the current CAP subsidies, in the article it is seen as a mandatory element of the risk management at farm level. The article presents the main conclusions of the analysis. First in the agriculture is dominated by farms without any degree of diversification. Second, low manufacturing a variety of farms determines the lack of correlation between the degree of diversification and the level of economic risk. The impact of CAP subsidies is more pronounced in mixed farms. To address the economic risk a greater chance of having specialized farms compared to those that are characteristic of low diversification of agricultural activities.