Economic profitability and long-term viability in Italian Agriculture

The EU direct payments system is about to change and Italian agriculture will face a scenario of decreasing aid. The present work is an attempt to estimate the types of farm at risk in such a scenario by analyzing Italian FADN data. We have estimated a profitability index relating real net income to a reference revenue that takes into account the opportunity cost of resources. This has allowed us to highlight situations where farms are unable to remunerate fairly the factors employed and to identify areas of Italian agriculture at risk. By comparing profitability indices with and without public aid and by analyzing demographic factors and production characteristics, it is possible to investigate how EU payments affect the persistence of non-profitable farms.