Joint production under uncertainty and multifunctionality of agriculture: policy considerations and applied analysis

The impact of various policy instruments on the production of environmental goods that are complementary to or competing with agricultural commodities is analysed in the light of the uncertainty in output prices and farmers' risk aversion. Some theoretical assessments are first summarised and then tested on a case study concerning beef and grassland biodiversity production in Monts du Cantal, France. The results of simulations carried out by mathematical programming farm-level models show that joint commodity and non-commodity production is nearly independent of the degree of farmers' risk aversion, and that commodity-linked policy instruments are not suitable for the production of environmental goods even under uncertainty. Copyright 2005, Oxford University Press.