DO DIRECT PAYMENTS AND AGRICULTURAL INSURANCE IMPACT VITICULTURE INCOME?

In the EU 7 million farmers benefit from direct payments. Direct payments represent a significant share of farmers’ income and help stabilize the farm income. Besides direct payments, the farmer can contract agricultural insurance to guarantee compensation for occurred damage on their farm. The insurance premium is a cost for farmers but provides safety in the situation of a risk occurrence. Premium can be subsidized in the frame of Common Agricultural Policy to help farmers insure their business and pre- vent climate risks and damages. The paper aims to determine the importance of direct payments and insurance in stabilizing farmers’ income using gross margin in viticulture. Both scenarios, 1st with direct payments and 2nd without direct payments with sub scenarios – 1st without risk occurrence, 2nd most probable, 3rd probable, and 4th catastrophic were calculated and discussed. Results show that in all shown scenarios/sub scenarios, farm income in viticulture is positive while only catastrophic scenario shows a negative gross margin. The decision tree shows that farmers need to insure their business in both scenarios. Limitations of the research arise from the limited access to data. To the best of our knowledge, there are no studies investigating the importance of direct payments and agricultural insurance in stabilizing the farmers’ income in Croatian agriculture.