Factors influencing dairy farmers’ participation in the Income Stabilization Tool: evidence from Northern Italy

Abstract This paper examines the factors influencing dairy farmers’ participation in an Income Stabilization Tool (IST), introduced by two dairy cooperatives in the Lombardy region (Italy). Using a sample representative of dairy cooperative members of the area, our results show that higher perception of input price volatility is significantly associated with a higher probability of IST uptake. Farmers’ prior experience of coupled payments, as well as of mutual funds that compensate for production losses due to adverse climatic events or animal diseases is negatively correlated with their probability of participating in this IST. In addition, farmers who are sole traders or have attained post-secondary education are significantly linked to a lower participation rate in the IST. In contrast, female farmers are more likely to adopt IST. Our results are robust across various model specifications. The findings suggest that the role of risk management tools should be re-evaluated in relation to indirect support measures, such as coupled payments and subsidies, in order to reduce perceived overlap among these tools, improve IST adoption, and enhance overall policy effectiveness. The intensive dairy farming practices in the Lombardy region and its essential role in the Italian dairy sector make our analysis informative for understanding the dynamics of IST adoption in areas of concentrated livestock operations.