Does Chemical Use Mitigate or Exacerbate Production Risk? Evidence From Conventional Maize Farms in Northern Italy

ABSTRACT This paper examines the relationships between chemical use, namely fertilisers and pesticides, and the production risk of conventional maize in Northern Italy. Using data from the Italian Farm Accountancy Data Network for the period 2015–2020, merged with a station‐based weather dataset, we analyse the production risk through moments of farm‐level yield and revenue probability distributions, namely the mean, variance, negative semi‐variance, skewness and lower partial skewness. Our empirical results, which are robust to potential unobserved confounders, show that higher fertiliser application is correlated with a lower downside risk for per‐hectare revenue and higher spending on pesticides is associated with an increase in expected yield. Furthermore, our results also reveal a negative relationship between crop exposure to extreme heat and the variance of per‐hectare revenue. The findings suggest a potential trade‐off in reducing pesticide use to meet the European Union's agricultural sustainability goals, as lower application of pesticides may lower average production.