Organic Production and the Capacity to Respond to Market Signals and Policies: An Empirical Analysis of a Sample of FADN Farms

This paper proposes a method of evaluating the impact of market and rural development policies oriented at stimulating the growth and spread of organic farming in Italy. Methodologically, we integrate positive mathematical programming (PMP) with cluster analysis (CA) to interpret farm dynamics and strategies and assess farm decisions. This provides useful information for interpreting production strategies adopted by homogenous groups of farms. The combination reveals an ex-ante effect of market prices and rural development policies on decisions to invest in organic production. The analysis is applied to sets of farms from the Farm Accountancy Data Network (FADN) from two Italian Regions, Emilia-Romagna and Sicily . The results reveal territorial and typological differentiation between farms moving towards organic production. In Emilia-Romagna, where agriculture is characterized by high specialization and high average revenue per hectare, the shift to organic production is more likely than in Sicily, where only the largest farms might consider the conversion to organic production.