The Italian food-farming sector is one of the most highly regarded worldwide for the quality of its products and, not surprisingly, it is one of the pillars of ‘Made in Italy’, together with fashion and motor vehicles.
According to the latest research from the Italian National Institute of Statistics, in 2020 the level of Italian food-farming exports reached a record high, valued at €46.1bn despite the impact of the pandemic on production, distribution and demand levels across Europe and worldwide.
Food, beverage and tobacco represent €39.1bn of the total (+1.9% compared to 2019), while agriculture, forestry and fishing products amount to €6.9bn (+0.7%).
On the whole, the sector accounts for more than 10% of global Italian exports, which totalled €433.5bn in 2020. The food-farming export business has been one of the few sectors showing growth during the tough times experienced by all other sectors struggling to cope with the pandemic. In 2020, there was a drop of -9.7% in total exports.
Just like raw materials or finished goods, Italian agricultural products are also propelled abroad by Italian cuisine, which ranks second in terms of global presence after Chinese food, with a 13% market share.
The good news for Italy is that the outlook points to further growth. This is fostered, on the one hand, by the reputation of quality and safety of Italian products, and, on the other, by the enlargement of consumption in some fields. For instance, the global wine market, in which Italy is one of the leading players, is expected to flow upwards of €423bn by the end of 2023.
Nevertheless, the trend of agricultural production is one of the least predictable in terms of quantity and quality since it is subject, by definition, to the whims of nature.
Frost, hail, heavy rainfall, as well as drought periods, are serious hazards for the agricultural production and food-farming market. Other major risks include possible insect outbreaks, plant and animal diseases, and blazes caused by excessive dryness.
It is clear that climate change also constitutes a high risk for operators in agriculture and in connected trade and production fields.
Agricultural enterprises have learnt how to address the risks with various prevention initiatives, ranging from methods to safeguard plantations from frost or hail, to the use of chemical products or natural techniques to prevent plant and animal diseases.
There also remains the issue of risk transfer.
Italy has a system of public aid – based on state and European Union funding – that supports the use of subsidised insurance policies (collective or individual), coupled with mutual funds and also emerging innovative types of coverage such as revenue loss and index-based policies.
Insurance policies are available offering cover against damage to agricultural production caused by the vagaries of the weather, including ‘frequent’ adverse conditions such as hail, excessive rain, snowfall or strong winds, as well as against catastrophic natural events such as frost, drought or flood.
Although the Italian insurance market has been constantly growing, one of the features it needs to rectify is territorial concentration.
Based on the recent Report on Risk Management in Agriculture 2021, carried out by the Rome-based Istituto di Servizi per il Mercato Agricolo Alimentare (Institute of Services for the Agricultural Food Market, or Ismea) in association with the Ministry of Agriculture, Food and Forestry Policies, the regions of northern Italy – Veneto, Emilia-Romagna and Lombardy – have 79.5% of overall national insurance policies on plant crops.
However, in 2020, the market in the northern regions registered a slight drop, while the south and the islands showed progressive growth, from a 10.6% market share in 2019 to more than 11.2% in 2020. Central Italy remained unchanged at 9.3%.
The insurance sector in 2020 registered steady performance in the agricultural subsidised policies market, with values of more than €6.1bn relating to plant crops alone, representing 72% of the total. According to Ismea, also adding livestock policies and those against damage to company property, the figure tops €8.5bn (+0.4% compared to 2019).
The evolution of insurance costs in 2020 has confirmed the upward trend of recent years. Premiums for plant crops have reached their highest level ever (€557.8bn), an 11% rise compared with 2019.
The most insured product is wine grapes, with a total of €1.97bn and a 0.5% growth over 2019. Significant figures can be also found for apples (€672bn) and rice (€430bn), followed by corn grain and industrial tomatoes.
In this context, there is a growing interest in parametric policies, which provide agricultural producers with a higher level of certainty compared with traditional insurance coverage because they are index-linked and losses are therefore much easier to settle.
Furthermore, parametric policies may be used to guard against the risk of climate change, which in recent years has been modifying historical patterns. Such policies in the agricultural field also allow risk managers in the sector to shield themselves both from adverse weather events and from a negative trend in yields, which can be caused by a variety of factors.
Agricultural risk and insurance management experts agree that this evolving system of risk transfer may increase the level of protection enjoyed by agricultural enterprises and provide the necessary safety net to support further growth of the important agricultural market.