The simulation is conducted to estimate the impact of a single farm payment (SFP) on farm risk management strategies and welfare under uncertainty in the UK (Table 2.1). A level of GBP 199 per hectare is chosen for the payment based on the average per hectare receipt of SFP in UK cereal farms in 2007. However, the expenditure for direct payments does not necessarily result in equivalent increase in farm income. According to the previous estimation in OECD (2003), the impacts of single farm payment on the mean income (transfer efficiency) are assumed to be 50% of the simulated impacts.7 The simulation result shows that certainty equivalent income increases slightly more than the increase in mean income, and the coefficient of variation of income falls by 19%.