Exploring Farm Investment Behaviour in Transition: The Case of Russian Agriculture

This paper analyses the investment behaviour of Russian farms during the period of economic stabilisation that followed Russia’s financial crisis of 1998, and is the first to apply the error‐correction investment model to describe farms’ investment behaviour in the transitional context. Additionally, the paper employs the error‐correction and the adjustment‐cost model to test for differences in the investment behaviour between various farm categories. The results show that in general Russian farms exhibited an error‐correcting behaviour in the period under investigation. From 1999 to 2005 the output–capital gap was closed by an average rate of 10% per year. Estimates of the adjustment‐cost model show that Russian farm investments are very sensitive to the sales–capital ratio, suggesting that Russian farms exhibit increasing returns to scale and positive expectations about future revenues. Yet, such farm characteristics as ownership structure, access to input markets and also regional specifics were found to be decisive for farm investment not only in the short but long term too. Finally, the results show that the adjustment‐cost model is adequate for the evaluation of differences in short‐term investment behaviour, whereas it is noticeably less powerful for investigating differences in the farms’ long‐term investment behaviour.     

On the nature and magnitude of cost economies in hog production

In this article, we assess the impact of farm size on production cost and evaluate the marginal costs and margins by considering that input prices may change with the scale of production. By using French hog farm data, we estimate a system of equations including a feed price function, input demand functions, and an output supply function based on a technology approximated by a combined generalized Leontief‐Quadratic form. Our results suggest that the marginal costs are over‐estimated when the adjustment of the feed unit prices to a change in farm size is not controlled for. More specifically, the cost economies for large farms (enjoying the highest profits) arise primarily from lower feed prices, with technological scale economies having little impact. In contrast, farms with no hired labor exhibit technological scale economies and reach higher price‐cost margins compared to larger farms.     

Hog Industry Structure and the Stringency of Environmental Regulation

The paper develops a comparative statics model of long‐run industry equilibrium in the presence of size‐based environmental regulation stringency and applies the model to the U.S. hog industry. The economic model shows that when size‐based environmental stringency is also size biased, large farms downsize, expand, or do neither depending on how environmental stringency shifts their marginal production cost relative to their average cost. Empirical testing using data from the top‐ten hog‐producing states suggests that environmental regulation stringency has limited impact on small farms and leads to a reduction in the number of large farms. Results cannot reject positive size bias at the farm level due to the stringency of environmental regulation.     

Is there a future for small farms in developed countries? Evidence from the French case

This research aims to identify the specific characteristics of small farms in developed countries and the factors that influence their survival and growth. Using the case of France, we employ statistical and econometric analysis of data from the Farm Structure Survey (N = 70,000) for the period 2000–2007. The principal findings suggest that small farms are no more likely than other farms to employ “alternative” strategies to the predominant model of increasing farm size, nor are they more likely to diversify on‐farm activities or operate under quality‐labeled production systems, with the notable exception of organic agriculture. However, where small farms do adopt or practice these activities, they are seen to have a favorable effect in ensuring their survival and growth. In contrast, we are unable to conclude that pluriactivity of farm households has a positive impact on the survival of small enterprises. The effect of geographical location on small farms is largely expressed in their concentration in mountainous or disadvantaged regions. Overall, the trajectory of small farms is marked by farm exit, principally as the result of farmers retiring at the end of their careers. The small farm sector is also revitalized by both larger farms declining and thus being reclassified as small farms, as well as the progressive entry into agriculture of small farm holders whose income was previously derived largely off‐farm.     

Farm diversification strategies in northwestern Spain: Factors affecting transitional pathways

The present paper identifies strategies that farmers have undertaken in northwestern Spain, an area characterized by late structural adjustment. For this study, a survey of over 559 farms has been conducted in four areas representative of different specializations and rural situations, from marginal to productive intensification. Farms have been categorized according to social and productive characteristics through a multivariable analysis. Four basic behaviors have been identified and connected with farm types and rural areas using a multiple correspondence analysis. These basic strategies were defined depending on whether investments have been made on farms to increase or intensify production and whether new on- or off-farm diversification activities have been introduced. This analysis allows us to assess transitional pathways for the future and to assume some consequences of farm behavior in connection with structural adjustments. Thus far, empirical evidence shows that the nature and main drivers of the diversification process are different from those in northern European areas. At the same time, a significant level of farm abandonment is registered.     

The impact of decoupled subsidies on productivity in agriculture: a cross‐country analysis using microdata

The decoupling of direct payments from production introduced in the reform of the Common Agricultural Policy is expected to make production decisions more market‐oriented and farmers more productive. However, ex‐post analyses of the productivity of farms have yet to uncover any evidence of a positive impact of the decoupling policy on farm productivity. Using Irish, Danish, and Dutch farm‐level data, we identify whether the decoupling policy has contributed to productivity growth in agriculture and farm product adjustment behavior. We find some evidence that the decoupling policy had significant positive effects on farm productivity and behavioral changes related to farm specialization.     

Specialization,diversification, and productivity: a panel data analysis of rice farms in Korea

This article examines the microeconomics of productivity associated with specialization/diversification in production activities, with an application to Korean rice farms. Korean rice farms tend to be very small and highly specialized. Our analysis examines the productivity effects associated with both farm size and farm specialization/diversification in Korean agriculture. Relying on farm‐level panel data, the analysis studies farm productivity in a multi‐input multi‐output context, accounting not only for changes in inputs and technical change in rice production, but also for the role of diversification in the production of other crops in current and previous periods. We find positive but small productivity gains from farm diversification. These gains come mostly from complementarity effects across farm outputs, with minimal effect of scale economies. The positive complementarity effects work against nonconvexity effects, which provide strong productivity incentives for rice farms to specialize.     

Determinants and impact of sustainable land management (SLM) investments: A systems evaluation in the Blue Nile Basin,Ethiopia

Ongoing debate over water management along the Blue Nile and land degradation in Ethiopia emphasizes the need for efficiency gains in agricultural production through sustainable land management (SLM). However, previous SLM studies overlook the tradeoffs involved in maintaining SLM investments over time. We address this limitation by combining a household survey that evaluates the economic impacts of SLM investments and maintenance, with a hydrological model that explores location‐specific infrastructure effects. We then use a multi‐market model to evaluate the impacts of alternative SLM investments on agricultural production, prices, and incomes over time. Analysis suggests SLM investments must be maintained for at least seven years to show significant increases in value of production, and that terraces on moderate and steep slopes are most effective in increasing agricultural yields. However, the benefits of terracing do not outweigh the cost of foregone off‐farm labor opportunities, nor compensate for lower agricultural prices from increased supply. Thus, SLM investments must be paired with other input and infrastructure investments, as well as subsidies for initial labor costs, in order to incentivize adoption and long‐term SLM maintenance.     

Analysing Production Technology and Risk in Organic and Conventional Dutch Arable Farming using Panel Data

This paper compares the production technology and production risk of organic and conventional arable farms in the Netherlands. Just–Pope production functions that explicitly account for output variability are estimated using panel data of Dutch organic and conventional farms. Prior investigation of the data indicates that within variation of output is significantly higher for organic farms, indicating that organic farms face more output variation than conventional farms. The estimation results indicate that in both types of farms, unobserved farm‐specific factors like management skills and soil quality are important in explaining output variability and production risk. The results further indicate that land has the highest elasticity of production for both farm types. Labour and other variable inputs have significant production elasticities in the case of conventional farms and other variable inputs in the case of organic farms. Manure and fertilisers are risk‐increasing inputs on organic farms and risk‐reducing inputs on conventional farms. Other variable inputs and labour are risk increasing on both farm types; capital and land are risk‐reducing inputs.     

Heterogeneity of Long‐run Technical Efficiency of German Dairy Farms: A Bayesian Approach*

In parametric efficiency studies, two alternative approaches exist to provide an estimate of the long‐run efficiency of firms: the dynamic stochastic frontier model and the generalised true random‐effects model. We extend the former in order to allow for heterogeneity in the long‐run technical efficiency of firms. This model is based on potential differences in firm‐specific characteristics and in firms’ inefficiency persistence. The model is applied to an unbalanced micro‐panel of German dairy farms over the period 1999 to 2009. Estimation of long‐run technical efficiency and inefficiency persistence is based on an output distance function representation of the production technology and estimated in a Bayesian framework. The results suggest that heterogeneity in long‐run technical efficiency of farms is mostly attributed to discrepancies in farm‐specific factors rather than differences in farms’ inefficiency persistence. Farm size is positively related to long‐run technical efficiency while subsidies exert a negative effect on the long‐run technical efficiency of farms. Inefficiency persistence is found to be very high, but heterogeneity in this persistence is low.     

Incorporating risk in a positive mathematical programming framework: a dual approach

In this study we develop a new methodological proposal to incorporate risk into a farm‐level positive mathematical programming (PMP) model. We estimate simultaneously the farm nonlinear cost function and a farmer‐specific coefficient of absolute risk aversion as well as the resource shadow prices. The model is applied to a sample of representative arable crop farms from the Emilia‐Romagna region in Italy. The estimation results confirm the calibration ability of the model and reveal the values of the individual risk aversion coefficients. We use the model to simulate different scenarios of crop price volatility, in order to explore the potential risk management role of an agri‐environmental scheme.     

Cost-effective nitrogen leaching reduction as influenced by linkages between farm-level decisions

This article focuses on how the linkages between various farm‐level decisions affect the choice of measures to reduce nitrogen leaching from crop production. A mathematical programming model is developed. The model considers not only management decisions that affect nitrogen leaching directly, but also other decision variables such as scheduling of field operations and machinery investments. A simplified analysis that ignores the latter management decisions, and the linkages between the various decisions, may result in abatement policies that are not cost‐effective because the policies will have other effects than expected. As an example, the empirical results show that subsidies to catch crops and spring ploughing may contribute to increased nitrogen load, quite contrary to the purpose of these subsidies. Further, it is noted that the characteristics of the production system make it costly to change land use, tillage practices, or fertilizer use drastically. Instead, cost‐effective nitrogen abatement includes a mix of various adjustments of farm‐level production practices. The EU set‐aside payment appears to reduce abatement costs.     

Brexit: How Will UK Agriculture Fare?

There is little doubt that Brexit would have significant implications for UK agriculture, a sector with strong trade links to the EU and strong reliance on CAP income support. This article reports preliminary results from employing a Computable General Equilibrium Model, a Partial Equilibrium Model and Farm Level Models to explore selected trade and domestic policy scenarios post‐Brexit. These allow for the estimation of changes in producer prices, production and farm incomes against a baseline scenario of continued EU membership. Under a Free Trade Agreement with the EU, agricultural impacts are relatively modest. By contrast, unilateral removal of import tariffs has significant negative impacts on prices, production and incomes. Adoption of the EU's WTO tariff schedule for all imports favours net importers (e.g. dairy) and harms net exporters (e.g. sheep). Given the strong dependence of most UK farms on direct payments, their removal worsens negative impacts of new trade arrangements and offsets positive impacts. Impacts vary across different types and sizes of farm, but also regionally. However, the period of adjustment to new trade and domestic policy conditions may prove very challenging for a large number of farm businesses.     

Determinants of off‐farm work and its effects on farm performance: the case of Norwegian grain farmers

Limited attention has been given in the literature to the impact of off‐farm work on farm performance. More knowledge about the determinants of part‐time farming and its effects on farm performance could help policymakers to introduce better targeted rural development policies. The aim in this article is to fill part of the above‐mentioned gaps by analyzing factors that influence the choices of off‐farm work by either the farmer alone or jointly by both the farmer and partner; and simultaneously examining how off‐farm work influences farm performance. These analyses were based on an unbalanced panel data set from Norwegian grain farms during 1991 to 2005. Among the determinants of off‐farm work hours, we found that, in addition to demographic, time trend, and some regional effects, there was a significant negative effect of farm output on farmers' off‐farm work hours. The production function results revealed that off‐farm work had a positive effect on farm output, at first increasing but then decreasing with increase in hours spent in off‐farm work. Furthermore, our analysis revealed no systematic effect of off‐farm work on farm technical efficiency.     

Patterns in Technical Efficiency and Technical Change at the Farm‐level in England and Wales, 1982–2002

English and Welsh farm‐level survey data are employed to estimate stochastic frontier production functions for eight different farm types (cereal, dairy, sheep, beef, poultry, pigs, general cropping and mixed) for the period 1982 to 2002. Differences in the relative efficiency of farms are explored by the simultaneous estimation of a model of technical inefficiency effects. The analysis shows that, generally, farms of all types are relatively efficient with a large proportion of farms operating close to the production frontier. However, whilst the frontier farms of all types are becoming more efficient through time because of technical change, it is also the case that the efficiency of the average farm for most farm types is increasing at a slower rate. In addition, annual mean levels of efficiency for most farm types have declined between 1982 and 2002. The factors that consistently appear to have a statistically significant effect on differences in efficiency between farms are: farm or herd size, farm debt ratios, farmer age, levels of specialisation and ownership status.     

中国式家庭农场规模效益分类研究

家庭农场是现代农业生产中最有效率的经营模式之一。文章对我国家庭农场概念及现状进行深入分析,并对家庭农场规模的经济效益、成本降低效益以及风险降低效益进行详细分析。该文通过构建规模效益分类模型,运用经济学均衡理论研究影响农场规模的主要因素,应用层次分析方法得到影响规模效益的因素。利用聚类分析方法,对我国农场的规模效益进行分类研究,为我国发展家庭式农场提供参考。     

Driving Forces behind Exiting from Farming in Western Europe

This study examines the exit process of Western European farmers. Using a simple theoretical model of structural change, we examine empirically the impact of farm characteristics, macroeconomic conditions and policy intervention on farm exits during the 1990s. Econometric estimates using regional data for 110 regions in Western Europe indicate that exits from farming are strongly influenced by farm characteristics and policy conditions. In particular, exit rates are higher in regions with smaller farms and are closely related to production structures. Exit rates are lower in regions with more part‐time farming, high subsidy payments and high relative price increases for agricultural outputs, indicating that off‐farm income and government intervention slow down structural change in European agriculture.     

Productivity and farm size in Australian agriculture: reinvestigating the returns to scale

A positive relationship between farm size and farm productivity is often considered to be largely due to increasing returns to scale in farm production. However, using farm‐level data for the Australian broadacre industry, we found that constant or mildly decreasing returns to scale is the more typical scenario. In this study, the marginal returns to various farm inputs are compared across farms with different sizes. We found that large farms achieved higher productivity by changing production technology rather than increasing scale alone. The results highlight the disparity between ‘returns to scale’ and ‘returns to size’ in the industry, suggesting that productivity improvement among smaller farms can be made through increasing their ability to access advanced technologies, rather than simply expanding their scale.     

Are farms in less favored areas less efficient?

This article investigates farm technical efficiency (TE) and the effect of heterogeneity on production among farms using the Slovenian Farm Accountancy Data Network sample of farms in the period 2007–2013. We model production technology with a random parameter model that allows us to examine both the direct effect of heterogeneity on production and the indirect effect through the interaction of unobserved heterogeneity with time and input variables. Additionally, we consider intersectoral heterogeneity among types of farming. Results confirm the importance of all these sources of heterogeneity. The second contribution of the article is that, in addition to using conventional statistical methods, we examine the differences between less favored area (LFA) and non‐LFA farms using matching techniques. Results indicate that there is only a minor and statistically nonsignificant difference in TE between these groups. However, the difference is highly significant in terms of heterogeneity and technology. In other words, results show that farms in LFAs are not more inefficient but rather use different, production–environment‐specific technologies. These findings call attention to the fact that omitting the effect of heterogeneity on production technology leads to biased TE estimates and, in turn, leads to potentially imperfect policy choices.     

Eco‐efficiency of high‐yielding variety rice cultivation after accounting for on‐farm environmental damage as an undesirable output: an empirical analysis from Bangladesh

This study computes the eco‐efficiency of high‐yielding variety (HYV) rice production by including an on‐farm environmental damage index (OFEDI) as an undesirable output using data envelopment analysis. It then identifies its determinants by applying an interval regression procedure on a sample of 317 farmers from north‐western Bangladesh. Results reveal that the mean level of the OFEDI‐adjusted production efficiency (i.e. eco‐efficiency) is 89 per cent, whereas ignoring OFEDI adjustment (i.e. with OFEDI = 0) reduces the mean level of efficiency to 69 per cent, implying that the production of undesirable output or on‐farm environmental damage induces an efficiency loss of 20 per cent with significant differences across regions. The proportion of farmers’ income from HYV rice agriculture, land ownership, extension services and socio‐environmental living standard are the significant determinants of improving eco‐efficiency. Policy implications include investments in extension services and land reform measures to increase land ownership, which will synergistically improve eco‐efficiency of HYV rice production in Bangladesh.