Measuring progress in agricultural sustainability to support policy-making

The concept of sustainability is one of the forefront issues in discussions of the challenges facing global agriculture, given the mounting pressure to increase food production in both socially responsible and environmentally friendly ways. From the perspective of Irish agriculture, sustainable intensification is of particular relevance, given ambitious targets to increase milk production in the context of European Union (EU) milk quota removal in 2015. A series of farm-level sustainability indicators are developed here using the Teagasc National Farm Survey FADN (Farm Accountancy Data Network) data for Ireland from 2012. Three dimensions, reflecting the multifaceted nature of sustainability (environmental, economic and social) are considered. Given the environmental challenges inherent in the sustainable intensification of agriculture, it is encouraging to observe that the more intensive, top performing farms (in an economic sense) emit relatively less greenhouse gases when compared to their less intensive counterparts. Conversely, the better performing farms in economic terms tend to have a higher nitrogen surplus per hectare on average. This is consistent with their higher rates of production intensity, but poses a challenge in terms of sustainable intensification and expansion. That said this analysis demonstrates that the nitrogen use efficiency of milk production is positively correlated with economic performance, with more intensive farms producing relatively more milk per kilogram of nitrogen surplus. From the perspective of social sustainability, demographic traits also tend to be positively correlated with economic performance. Given a growing recognition of the need for interconnected policy in the area of sustainability, this research should help inform policy debates and provides a guide for the undertaking of similar assessments elsewhere.     

Effects of Geographical Stratification in a Farm Accountancy Data Network on the Accuracy of the Estimates

This study analyses the effects on the accuracy of the estimates produced by an additional stratification of a sample, in this case the sample of the Farm Accountancy Data Network (FADN) of Navarra. This is carried out by studying the accuracy of the total standard gross margin estimator. For the analysis, the variances of the estimator were compared for two samples: one stratified according to type of farming and economic size, and the other with the addition of a geographical stratification. The conclusion of the analysis is that for samples whose size is similar to that of the FADN of Navarra (400 farms), accuracy is not improved by a geographical stratification. This result, a particular case in which stratification does not improve the accuracy of the estimates, may be clarified by the theoretical considerations expounded in this paper.     

Efficiency,total factor productivity and returns to scale in a sustainable perspective: An analysis in the European Union at farm and regional level

For global sustainability it is imperative to find a balance across the three main components of sustainable development which are the economic, social and environmental aspects. However, it is not a simple task to make these contexts compatible, usually because of economic pressures which transform them into opposed objectives. This framework occurs across several dimensions within society and the economy, where the agricultural sector is not an exception. The objective of this study is to analyse the efficiency, total factor productivity and returns to scale in an economic, social and environmental perspective in farms of the European Union (EU) regions through Data Envelopment Analysis (DEA) approaches. The research concerning the returns to scale will be complemented by the Keynesian models. Data obtained from the European Union Farm Accountancy Data Network (FADN) was considered. The results show that in maintaining or improving the levels of production in farms, it is often possible to greatly reduce, in some cases, the consumption of fertilizers and crop protection products. On the other hand, from a social perspective, some European Union regions are more generous in the salaries paid to farming workers and absorb more labour, which in a European context of unemployment, may be an interesting way to realistically look at and be engaged in the agricultural planning in a sustainable way, founding a balanced trade-off among the economic, social and environmental dimensions.     

Geographical downscaling of outputs provided by an economic farm model calibrated at the regional level

There is a strong need for accurate and spatially referenced information regarding policy making and model linkage. This need has been expressed by land users, and policy and decision makers in order to estimate both spatially and locally the impacts of European policy (like the Common Agricultural Policy) and/or global changes on farm-groups. These entities are defined according to variables such as altitude, economic size and type of farming (referring to land uses). European farm-groups are provided through the Farm Accountancy Data Network (FADN) as statistical information delivered at regional level. The aim of the study is to map locally farm-group probabilities within each region. The mapping of the farm-groups is done in two steps: (1) by mapping locally the co-variables associated to the farm-groups, i.e. altitude and land uses; (2) by using regional FADN data as a priori knowledge for transforming land uses and altitude information into farm-groups location probabilities within each region. The downscaling process focuses on the land use mapping since land use data are originally point information located every 18 km. Interpolation of land use data is done at 100 m by using co-variables like land cover, altitude, climate and soil data which are continuous layers usually provided at fine resolution. Once the farm-groups are mapped, European Policy and global changes scenarios are run through an agro-economic model for assessing environmental impacts locally.     

Complying with greening practices in the new CAP direct payments: An application on Italian specialized arable farms

The main novelty of the most recent Common Agricultural Policy reform is the greening, which provides a payment to farmers who respect certain ‘agricultural practices beneficial for the climate and the environment’. The greening is part of a framework that includes other changes to the first pillar.In the present study the possible impact of first pillar reform on a Farm Accountancy Data Network (FADN) sample of Italian farms was carried out using a Positive Mathematical Programming model. This model considers the mechanisms of production choices according to compliance with the greening practices, as well as possible administrative penalties or reductions in payments in the case of non-compliance.Results showed that while the impact of the greening practices is limited in terms of land use, there were positive effects on environmental indicators. Coupled payments, along with greening practices, determine a larger impact and are effective in achieving environmental goals. Moreover, the system for reducing green payments and levying administrative penalties in case of non-compliance is effective and ensures compliance with practices in almost all farms.     

Cap towards 2020 and the cost of political choices: The case of Emilia-romagna region

The paper assesses the different schemes of regionalisation and greening implementation according to both the preliminary proposals presented to the Trilogue and the CAP Reform adopted on 16 December 2013. The objective is to compare the different potential impacts on production (land use) and on the economic revenue of farm holders in the Emilia-Romagna region (Italy). The assessment is performed by a regional positive mathematical programming (PMP) model and is carried out for single farms appearing in the Farm Accountancy Data Network (FADN) data. Sampling weights are used to make the simulation results consistent with the production structure of the region. The findings confirm a big weakening in what would have been the impact of the Commission’s proposal. In terms of lower gross margin incurred by farmers for fulfilling the greening requirements in the final CAP scenario, the model estimates a reduction corresponding to 20 €/ha. The greatest economic effects of the new CAP appear to be mainly due to the redistribution of direct payments.     

Policy drivers of farm succession and inheritance

Farm succession and inheritance is increasingly considered a complex phenomenon which not only affects core dimensions of farm family life but also the agricultural sector more widely. Intergenerational farm transfer in particular is increasingly viewed as fundamental to the sustainability and development of global agriculture. In the majority of EU countries, the average age of farmers is increasing, while the number of farmers under 40 years of age is decreasing. There is growing concern that this demographic trend may have negative impacts on the agricultural industry because it is younger and not older farmers who are associated with more efficient and effective production practices. The question of what motivates decisions to transfer farms is a complex one, and research to date has not apparently enlightened agricultural policy to the extent that current trends towards an ageing farm population are being managed. This research aims to investigate economic and financial aspects of the policy drivers of farm succession and inheritance in Ireland to understand what it is about the policy environment that is failing to stimulate higher levels of farm transfer. It draws on the Teagasc National Farm Survey data which provides Irish data to the Farm Accountancy Data Network in the European Commission. A hypothetical microsimulation model is used to investigate economic factors of farm transfers, with scenarios created to test these factors and their impacts on the transfer process. The Net Present Value (NPV) of income streams for farmers and their successors are calculated to assess which scenarios have the highest/lowest financial effects. The findings illustrate a range of possible scenarios for farm succession/inheritance, with some results indicating that under current policy retaining a farm until death may be more economically beneficial to a farmer than transferring land before death.     

The factors influencing the profitability of leased land on dairy farms in Ireland

The Republic of Ireland possesses a land market that is constrained by minimal sales each year, less than 1%. In an effort to capitalise on milk quota abolition and to increase dairy production, a suite of tax incentives has recently been introduced in the Republic of Ireland to encourage land mobility and long-term leasing among Irish dairy farmers. Using Irish Farm Accountancy Database Network (FADN) data from 2011–2017 to examine this, a Heckman sample selection model explores two aspects; (i) the factors that influence a farmer’s decision to rent, or continue renting, land and (ii) the profitability of dairy farmers renting in land. We find self-selection into the rental market is driven by farm traits that include a high level of hired labour, the presence of a successor, intensive farming practices and dairy discussion group membership. The results show that rental agreements assist farms in achieving economies of scale. The findings provide evidence to support government intervention such as tax incentives for renting out land and knowledge sharing discussion groups.     

Internal and contextual drivers of dairy restructuring: evidence from French mountainous areas and post‐quota prospects

The end of the milk quota system in Europe has resulted in substantial structural changes to the dairy industry, calling its future into question, especially in mountainous areas. This study analyzes the internal and contextual factors that influence dairy restructuring in French mountainous areas. Three complementary logit models are used to specify farmer decisions (e.g., dairy production exit, stability, and growth). Original and exhaustive geo‐located administrative datasets are combined to create a farm longitudinal dataset and characterize farm‐restructuring patterns on a fine geographical scale. Farm size, corporate legal status, and specialization are positively associated with farm growth. Viable diversification strategies through either farm processing or agro‐environmental scheme contracting are also highlighted. Farm sustainability is supported by the economic success of the local industry and the propensity to adopt extensive practices. With respect to public policy, dairy policy appears to have the strongest impact. Thus, the liberalization of dairy policy threatens the future of dairy farming, particularly in areas with low milk density and no production under labels. This work calls for a policy that promotes the collective dimension of dairy farm performance. The current rural development policy alone may be insufficient to support farms’ long‐term sustainability.     

A nonparametric analysis of the determinants of family farm efficiency dynamics in Lithuania

This article presents insights into the efficiency of Lithuanian family farms. The research covers the years 2004–2009 and is based on farm‐level Farm Accountancy Data Network data. Bootstrapped data envelopment analysis was employed to obtain efficiency scores, whereas stochastic kernels and multivariate methods, viz. fuzzy clustering and nonparametric regression, were utilized to assess the impact of selected determinants on efficiency. Clustering analysis indicated that the efficiency change paths specific for the analyzed sample differed in both their average levels and ranges. Furthermore, it was concluded that Lithuanian agricultural policy should focus on increasing the efficiency of crop farms. Cluster analysis suggested that production subsidies might be having a negative effect on efficiency.     

Effects of management information from FADN on profitability of Dutch potted-plant firms

The Dutch Farm Accountancy Data Network (FADN) provides managerial reports to participants of the network. This article analyzes the impact of this type of management information on the profitability of agricultural producers. A dual system of input demand and output supply equations is applied to measure the effect of management information. The approach is applied to a panel data set of Dutch potted‐plant firms over the period of 1975–1995. Management information provided by the FADN resulted in savings in materials and services and a more intensive use of energy. Shadow prices of structure, machinery, and labor increased as a result of management information. The results show that management information is more likely to have a positive effect on profitability of potted‐plant firms in the long run than in the short run. The results suggest that the availability of management information allows firms to operate on a larger scale in the long run.     

Catching Up or Falling Behind in European Agriculture: The Case of Milk Production

The paper explores and analyses the catching up and falling behind processes in the European dairy sector over the period 2004–2011, using a stochastic metafrontier multiple output distance function for 24 EU Member States. The metafrontier estimates reveal considerable productivity differences in milk production across the EU at the regional (NUTS‐2) level. Milk yield per cow is the highest in the old Member States, especially in those regions located in the northwest of the EU, while the lowest productivity is observed in Eastern Europe. The same structure was found for both the TFP (Total Factor Productivity) levels and TFP growth. Moreover, the results for technical change suggest that farm sizes are not optimal in many regions in Central and Eastern Europe from a dynamic perspective. The comparative analysis suggests that in the new compared to the old Member States, fewer farms could benefit from the movement of the frontier. Moreover, there are no signs that poorly performing farms are catching up with the best performing farms in the EU regions/countries.     

Point De Vue Fadn: Buttress for Farm Policy or a Resource for Economic Analysis?

FADN: Buttress for Farm Policy or a Resource for Economic Analysis? We argue that the Farm Accountancy Data Network (FADN) is capable of much more than it currently achieves and that it has been greatly under‐utilised for policy analysis by economic researchers. We illustrate graphically some of the wider possibilities offered by FADN beyond its traditional role as a buttress for farm policy Farm incomes differ enormously between farms and differences within a member state are often more important than differences between member states. The dataset allows us to make differences explicit. It is possible to analyse the composition of farm incomes, for example the significance of subsidies amongst different farm types and farming systems. Some national FADN datasets also permit classification of farm households according to the relative importance of farm and non‐farm incomes and allow us to examine the impact of income composition on, for example, investment behaviour, FADN data can be used for ex‐ante as well as ex‐post policy evaluations and we illustrate with an example of the impact of different models for implementing the Single Farm Payment in Germany. We believe that certain enhancements to the dataset are possible to improve further its potential for research support, for example by including more non‐agricultural income sources in the European FADN. Le RICA:instrument d'appui à la politique agricole, ou ressource pour l'analyse économique? Le réseau d'informations comptables agricoles (RICA) dispose d'un potentiel très supérieur à son usage actuel et il est fortement sous‐utilisé par les chercheurs qui s'intéressent à l'analyse économique des politiques agricoles. On illustre ici, à l' aide de quelques graphiques, quelques‐unes des possibilityés d'élargissement de l'usage du RICAau‐delà de son rôle habituel d'appui à la politique agricole. Les revenus agricoles different fortement d'une exploitation à l'autre et les disparités intra‐Etats membres sont souvent plus importantes que les disparités inter‐Etat Le RICA permet de visualiser ces différences. Il est possible d'analyser la formation du revenu agricole, par exemple le rôle des subventions d'un système de production ou d'un type d'exploitation à l'autre. Pour certains pays, il est possible de trier les ménages agricoles en fonction de l'importance de leurs revenus non agricoles, ce qui permet par exemple l'étude des relations entre revenus extérieurs et investissements. Les données du RICA peuvent être utilisées ex ante pour prévoir les conséquences d'une mesure politique ou ex post pour en évaluer les effets. Ce point est illustré par un exemple qui consiste àétudier l'impact des effets du ‘paiement unique’ sur différentes exploitations types en Allemagne. Il devrait être possible d'ajouter des améliorations supplémentaires au stock de données existantes pour le rendre encore plus utile à la recherche, en particulier en incluant systématiquement les relevés de revenus non agricoles dans le RICA européen. INLB: Stützpfeiler der Landwirtschaftspolitik oder Ressource für wirtschaftliche Analysen? Wir vertreten den Standpunkt, dass das Informationsnetz landwirtschaftlicher Buchführungen (INLB) weit mehr als zur Zeit zu leisten vermag und dass Wirtschaftsforseher es für Politikanalysen nur unzureichend genutzt haben. Wir erläutern mit Hilfe von Grafiken einige der weiteren Möglichkeiten von INLB, die über die traditionelle Rolle als Stützpfeiler der Landwirtschaftspolitik hinaus gehen. Die landwirtschaftlichen Einkomrnen variieren sehr von Betrieb zu Betrieb, und Unterschiede innerhalb eines Mitgliedstaates sind oftmals von größerer Bedeutung als Unterschiede zwischen den Mitgliedstaaten. Der Datensatz ermöglicht es uns, diese Unterschiede zu verdeutlichen. Es ist möglich, die Zusammensetzung der landwirtschaftlichen Einkomrnen zu analysieren, beispielsweise die Bedeutsamkeit von Subventionen zwischen verschiedenen Betriebstypen und ‐systemen. Einige nationale INLB‐Datensätze ermöglichen es uns zudem, landwirtschaftliche Haushalte gemäß der relativen Bedeutung von landwirtschaftlichen und außerlandwirtschaftlichen Einkomrnen zu klassifizieren, und die Auswirkungen der Zusammensetzung der Einkomrnen beispielsweise auf das Investitionsverhalten zu untersuchen. Die INLB‐Datensätze können sowohl ex‐ante als auch ex‐post für Politikbewertungen herangezogen werden, und dies erläutern wir anhand des Beispiels, welches die Auswirkungen verschiedener Alternativen bei der Umsetzung der einheitlichen Betriebsprämie in Deutschland darstellt. Wir sind der Auffassung, dass bestimmte Verbesserungen am Datensatz möglich sind, um das Potenzial des INLB zur Unterstützung von Forschungsarbeiten weiterzu verbessern, beispielsweise durch die Aufnahme weiterer außerlandwirtschaftlicher Einkommensquellen in das europäische INLB.     

EU Policies on Bioenergy and their Potential Clash with the WTO

The paper outlines EU policy on bioenergy, including biofuels, in the context of its policy initiatives to promote renewable energy to combat greenhouse gas emissions and climate change. The EU’s Member States are responsible for implementing EU policy: thus, the UK’s Renewables Obligation on electricity suppliers and its Renewable Transport Fuel Obligation and road‐fuel tax rebates are examined. It is unlikely that EU policy is in conflict with the WTO Agreement on Agriculture or that on Subsidies and Countervailing Measures, but its provisions on environmental sustainability criteria could be problematic.     

Farmers and their groves: Will cost inefficiency lead to land use change?

Increased forest areas and climate change mitigation are policy goals enhanced by expanding private forest ownership. This study shows transfer of land from farms owning forested acreage associated with low quality land and high production costs achieves such goals. Calculated cost efficiency scores show a large gap between the most and least efficient farms, and farms with forests are less cost efficient. Land reforestation through subsidy programs could replace income from agricultural production. We illustrate that farms from the applied FADN panel could reforest 45,000 hectares, binding about 0.5 mln tons of carbon annually without limiting food or feed supply.     

The commercialisation of subsistence farms: Evidence from the new member states of the EU

For selected regions of five EU Member States (Bulgaria, Hungary, Poland, Romania and Slovenia), this paper examines the determinants of the commercialisation of (semi)subsistence farms. While subsistence farming has become an important feature of the EU, there is a lack of evidence on its spatial distribution, importance and reasons for persistence. The analysis utilises cross-regional survey data and qualitative interviews. Results suggest the absence of a subsistence poverty trap driven by either farmer perceptions or transactions costs although capital endowment appears to play a significant part. On the other hand the degree of market engagement depends on access costs, which vary with location, households’ productive assets, specialisation, and risk propensity. Implications for land use policy are discussed.     

CAP Subsidies and Productivity of the EU Farms

The paper investigates the impact of the Common Agricultural Policy (CAP) subsidies on farm total factor productivity (TFP) in the European Union (EU). We employ a structural semi‐parametric estimation algorithm directly incorporating the effect of subsidies into a model of unobserved productivity. We empirically study the effects using the Farm Accountancy Data Network (FADN) samples for the EU‐15 countries. Our main findings are clear: subsidies impact negatively on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity is more nuanced and in several countries it turned positive.     

Assessing the Impacts of Pillar 1 and 2 Subsidies on TFP in French Crop Farms

This article analyses the impact of common agricultural policy (CAP) subsidies on total factor productivity using a FADN dataset of French crop farms between 1996 and 2003. We first estimate a production function using a system GMM approach and then recover farm‐level total factor productivity (TFP). Further, the impact of Pillar 1 and 2 subsidies on TFP is investigated and results show that several subsidies have a negative impact on productivity during the period covered in the dataset. CAP reforms have also had an impact on the relationship between subsidies and productivity.     

The Capitalisation of CAP Payments into Land Rental Prices: A Panel Sample Selection Approach

The empirical literature suggests that farmland prices and rents capitalise agricultural subsidies and that the 2003 reform of the EU Common Agricultural Policy, which decoupled subsidies from production and attached them to land, may have increased the extent of the phenomenon. Employing a farm‐level dataset, the Farm Accountancy Data Network (FADN) for Italy, we investigate this issue while accounting for selectivity, endogeneity and unobserved individual heterogeneity. To understand the impact of the reform we compare the estimates of capitalisation rate for decoupled payments with those for coupled payments. After correcting for unobserved individual heterogeneity and selectivity, our results reveal no capitalisation of coupled payments and only limited capitalisation of decoupled area payments into farmland rents in Italy.     

Crop insurance policies and purchases in France

While many crop insurance systems have been reformed around the world, few academic researches have addressed the determinants of the decision on crop insurance at the farm's micro level. In this article, both the financial and the agricultural literature lead to the identification of many rationales for the crop insurance decision. Using data from the period 2003–2006 on a representative survey of French farms (FADN‐RICA), we investigate the different factors that incite farmers to insure against crop risk. We emphasize that the highest risk farms are more likely to have insurance and this decision is positively related to the past amount of claims. Insurance is subscribed by larger farms because insurance appears too expensive for smaller farms, which are indeed naturally less diversified. Interestingly, financial variables (such as capital structure or return on investment) do not significantly determine the insurance decision.