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Article
Publication date: 14 March 2008

Štefan Bojnec and Laure Latruffe

The aim of this paper is to investigate technical, scale, allocative and economic efficiencies by data envelopment analysis (DEA) and stochastic frontier methods to…

Abstract

Purpose

The aim of this paper is to investigate technical, scale, allocative and economic efficiencies by data envelopment analysis (DEA) and stochastic frontier methods to provide a decision‐making tool and managerial implications in the measurement of farm business performance and efficiency.

Design/methodology/approach

Technical, scale, allocative and economic efficiencies are analyzed with the Farm Accountancy Data Network (FADN) sample for 13 farm business branches in Slovenia in the period 1994‐2003. DEA models are used with an output‐orientation, three outputs and four inputs. The non‐parametric DEA estimations are compared with a parametric stochastic frontier approach. The cluster analysis is used to identify three different farm business groups according to their performance.

Findings

The average technical, scale, allocative and economic efficiencies for the whole FADN sample over the analyzed period are relatively high (around or over 0.90), suggesting that, although the FADN sample contains very different farms, the latter have similar management practices, and are similarly able to make the best use of the existing technology. Five farm branches (crop, dairy, livestock using own feed, fruit, and forestry) are fully efficient with respect to all four analyzed efficiency measures, suggesting that these specializations have the best chance to compete on the European and world markets.

Originality/value

Studies of technical, scale, allocative and economic efficiencies are rare for transitional farm businesses, especially in Slovenia. The research contributes to the crucial issue of whether small family farm businesses might be able to compete on international markets, as Slovenian agriculture is characterized by such structures.

Details

Industrial Management & Data Systems, vol. 108 no. 2
Type: Research Article
ISSN: 0263-5577

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Article
Publication date: 5 February 2021

Gabriele Dono, Rebecca Buttinelli and Raffaele Cortignani

The paper examines the factors that influence the production of cash flows in a sample of Italian farm accountancy data network (FADN) farms to generate information useful…

Abstract

Purpose

The paper examines the factors that influence the production of cash flows in a sample of Italian farm accountancy data network (FADN) farms to generate information useful for calibrating policies to support farmers' investments.

Design/methodology/approach

An econometric analysis on the sample estimates the influence of structural, economic, commercial and financial variables on CAFFE, i.e. the cash flow that includes the payments to the farmer's resources and the free cash flow on equity (FCFE). The econometric problem of endogeneity is treated by adopting the Hausman test to choose between fixed and random effects models. The results for Italian agriculture and its types of farming (TFs) are examined based on the FCFE/capital depreciation ratio, where FCFE subtracts from CAFFE the opportunity cost payments to the farmer's resources. This ratio identifies TFs with problems of sustainability of the production system.

Findings

The results show that increasing the productive dimension, in particular the endowment of farmland and working capital, is still essential to stimulate the production of cash flows of Italian agriculture. Without this growth, increasing the depreciable capital base is ineffective. FCFE does not compensate for depreciation in several TFs, which in various cases could also improve by improving economic efficiency and commercial position.

Research limitations/implications

Assessing the factors that most influence cash flows can help to better calibrate rural development measures to the territories and farming types that most need public support. Our analysis procedure can be applied to all production systems equipped with farm accounting networks; however, the criteria for rewarding farmer resources and calculating the replacement value of agricultural capital need to be better discussed.

Originality/value

The specification of rural development policies rarely takes into account the financial sustainability conditions of farms, as well as the factors that determine them, in defining the support parameters and the selection criteria for funding. Our approach, based on the analysis of FADN data, considers these aspects and provides ideas for better calibrating public support for investments among agricultural territories, sectors and types of farms.

Details

Agricultural Finance Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 3 April 2018

Adam Wąs and Pawel Kobus

The purpose of this paper is to identify the factors that determine demand for crop insurance in Poland.

Abstract

Purpose

The purpose of this paper is to identify the factors that determine demand for crop insurance in Poland.

Design/methodology/approach

To examine the determinants of decisions regarding crop insurance, the authors used logistic regression. The base source of data for the analysis was the 2013 FADN sample. The scale of yield losses, the indemnities received and the Arrow-Pratt risk aversion coefficient were examined in a representative sample of farms in consecutive years in the period 2004-2013.

Findings

Losses are the major determinants of crop insurance uptake. Additionally, it was observed that the economic determinants are in line with the expected utility theory, while contrary to expectations, farmer’s characteristics such as education level, age or even risk aversion did not prove to have any influence on crop insurance uptake.

Research limitations/implications

The FADN sample is representative as regards the type of farming, economic size of farm and location of the farm. Every farm in the sample represents a specific number of similar farms in the population. However, it must be emphasised that the representativeness of the sample with respect to other determinants, e.g., yield losses in previous years, using crop insurance or the farmers’ age and education has not been verified due to lack of data characterizing the general population with regard to these factors.

Practical implications

It could be argued that the system of crop insurance subsidies should be targeted to encourage the farmers who previously had not used insurance to join the system.

Originality/value

The paper presents the analysis of crop insurance uptake in a country with a strongly polarised agriculture. The Polish farm sector consists of 1.4 million farms with sizes ranging from 1 ha to over a few thousands hectares. The research is based on a data set of 5,202 farms which contains data from ten years (2004-2013). The novelty of the methodological approach is that it includes information on the number of farms represented by every farm in the FADN sample in the Horvitz-Thompson estimator in order to achieve results which are valid for the general population of Polish farms.

Details

Agricultural Finance Review, vol. 78 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 29 April 2014

Yann de Mey, Frankwin van Winsen, Erwin Wauters, Mark Vancauteren, Ludwig Lauwers and Steven Van Passel

The purpose of this paper is to present empirical evidence of risk balancing behavior by European farmers. More specifically, the authors investigate strategic adjustments…

Abstract

Purpose

The purpose of this paper is to present empirical evidence of risk balancing behavior by European farmers. More specifically, the authors investigate strategic adjustments in the level of financial risk (FR) in response to changes in the level of business risk (BR).

Design/methodology/approach

The authors conducted a correlation relationship analysis and run several linear fixed effects regression models using the European Union (EU)-15 FADN panel data set for the period 1995-2008.

Findings

Overall, the paper finds EU evidence of risk balancing. The correlation relationship analysis suggests that just over half of the farm observations are risk balancers whereas the other (smaller) half are not. The coefficient in our fixed effects regression suggests that a 1 percent increase in BR reduces FR by 0.043 percent and has a standard error so low that the existence of non-risk balancers is doubtful. The results reject evidence of strong-form risk balancing – inverse trade-offs between FR and BR keeping total risk (TR) constant – but cannot reject weak-form risk balancing – inverse trade-offs between FR and BR with some observed changes in TR. Furthermore, the extent of risk balancing behavior is found to differ between different European countries and across farm typologies.

Practical implications

This study provides European policy makers a first insight into risk balancing behavior of EU farmers. When risk balancing occurs, BR-reducing agricultural policies induce strategic upwards leverage adjustments that unintentionally reestablish or even increase total farm-level risk.

Originality/value

Making use of the large and unique FADN database, to the best of the authors knowledge, this study is the first that provides European (EU-15) evidence on risk balancing behavior, is conducted at an unprecedented large scale, and presents the first risk balancing evidence across countries and farming systems.

Details

Agricultural Finance Review, vol. 74 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 8 April 2019

Tomas Baležentis, Aiste Galnaitytė, Virginia Namiotko, Lina Novickytė and Xueli Chen

The new programming period of 2021–2027 of the European Union (EU) Common Agricultural Policy requires reconsidering the policy measures. In the new period, the European…

Abstract

Purpose

The new programming period of 2021–2027 of the European Union (EU) Common Agricultural Policy requires reconsidering the policy measures. In the new period, the European Commission is to allow each member state (MS) developing eco-schemes to support and/or incentivise farmers to observe agricultural practices beneficial for the climate and the environment beyond their mandatory requirements. The purpose of this paper is to compare the performance of organic and conventional family farms.

Design/methodology/approach

Organic farming under the organic farming measure of the Rural Development Programme is one of the most widely applied sustainable farming practices in the EU as well as in Lithuania. By assessing the ex post economic impact of the organic farming measure on farm performance indicators, the authors seek to reveal possibilities and obstacles for the implementation of sustainable farming practices. A counterfactual ex post impact assessment method – propensity score matching (PSM) analysis – was used to evaluate ex post economic impact of the organic farming measure on the performance of farming indicators.

Findings

The application of the PSM allowed assessing both the effectiveness of the implemented measure and possibilities for applying this measure in the future. The research has revealed that organic farming is less profitable and the gap between farm income in organic and conventional farms has increased during the period of 2007–2013.

Originality/value

The most comprehensive economic information about the farm activities from the Farm Accountancy Data Network (FADN) was used for the ex post economic impact evaluation of the organic farming measure in Lithuania. The matched groups of Lithuanian family farms (organic and conventional) were compared. The results of the research provide a new knowledge about the effectiveness of the organic farming measure in Lithuania and suggest the ways of their improvement in the future. The results can also be generalised to other countries with similar agricultural structure.

Details

Management of Environmental Quality: An International Journal, vol. 30 no. 3
Type: Research Article
ISSN: 1477-7835

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Article
Publication date: 31 August 2020

Pier Paolo Miglietta, Donatella Porrini, Giulio Fusco and Fabian Capitanio

The term “charity hazard” refers to the issue of the crowding out of insurance by co-existing relief programs in the context of different institutional governmental…

Abstract

Purpose

The term “charity hazard” refers to the issue of the crowding out of insurance by co-existing relief programs in the context of different institutional governmental disaster schemes. In this context, the aim of this paper is to verify if the charity hazard phenomenon exists in the Italian agricultural insurance scheme.

Design/methodology/approach

Annual data regarding crop insurance, subsidies and farm structure were extracted from ISMEA, ISTAT and FADN databases. A SYS-GMM dynamic panel model was estimated, considering the 2010–2017 time period and the Italian Regions as units of the analysis.

Findings

The empirical results highlight a negative relation between crop subsidies and the farmers' policies and total premium paid. The disincentive and crowd-out effects of public aid and subsidies on the choice of whether or not to take out an agricultural insurance policy ends up being one of the key factors for the low level of penetration of the agricultural insurance in Italy.

Practical implications

Since the diffusion of agricultural insurance can contribute to the general objective of sustainability and resilience, the implementation of alternative solutions to subsidies could be needed (e.g. the introduction of mandatory insurance against adversities or financial support for a geographically specific insurance tool).

Originality/value

Investigating empirically the determinants of the agricultural insurance policy diffusion among the Italian Regions, this study ensures an original contribution to the scientific progress in the field, demonstrating the existence of charity hazard caused by the public subsidies provision.

Details

Agricultural Finance Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 26 August 2014

Marianne Lefebvre, Dimitre Nikolov, Sergio Gomez-y-Paloma and Minka Chopeva

The purpose of this paper is to analyze the determinants of agricultural insurance adoption in Bulgaria, using a purpose-built survey of 224 farmers interviewed in 2011…

Abstract

Purpose

The purpose of this paper is to analyze the determinants of agricultural insurance adoption in Bulgaria, using a purpose-built survey of 224 farmers interviewed in 2011. The insurance decision is analyzed conjointly with other risk management decisions on the farm such as having contracts with retailers or processors, diversifying farm activities and using irrigation.

Design/methodology/approach

The agricultural insurance sector in Bulgaria is presented in the broader context of the transition to a market-oriented economy and integration of Bulgarian agriculture into the EU Common Agricultural Policy. The recent developments on the determinants of farm insurance adoption in the agricultural economics and finance literature are discussed. A multivariate probit model is used in order to determine the factors explaining the adoption or non-adoption of various risk management tools by the surveyed farmers, including farm insurance.

Findings

The authors find that farmers with diversified activities, using irrigation or having contracts with retailers or processors, are more likely to adopt insurance, after controlling for farms and farmers’ structural characteristics. Additionally, the authors find that the main characteristics distinguishing farmers who purchase agricultural insurance from non-users are farm size and farm location. The existence of strong regional effect suggests the importance of adapting the insurance products to the different regional contexts in Bulgaria.

Originality/value

This paper contributes to the (limited) literature on agricultural insurance adoption in transition countries, currently shifting from a system where compensation against natural hazards tended to come from a State damage mitigation fund, inherited from the centrally planned governments to private and voluntary agricultural insurance. This research provides a unique data source on the Bulgarian case study.

Details

Agricultural Finance Review, vol. 74 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 3 July 2017

Simone Severini, Antonella Tantari and Giuliano Di Tommaso

The purpose of this paper is to assess how direct payments (DPs) of the Common Agricultural Policy affect income and revenue variability faced by Italian farmers.

Abstract

Purpose

The purpose of this paper is to assess how direct payments (DPs) of the Common Agricultural Policy affect income and revenue variability faced by Italian farmers.

Design/methodology/approach

Balanced farm-level panel data are used to construct coefficients of variation over the period 2003-2012. Nonlinear robust regression techniques are used to measure the effect of DP, farm size, fixity in resources, labor intensity, farm production orientation, and specialization on the variability of farm income (FI) and farm revenue. This is done on the overall sample as well as on subsamples of farms located in different regions and belonging to different types of farming.

Findings

DPs have mixed effects on the variability of FI. While a negative and significant relationship is found on the whole national sample, this is not generally the case when models are run on the considered subsamples. On the contrary, DPs have always significant variability increasing effects on revenue. This suggests that DPs reduce the degree of risk that farmers face allowing them to engage in riskier activities. Thus, DPs are less effective than expected in terms of income stabilization because these distort farmers’ risk management behavior. Because of this, DPs could constrain the development of markets for risk management instruments and reduce the effectiveness of policies supporting the use of these instruments.

Originality/value

The analysis is inspired by El Benni et al. (2012) but uses a different approach, applies it to a different country, and yields different results. Volatility measures are calculated over more years, and the paper accounts for differences in farm production orientation and is not based on an unbalanced panel of farms. Because of these differences, the authors obtained different results regarding the correlation between DP and income and, even more, revenue variability. Finally, comparing the results of models referring to FI and farm revenue improves the author’s understanding of the impact of DP on farmers’ risk management behavior and allows interesting policy considerations.

Details

Agricultural Finance Review, vol. 77 no. 2
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 3 April 2018

Fabio Gaetano Santeramo

The purpose of this paper is to investigate how experience in insurance contracts may influence participation in the Italian crop insurance market.

Abstract

Purpose

The purpose of this paper is to investigate how experience in insurance contracts may influence participation in the Italian crop insurance market.

Design/methodology/approach

From Italian farm-level data, the author estimates a dynamic discrete choice model of participation to investigate the role of experience. The methodology, coupled with exploratory analysis of the data, allows one to compare the relevance of different sources of experience in the crop insurance decision-making process.

Findings

The author found that experience tends to be a catalyst for insurance participation. Policy implications are discussed, in particular, the author discusses on the importance of bolstering uptake to exploit the advantages of the inertia that emerge from experience, and the importance of initiatives to increase the knowledge of crop insurance instruments.

Originality/value

To the best of the author’s knowledge, the role of experience has been underinvestigated. The analysis has the specific contribution of modeling the potential role of experience (exploited after buying an insurance contract) on uptake in crop insurance programs.

Details

Agricultural Finance Review, vol. 78 no. 2
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 21 November 2019

Maria Cecilia Mancini, Filippo Arfini and Marianna Guareschi

The purpose of this paper is to analyse the determinants and the impact of some of the more significant innovations applied to the localised agri-food systems (LAFSs…

Abstract

Purpose

The purpose of this paper is to analyse the determinants and the impact of some of the more significant innovations applied to the localised agri-food systems (LAFSs) bearing a (Geographical indication) GI product, considering the multi-faceted aspects of innovation and how the producers have managed the implementation of such innovations.

Design/methodology/approach

Parmigiano Reggiano (PR) system is considered as a representative GI product, with the system showing the features of an LAFS in terms of governance, territorial reputation and quality perceived by consumers. PR innovations from 1860 to 2015 are analyszed and classified as technological and organisational. Three determinants of innovations are identified in the PR LAFS: consumer needs; value chain (VC) strategies; and governance. Finally, the innovation impact on the VC, product quality and rural development are studied.

Findings

The analysis shows the positive and negative impacts of innovations. The main finding is that governance action is crucial to pursuing quality strategies and maintaining economic value at production level.

Research limitations/implications

The research analyses some of the more significant innovations applied to the PR VC. Despite a large number of innovations were introduced from 1860, the authors had to choose just some of them, considering also the availability of dates.

Practical implications

The research gives some recommendation to the PR Consortium, in specific, or governance institutions in LAFS context in general, to achieve rural development goals. The research shows that governance action is crucial to pursuing quality strategy and to maintaining economic value at production level. This implies that instead of simply raising yield per cow, the VC should aim at increasing (or maintaining) the value of production by the way of marketing strategies. Organisational, marketing and technological innovations adopted in synergy and in joint agreement among the chain actors would bring mutual benefit for the VC and for the territory.

Social implications

The research shows the trade-off between VC competiveness and rural development. In fact, the increase of VC competiveness involves a growth of cost of production and the decrease of labour force. Thus, it creates a loss of employee and increases the distance between dairies with high amount of capital and familiar/smaller dairies which have low amount of capital to invert, that obstructs rural development especially in disadvantage area.

Originality/value

The paper analyses the determinants and the impact of some of the more significant innovations applied to LAFS which are home to a GI product, considering the multi-faceted aspects of innovation and how producers have managed the implementation of such innovations. It underlines implication on territory and sustainability.

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