Production risks in Bulgarian peanut production

As farmers in a transition economy search for new crop enterprises with a potential for income enhancement they are faced with increased risks in the process of resource allocation. It has been noted that biased estimation of production function estimates results from the lack of accountability of risks. Since peanut production in Bulgaria has increased at a varying rate since 1989 it is important that we examine the risks associated with input use. The data for this study were collected from farmers from 18 villages in the southern part of Bulgaria. A total of 205 farmers were surveyed for this study. Peanut yield in Bulgaria is positively related to the quantity of seed used, fungicide, manual labor, investment level and mechanized labor used. Peanut yield is negatively influenced by investment levels but positively by the increase of manual labor. The response of yield to quantity of seed used is elastic, and an addition of a kg of peanut seeds may increase yield by 32kg. However, as the quantity of seeds used per ha increases the risk is expected to increase, hence farmers may be cautious in increasing the quantity of seeds used. Investment capital, manual labor and mechanized labor are positively related to yield and there will be a reduction in yield if the optimal levels of those inputs are surpassed. Thus farmers may increase yield and production by augmenting the seeding rate, other factors remaining constant.Agricultural and Food Policy,

THE ECONOMICS OF PEANUT PRODUCTION IN BULGARIA DURING THE TRANSITION PERIOD

We examined peanut production systems and selected factors affecting the development of commercial peanut enterprises in Bulgaria. A survey of 220 individual farms and farm cooperatives engaged in the cultivation of peanuts was conducted during 2000 and 2002. Poor farm structure, low level of technology, and nonconformity to farm decision making impede the financial and economic development of Bulgarian peanut production and farm growth, thus limiting farm enterprises emergence into competitive economic units financially operative in a freemarket economy. The underlying cost structure, couple with small farms, averaging 0.8 ha in size, prevent farmers from capturing economies of scale, limit farm profitability and hence farm modernization. The lack of owned farm machinery, equipment and storage facilities renders the restructuring and specialization extremely difficult. However, peanut production is still a viable farm enterprise for Bulgarian farmers

ФИНАНСОВО ИКОНОМИЧЕСКИ АНАЛИЗ НА ПРОИЗВОДСТВОТО НА ФЪСТЪЦИ В БЪЛГАРИЯ

Peanut is not listed as one of the major crops in the Bulgarian agricultural sector, but its economic and fi nancial viability is promising, but unknown. We use enterprise budgets, capital budgeting techniques, risk analysis and logistic regression models to examine the fi nancial and economic structure of peanut farms and to evaluate the factors infl uencing short and long-term profi tability. The results show that peanut production is a profi table venture for most peanut farmers in Bulgaria. Long-run analyses show that peanut production may be economically feasible and producers engaged in production for a period of seven years, and at a discount rate of 13%, may generate internal rates of return (IRR) that vary from -20.57% to 67.39%. About 70% of the farms studied had IRRs greater than the discount rate. Sensitivity analyses show that profi tability of peanut production was infl uenced by yield and variable costs. There were risks at the village level associated with peanut production.Въпреки, че фъстъците не са основна култура за България, те имат значителен икономически и финансов потенциал, който не е достатъчно проучен. За изследване на икономическото и финансово състояние на стопанствата произвеждащи фъстъци, както и за оценка на факторите, които влияят върху ефективността в кратко срочен и дългосрочен аспект бяха използвани техниките на производствените и капиталови бюджети, анализ на риска и логистични регресионни модели. Получените резултати показаха, че за повечето стопанства отглеждащи фъстъци в България производството е рентабилно. Анализите в дългосрочен план показват, че производството на фъстъци за период от седем години може да бъде икономическо оправдано при дисконтов фактор от 13%, като вътрешната норма на възвращаемост (IRR) варира от 20.57% до 67.39%. За около 70% от изследваните стопанства IRR превишава дискантовия фактор. Резултатите от анализа на чувствителността показват, че ефективността на производството на фъстъци се влияе от средните добиви и променливите разходи. На равнище селище съществуват някои рискове на производство на фъстъци

ИКОНОМИКА НА ФЪСТЪКОПРОИЗВОДСТВОТО В БЪЛГАРИЯ ПРЕЗ ПРЕХОДНИЯ ПЕРИОД

We examined peanut production systems and selected factors affecting the development of commercial peanut enterprises in Bulgaria. A survey of 220 individual farms and farm cooperatives engaged in the cultivation of peanuts was conducted during 2000 and 2002. Poor farm structure, low level of technology, and nonconformity to farm decision making impede the financial and economic development of Bulgarian peanut production and farm growth, thus limiting farm enterprises emergence into competitive economic units financially operative in a freemarket economy. The underlying cost structure, couple with small farms, averaging 0.8 ha in size, prevent farmers from capturing economies of scale, limit farm profitability and hence farm modernization. The lack of owned farm machinery, equipment and storage facilities renders the restructuring and specialization extremely difficult. However, peanut production is still a viable farm enterprise for Bulgarian farmers.Изследвана е системата на производство на фъстъци и факторите влияещи върху развитието на фъстъчения сектор в България. Проучени са 220 индивидуални и кооперативни земеделски стопанства произвеждащи фъстъци през периода 2000-2002 г. Неподходящата структура на земеделските стопанства, ниското технологично равнище, несъобразяването с процеса на вземане на решения затрудняват финансовото и икономическото развитие и ръста на производството на фъстъци. По такъв начин се ограничава и процеса на превръщане на земеделските стопанства в конкурентни единици, способни да работят ефективно в условията на пазарна икономика. Структурата на разходите, наред с дребните земеделски стопанства със средна обработваема площ 0.8 ha възпрепятствуват извличането на полза от икономия от мащаба, ограничават продуктивността, а от тук и процеса на модернизиране на стопанствата. Липсата на собствена техника, оборудване и складова база предопределят и големите трудности на преструктуриране и специализация на производството. Независимо от това, производството на фъстъци все още е изгодно за българските фермери

ФИНАНСОВО ИКОНОМИЧЕСКИ АНАЛИЗ НА ПРОИЗВОДСТВОТО НА ФЪСТЪЦИ В БЪЛГАРИЯ

Peanut is not listed as one of the major crops in the Bulgarian agricultural sector, but its economic and fi nancial viability is promising, but unknown. We use enterprise budgets, capital budgeting techniques, risk analysis and logistic regression models to examine the fi nancial and economic structure of peanut farms and to evaluate the factors infl uencing short and long-term profi tability. The results show that peanut production is a profi table venture for most peanut farmers in Bulgaria. Long-run analyses show that peanut production may be economically feasible and producers engaged in production for a period of seven years, and at a discount rate of 13%, may generate internal rates of return (IRR) that vary from -20.57% to 67.39%. About 70% of the farms studied had IRRs greater than the discount rate. Sensitivity analyses show that profi tability of peanut production was infl uenced by yield and variable costs. There were risks at the village level associated with peanut production.Въпреки, че фъстъците не са основна култура за България, те имат значителен икономически и финансов потенциал, който не е достатъчно проучен. За изследване на икономическото и финансово състояние на стопанствата произвеждащи фъстъци, както и за оценка на факторите, които влияят върху ефективността в кратко срочен и дългосрочен аспект бяха използвани техниките на производствените и капиталови бюджети, анализ на риска и логистични регресионни модели. Получените резултати показаха, че за повечето стопанства отглеждащи фъстъци в България производството е рентабилно. Анализите в дългосрочен план показват, че производството на фъстъци за период от седем години може да бъде икономическо оправдано при дисконтов фактор от 13%, като вътрешната норма на възвращаемост (IRR) варира от 20.57% до 67.39%. За около 70% от изследваните стопанства IRR превишава дискантовия фактор. Резултатите от анализа на чувствителността показват, че ефективността на производството на фъстъци се влияе от средните добиви и променливите разходи. На равнище селище съществуват някои рискове на производство на фъстъци

ECONOMIC AND FINANCIAL ANALYSIS OF PEANUT PRODUCTION IN BULGARIA

Peanut is not listed as one of the major crops in the Bulgarian agricultural sector, but its economic and fi nancial viability is promising, but unknown. We use enterprise budgets, capital budgeting techniques, risk analysis and logistic regression models to examine the fi nancial and economic structure of peanut farms and to evaluate the factors infl uencing short and long-term profi tability. The results show that peanut production is a profi table venture for most peanut farmers in Bulgaria. Long-run analyses show that peanut production may be economically feasible and producers engaged in production for a period of seven years, and at a discount rate of 13%, may generate internal rates of return (IRR) that vary from -20.57% to 67.39%. About 70% of the farms studied had IRRs greater than the discount rate. Sensitivity analyses show that profi tability of peanut production was infl uenced by yield and variable costs. There were risks at the village level associated with peanut production

Production risks in Bulgarian peanut production

As farmers in a transition economy search for new crop enterprises with a potential for income enhancement they are faced with increased risks in the process of resource allocation. It has been noted that biased estimation of production function estimates results from the lack of accountability of risks. Since peanut production in Bulgaria has increased at a varying rate since 1989 it is important that we examine the risks associated with input use. The data for this study were collected from farmers from 18 villages in the southern part of Bulgaria. A total of 205 farmers were surveyed for this study. Peanut yield in Bulgaria is positively related to the quantity of seed used, fungicide, manual labor, investment level and mechanized labor used. Peanut yield is negatively influenced by investment levels but positively by the increase of manual labor. The response of yield to quantity of seed used is elastic, and an addition of a kg of peanut seeds may increase yield by 32kg. However, as the quantity of seeds used per ha increases the risk is expected to increase, hence farmers may be cautious in increasing the quantity of seeds used. Investment capital, manual labor and mechanized labor are positively related to yield and there will be a reduction in yield if the optimal levels of those inputs are surpassed. Thus farmers may increase yield and production by augmenting the seeding rate, other factors remaining constant