Examining the Relative Competitiveness of Irish Agriculture (1996 – 2003/4)

End of Project ReportThis paper examines the competitiveness of Irish agriculture compared to that of other EU and non-EU countries. The analysis was based on two main data sources – the Farm Accountancy Data Network (FADN) for years 1996-2003 and the International Farm Comparisons Network (IFCN) for 2003 for beef production and for 2004 for milk production. Results showed that the Irish competitive position compared to other EU and non-EU countries was positive when total cash costs were considered indicating a positive outlook for Irish milk production in the short to medium term. However, as the opportunity costs of owned resources are not included in ‘cash cost’ calculations, total economic costs which include imputed charges for owned resources were considered to examine the longer term outlook for the competitiveness of the sector. Using this measure, the competitive ranking for Irish agriculture slipped relative to the other countries. It was found that the main reason for the relatively high economic costs on Irish farms was due to the high imputed land and labour costs. These findings could be considered as a warning signal for the future competitive performance for the average sized Irish farm. However, based on FADN data the competitive position of ‘larger’ Irish dairy farms (in the 50-99 dairy cow size category) did manage to maintain their competitive position within Europe even when total economic costs were considered. Hence, it could be concluded that part of the explanation of the deterioration of competitive ranking for the average Irish dairy farm when total economic costs are considered relates to the relatively low scale of primary agricultural activity in Ireland during this period

Estimation and projection of costs and margins in crop enterprises in the Republic of Ireland

End of project reportThis project reports on the farm level crop economics research conducted in the Rural Economy Research Centre (RERC), Teagasc during the period 2003-2006. The research conducted made current estimates and one year ahead forecasts for margins in each of the major crop enterprises in the Republic of Ireland. The enterprise specific information was based on information from the Teagasc National Farm Survey (NFS), supplemented by projections of price, cost and policy information from a variety of other sources. Yield projections were based on past trends and incorporate estimates of expected variability. In addition, the distribution of profitability amongst the population of crop farms has been examined to gain further insights into the farm level situation and outlook for tillage farms based on the results from the NFS data

Analysis of the Competitiveness of Cereal Production in Selected EU Countries

This paper examines the competitiveness of cereal production in selected EU member states, during the period 1996 2000. Profitability was selected as a measure of competitive performance and costs of production, value of output and partial productivity indicators were examined as possible sources (potential) of competitive performance. Using data from the Farm Accountancy Data Network (FADN) the analysis showed that productivity levels in the UK, Ireland and France were consistently higher then competing countries Denmark, Germany and Italy. In terms of profitability, the opportunity cost of owned resources had a major impact on the competitiveness of cereal production within the EU. Cash costs as a percentage of total output were lowest in Italy but in terms of total economic costs, including an opportunity cost for all owned resources, Italy had the highest cost structure amongst the countries examine. These findings have implications for EU cereal producers in the medium term as direct payments are decoupled from production and producers must make production decisions based on full economic costs of production, including adequate remuneration for owned resources.competitiveness, cereal production, profitability, competitive performance, competitive potential, Production Economics, Q12,

An Examination of the Productivity of Irish Agriculture in a Decoupled Policy Environment

End of project reportThe Single Farm Payment (SFP) scheme came into effect in the EU from the first of January 2005. This scheme replaced the many ‘coupled’ livestock and arable aid schemes available to farmers and was heralded as a significant move towards decoupling. This thesis explores the initial effects of this policy on total factor productivity (TFP) and its components (technical efficiency change, technical change, and scale efficiency change) in the main farming sectors in Ireland

A Comparison of Stochastic Frontier Approaches to Estimating Inefficiency and Total Factor Productivity: An Application to Irish Dairy Farming

This paper compares standard stochastic frontier models for panel data with a number of recently developed models designed to remove unobserved heterogeneity from the inefficiency component. Results are used to construct a generalised Malmquist total factor productivity (TFP) index. We conclude that the choice of approach makes little difference where the purpose of the study is to analyse aggregate trends in TFP and its components. However, where inefficiency estimates and their dispersion are of interest, attention should be paid to how the analyst’s interpretation of inefficiency relates to the underlying assumptions of the model that is used.Efficiency, panel data, total factor productivity, stochastic production frontier, ‘true’ effects models, dairy sector

The Role of Risk in the Decision to Produce Post-Decoupling - A Stochastic Budgeting Example

Under the Mac Sharry and Agenda 2000 reforms, direct payments comprised a significant portion of farmers' income in the EU. Farmers had to engage in production to receive these payments but the payments were relatively risk-free and therefore risk may not have played an important role in the production decision. This paper considers the effect of the decoupling of direct payments from production in the EU and in particular, on the role of production risk in the decision making process. In an environment where direct payments are completely decoupled from production, farmers may engage in an 'entitlement farming' system, that is retain their land only to activate the decoupled payment and not actually produce any tangible goods. This paper examines the effect of production risk on the economic trade off between 'entitlement farming' and conventional farming. A stochastic budgeting model is developed for two representative farms. The model is used to measure the probability that the returns to the 'entitlement farming' system could be higher than the profit emanating from a conventional farming system given production risk. The results show that for the less efficient representative farm, the probability of achieving a significantly higher profit by engaging in entitlement farming is 46 percent, while further analysis shows that there is a 9 percent probability that profits from conventional farming systems would be only marginally higher than the 'entitlement farming' option.Decoupling, Risk Analysis, Production Risk, Decision Analysis, Stochastic Modelling, Agricultural and Food Policy, Risk and Uncertainty, Q12, Q18,

Risk Analysis and Stochastic Modelling of Agriculture

End of Project ReportThis project analysed the role of risk in farmers’ production decisions and the impact of policy changes on risk in agricultural production. · A stochastic budgetary farm level model was developed using Irish National Farm Survey data and FAPRI-Ireland projections. · The model was used to examine the varying level of farmers’ exposure to risk under different policy regimes. · Results showed that under the Mac Sharry and Agenda 2000 regimes of agricultural policy the major incentive for profit maximising farmers to engage in production was to qualify for direct income support. Direct payments were relatively risk free sources of income and therefore risk played only a minor role in the production decision. The results showed that farmers would be exposed to more risk under decoupling. The return to production post decoupling is market based only, as the direct payment is no longer linked to production, and therefore is more exposed to price and production risk. · The stochastic budgetary model, which accounts for price and production risk, was used to estimate the economic trade off between “entitlement farming”, that is retaining farm land only to claim payments and not produce any tangible products, and conventional farming. · The results showed that for less efficient farms, the probability of achieving a significantly higher profit by engaging in entitlement farming is 46 percent, while further analysis shows that there is a 9 percent probability that profits from conventional farming systems would be only marginally higher than the ‘entitlement farming’ option

Foot-and-Mouth Disease control costs compared: An Irish case study.

The primary objective of this paper is to evaluate alternative control strategies for a number of simulated outbreaks of Foot-and-Mouth Disease (FMD) in four agriculturally diverse Irish regions, examining for the first time, the potential role of emergency vaccination in the country. The recent EU Directive (2003/85/EC) on FMD control permits the use of emergency vaccination as part of an FMD control strategy. While the slaughter of infected animals and dangerous contacts (susceptible animals on epidemiologically linked holdings) remains the principal tool for tackling an outbreak, the potential use of vaccination as an adjunct to the basic culling policy is now being considered. Using an integrated approach, combining epidemiological and economic modules, the alternatives of stamping-out both alone and in conjunction with emergency vaccination are examined using hypothetical outbreaks and their control costs compared. Overall, it cannot be said, a priori, that one control option is better than the other. Choice of control strategy would appear to be highly dependent on herd density, production type and other region specific issues. This analysis has focused on control costs only; taking wider economy costs into account may however change this overall conclusion.Foot-and-Mouth disease, alternative control strategies, transboundary animal diseases, emergency vaccination, Livestock Production/Industries, Q1, Q17, Q58,

An investigation into the impact of policy reform on the level of structural change in the agri-food sector of Ireland, Denmark and the Netherlands

This paper conducts a detailed, micro-focused investigation on the implications of recent agricultural policy changes on the structure of production systems in Ireland, Denmark and the Netherlands in terms of farm numbers, system switching, specialisation, the role of economies of scale, on-farm investment, off-farm employment and economic viability. Given the close relationship between farm structure and agricultural production, the impact of the recent CAP reform on production decisions should give a good indication of the form agricultural structural change will take. Two competing hypotheses of post decoupling structural change are proposed; a ‘production inducing effect’ and an ‘expectations effect’. Using Irish, Danish and Dutch micro-data, which are comparable due to their participation in FADN, a descriptive analysis of the key characteristics of production in the agri-food sectors in each country will be performed using key indicators of structural change. The results indicate that the ‘expectations effect’, which claims that producers may adopt a ‘safety first’ strategy and make only minimal changes to production plans in case future payments are reassessed and re-linked to production or an agricultural activity, seems to be prevalent.Policy Reform, Agricultural Structural Change, FADN, Agricultural and Food Policy, Farm Management,

The economic viability of biomass crops versus conventional agricultural systems and its potential impact on farm incomes in Ireland

Ireland is currently importing 90 percent of its energy. The burning of domestically produced nonrenewable peat provides 4.9 percent of Ireland’s total primary energy supply while renewable biomass crops currently account for only 1 percent of the domestically produced energy supply. The Irish government have set a target of 30% of peat (approximately 0.9 million tonnes) used for electricity generation to be replaced by renewable energy crops. This would be equivalent to approximately 0.6 million tonnes of biomass crops or approximately 45,000 hectares of biomass. Direct payments and subsidies accounted for over 100 percent of average family farm income on beef and sheep farms in 2006. Therefore there appears to be significant potential for Irish farmers to replace conventional agricultural enterprises with biomass crops. A probit model was built to identify the socio-economic characteristics of farmers who may be willing to adopt energy crop production. The results from this were used in the construction of a linear programming model to determine the optimal enterprise for each farmer at varying energy prices.Willow, Miscanthus, Co-firing, Net present value, Probit, Linear programming, Agricultural Finance, Institutional and Behavioral Economics, Resource /Energy Economics and Policy,