SMALL FARMS IN CENTRAL AND EASTERN EUROPE: IS THERE A FUTURE FOR THEM?

Agribusiness, Agricultural and Food Policy, Consumer/Household Economics, Land Economics/Use,

WILLINGNESS OF FOOD INDUSTRY COMPANIES IN CO-FINANCING COLLECTIVE AGRICULTURAL MARKETING (CAM) ACTIONS

Marketing,

THE CHOICE BETWEEN CONVENTIONAL AND ORGANIC FARMING – A HUNGARIAN EXAMPLE

The organic agriculture represents a promising alternative for the future of European agriculture. It is consistent with the notion of sustainable development set forth already in the 1992 CAP Reform. Despite of increasing importance of organic farming, the research on organic farming is still limited. This scarcity of the research is especially true for New Member States of the enlarged EU. This paper investigates the choice between conventional and organic production technologies for individual farmers in Hungarian agriculture. We apply a model that explicitly accounts for the effects of farm-specific variables like age and education on the expectations farmers have on the utility of both production technologies. In addition we take into account the perceptions of farmers about the organic farming. The model was estimated on a cross-section data set of Hungarian farmers for the period 2007 using a logit specification. It appears that education has a positive impact on the choice between conventional and organic farming, and, the size of the farm in hectares has a negative effect on this choice. Age and some general considerations on environmental friendly technologies do not have a significant effect on choice between conventional and organic farming.Innovation, Attitudes, Organic production, Diffusion, Agribusiness, Crop Production/Industries, Food Consumption/Nutrition/Food Safety,

Új utakon az agrárgazdasági kutatások

Az agrárgazdaság nemzetközi kutatási irányzatait abból a célból tekintettük át, hogy a jövÅ‘ben azokhoz a magyarországi kutatás is felzárkózhasson. Ehhez két közelítési módot alkalmaztunk: egyrészt a jelenlegi (fÅ‘ként a 2000-es) évtized szakirodalma alapján próbáltuk meghatározni a hosszabb távon várható tendenciákat, másrészt a közelmúltbeli konferenciák témáinak elemzésével kíséreltük meg a tematikai arányok rövid távú változásait megbecsülni. A hosszú távú új irányzatok közül kiemelhetÅ‘k egyrészt a transzdiszciplináris kutatások, amelyeket az EUEU is zászlajára tűzött, s ma már nemzetközi intézete, folyóirata és nemzetközi szövetsége is van. KiemelhetÅ‘k másrészt a mezÅ‘gazdasági és közgazdasági paradigmákkal kapcsolatos egyenkénti és összehasonlító vizsgálatok, amelyek a jövÅ‘ben szükséges szemléletmódokat alapozzák meg. Megkülönböztetett figyelmet érdemel a multifunkciós és a globalizált mezÅ‘gazdaság paradigmája, valamint a biofizikai, illetve ökológiai közgazdaságtan irányzata. Az áttekintett tizenegy nemzetközi tanácskozás programja tükrében azt vizsgáltuk, hogy az egyes nemzetközi tanácskozások témái mennyiben tudtak az elmúlt években a kutatások főáramába beágyazódni. Ez segíthet a hazai kutatások helyes irányainak kijelölésében. Kétségkívül a rendszerváltás utáni években jelentÅ‘sen visszaesett a magyar kutatók nemzetközi fórumokon való jelenléte, ami csak a legutóbbi években kezd pozitív irányba elmozdulni. Ebben döntÅ‘ szerepe van az új, fiatal és részben középgenerációnak, illetve néhány hazai műhelynek. A kérdés az, hogy milyen további tennivalóink vannak abban a tekintetben, hogy a következÅ‘ években a hazai kutatók eredményei nagyobb arányban igazodjanak a főáramhoz és mérettessenek meg nemzetközi szinten, bekerülve a tanácskozások plenáris, „contributed paper†és poszter szekcióiba, és mindehhez milyen lépések szükségesek a kutatási témaválasztásban és az alkalmazott módszertanban. ---------------------- International trends of researches in agricultural economics have been surveyed in order to help Hungarian research in closing up. Two different approaches have been applied: we tried to indicate long-term tendencies based on recent literature (mainly of the present decade) while short-term shifts in theme structure have been assessed based on international conference topics. From the long-term new trends transdisciplinary researches can be highlighted which is a new target of the EU as well and has its own journal, research institute and international association. From another direction single and comparative analyses of agricultural and economical paradigms should be mentioned which can lay the foundation of attitudes or approaches usable in future researches. For examples, paradigms of multifunctional agriculture and that of globalised agriculture are worth to distinct attention, as are relatively new economic paradigms such as biophysical economics or ecological economics as well. In connection with conferences we tried to discover how programs of international meetings could join in the mainstream of researches. This could help in the correct determination of directions of Hungarian researches. After the political transition presence of Hungarian scientists on international meetings undoubtedly reduced and this trend seems to change only in the last years. In this change the young generation of researchers and some institutions play a great part. The challenge is what further works are to be done in better adapting domestic researches to the mainstream and enabling Hungarian scientists in a more intensive involvement to international meetings and in living up to their commitments.agrárgazdaságtan, kutatási irányzatok, tudományos haladás, paradigma, transzdiszciplína, konferenciák, agricultural economics, reseach trends, scientific progress, paradigm, transdiscipline, conferences, Agribusiness, Research and Development/Tech Change/Emerging Technologies,

The possible effects of the CAP Reform on farm employment in Hungary

This study analyses the possible impacts of CAP reform on farm employment in an economically disadvantaged rural region in Hungary using survey among farmers. Results show that farmers are rather pessimistic about the employment effects of CAP reformy expecting a decrease in the number of farm jobs regardless of the type. Econometric analyses suggest that farm size in terms of area is positively related to the expected number of male employment on the farms, whilst the less favoured land has negative effects on the male employment except seasonal workers. Farms employing more labour expect thet number of full time female workers to slightly increase, whilst the number of part-time and seasonal employees is expected to decrease. Less favoured areas have negative impact on the job expectancy for seasonal workers. In general, farmers’ expectations contradict to the intention of CAP reform.CAP reform, farm employment, Hungary, Agricultural and Food Policy, Q18,

Agri-food business: Global challenges â Innovative solutions

The rise of a western-style middle class in many successful emerging economies like China currently is inducing deep structural changes on agricultural world markets and within the global agri-food business. As a result of both higher incomes and concerns over product safety and quality the global demand for high-quality and safe food products is increasing significantly. In order to meet the new required quality, globally minimum quality standards are rising and private standards emerging. All over the world these developments cause adjustments at the enterprise, chain and market levels. At the same time, the tremendously increasing demand for renewable energy has led to the emergence of a highly promising market for biomass production. This has far-reaching consequences for resource allocation in the agri-food business, for the environment, for the poor in developing countries and for agricultural policy reforms. The challenges increase with ongoing liberalisation, globalisation and standardisation, all of which change trade patterns for agricultural and food commodities, and influence production costs and commodity prices. The objective of the IAMO Forum is to show opportunities as well as risks for all participants of the food economy in the ongoing globalisation process: for small peasants in developing countries, farmers in Europe and globally active food enterprises and retailers. The success of enterprises depends on the ability to find innovative solutions with regard to the organisation of enterprises, chains, and markets, as well as future policy design. Concerning bio-energy strategies has to be identified to combat global warming most efficiently and concurrently attenuate the competition between "tank and table" on farmland. IAMO Forum 2008, as well as this book, would not have been possible without the engagement of many people and institutions. We thank the authors of the papers, as well as the referees. Furthermore we are highly indebted to MARLIES LOHR, NADINE GIEMSA and RONNY RECKE who in an outstanding way contributed to the organisation of the Forum. This is true as well for the IAMO administration, whose work we gratefully acknowledge. Many sponsors has funded the IAMO Forum 2008. We are very grateful to the German Research Foundation (DFG), The Federal Ministry of Food, Agriculture and Consumer Production in Germany, The Ministry of Cultural Affairs of the Federal State Saxony-Anhalt, Germany and last but not least the City of Halle. Further Conference sponsors are the BIONADE Corporation, Gaensefurther Mineral Water, The Wine Growers Association of the Region Saale-Unstrut, Germany, Obsthof am SüÃen See GmbH, Monsanto Company, KWS Saat AG, Sachsen-Anhalt-Tours, Baumkuchen Salzwedel and the Hallesches Brauhaus.Agribusiness, Agricultural and Food Policy, Agricultural Finance, Community/Rural/Urban Development, Industrial Organization, Institutional and Behavioral Economics, International Development, Marketing, Political Economy,

How Effective is the Invisible Hand? Agricultural and Food Markets in Central and Eastern Europe

Since the seminal work of Adam Smith, markets have been considered an efficient tool for co-ordinating the behaviour of economic agents. The basic characteristic of a market economy is that the complex system of interaction among individuals is not centrally coordinated. Under the assumption of profit and utility maximisation (and a whole set of assumptions about the institutional framework), relative prices and their change over time provide the signals that guide, like an invisible hand, the allocation of resources, i.e., the structure of production and the intensity of input use in the various production processes. They do this by co-ordinating the activities of economic agents, i.e., of resource owners, producers, intermediaries, traders, and consumers. After system change in the former Soviet Union and in Central and Eastern Europe (CEE) central economic planning had to be replaced by other forms of co-ordination. The general direction in all transition countries was towards a market economy, but the speed and depth of reforms towards an environment in which markets can evolve differed largely between countries, sectors and between different phases during the past 15 years. IAMO Forum 2005 focuses on this development and discusses the functioning of markets, the requirements for this, and the advantages and disadvantages of other co-ordination mechanisms under different environments in the agricultural and food sectors in Central and Eastern Europe. CEE agri-food markets deserve researchers' and policy makers' attention for several reasons. Two of them regard the high demand for support to policy decisions that aim to stimulate economic and social development in the region. In most CEE countries, the significance of the agricultural and food sector is relatively high with respect to income and employment. In particular, rural areas can benefit from the development of this branch of the economy. Also, there is marked indication that agri-food markets in CEE are not ensuring exchange as frictionless as possible. This means that large benefits can be expected if potential improvements of the economic environment are implemented and if individual agents adapt optimally to that environment. Another motivation for economic research on transition countries is that we are looking at a huge region that started almost as a vacuum with regard to institutional settings. This means that a wide range of substantially different settings were introduced in the respective countries, and were only weakly confined by political rigidities or path dependencies. From a distant perspective, the repeated fundamental shifts in recent economic policies almost evoke the impression of a trial and error approach. The consequences of distinctively different options (across countries and periods) can be observed in a way almost similar to a laboratory situation. Such unique opportunity has attracted economists, particularly those interested in institutional economics, to conduct research on CEE. However, this also means that the experiences made in CEEC can enhance the general understanding of what markets can do and what the limitations of market coordination are. This volume contains selected contributions presented at IAMO Forum 2005 and gives an overview of the major topics discussed there. Partial analyses of specific economic problems usually abstract from the general economic framework which is assumed to be more or less constant as expressed in ceteris paribus clauses. Oftentimes, the set of institutional conditions is even assumed to be sufficiently well-described by the framework used in neoclassical models. Particularly for transition countries, this has frequently led to spurious results because crucial aspects of the framework actually in place were not considered, and sometimes were not even thought of. An extreme and very obvious example is the neglect of the effects of the replacement of monetary by nonmonetary exchange in phases of a barter economy. There is no generic approach to avoid unintended omission of crucial framework conditions, but it must generally be emphasised that a broad look at the various interdependent markets and at the entire socioeconomic context of a country is needed before going into detail. Descriptive analyses of the situation in various markets form part of such a broad look. The contributions of POPP, FERTÃ et al., WILKIN et al., and HEIN in the chapter Selected analyses from CEEC provide excellent examples, and focus on market developments in new EU member countries. On the one hand, the papers show the heterogeneity of problems e.g. due to largely differing farm structures. On the other hand, several common patterns can be observed: The market shares and power of large processors and retailers (hypermarkets, etc.) are increasing. Also, international (especially intra-EU) trade in commodities has increased in response to CAP-induced price harmonisation. Both tendencies weaken the market position of farmers, particularly small entities which cannot supply in volumes sufficient for large processing and trade firms. Within the food industry concentration increased as many smaller firms could not comply with EU processing standards and had to quit the market. The increased size and specialization of large producers, as well as of large processors, made many of those firms co-ordinate business with each other through long-term contractual agreements rather than by relying on spot markets. This tendency is very distinct in the fruit and vegetable sector, as WILKINâs contribution describes. Two contributions draw attention to the institutional framework itself, mainly by looking at circumstances which prevent market allocation from leading to an optimal outcome. HOBBS describes factors that impede investment and growth by drawing on transaction cost economics. Situations typical for transition countries are highlighted where e.g. transparency is not sufficient or the existence and reliable enforcement of contract or corporate law are not guaranteed. NUPPENAU stresses the need for the appropriate and precise formulation of land property rights, which should evoke a balance between governance and exclusion. The importance of appropriate and reliable institutions to avoid flaws is emphasised. But even with suitable institutions, transaction costs cannot be reduced to zero. The main reason for this is that since agents may gain form a head start of information, incentives to reveal their knowledge are quite restricted. Furthermore, some of the information required to make correct decisions is not available. This especially concerns information regarding all future contingencies. An uncertain future and the asymmetric distribution of information impose special problems when decisions have long-term effects and agents are linked together through investment decisions. This offers possibilities for opportunistic behaviour, i.e., when an agent behaves in a way that allows him to extract rents from the partners' activities. The friction induced in such situations may result in a market outcome that is biased by transaction costs. Mitigating this bias should be a goal of public policy but it is also in the interest of (at least some of the) private agents involved. This issue is discussed in more detail in the papers dealing with alternative governance structures. A number of contributions to IAMO Forum highlight approaches for measuring the well-functioning of markets. While studies that aim to directly measure transaction costs are very rare and are necessarily limited to comparing only very specific portions of transaction costs, most studies focus on indirect indicators. These usually start from the idea that in a well-functioning, competitive market any supply or demand shocks are reflected in price changes, not only in the particular market where the shock occurs but also in other, related markets, i.e., in different locations or at different stages of the production and marketing chain. Consequently, an approach for assessing the functioning of markets is to compare price differentials with processing-, marketing- or transfer-costs, or â since these costs are usually difficult to quantify â to observe price differentials over time. Accepting the assumption that the costs reflected by price differentials are more or less constant (or stationary) over the observed time span, any additional price changes or a lack of price co-movement is interpreted as an indication for insufficiently connected or insufficiently functioning markets. Three contributions in the chapter Analytical approaches for measuring market efficiency describe analyses which mainly focus on the vertical dimension, i.e., between market stages. BOJNEC, in his descriptive price analysis for several agricultural products in Slovenia since 1991, finds a heterogeneous development of the farm gate/consumer price spread: The processing and marketing margins increased for wheat and beef while they declined for grapes (processed to wine), sugar and poultry. BRÃMMER and ZORYA, as well as BAKUCS and FERTÃ, use cointegration analysis to describe the degree and nature of vertical price integration in the Ukrainian wheat market and the Hungarian pork market, respectively. Both studies find that price changes are transmitted vertically, that there is a tendency to "correct" any deviations from some underlying equilibrium price-relationship. However, such error correction mechanisms are found not to be a constant, universal force. In the Hungarian paper, it could only be found for a sub-period of the observed time span, excluding the highly volatile early 1990s. Also, equilibrium was found to be achieved by adjustment of farm gate prices only while the retail prices were found to be exogenous, i.e., not responding to any disequilibrium. The paper on Ukraine shows that adjustment processes between wheat and wheat flour prices cannot be sufficiently described by a constant error correction mechanism for the period 2000 to 2004. In fact, four different regimes of adjustment processes were found to have been in force, reflecting particular phases of largely differing market situations and political interventions. The functioning of markets depends on several crucial conditions. One of these conditions concerns the availability of information. Only if agents have perfect and complete information will the exchange lead to an outcome in which no individual can be better off without reducing the welfare of others. However, in the real world this condition regarding information is not fulfilled. Information is not perfect, since the future cannot be predicted with certainty. Incomplete information results from, first, not all information being revealed, and second, individuals not possessing the mental capacity to collect and process all information. Moreover, because of its asymmetric distribution, information can be regarded as a resource that can be exploited by agents. This means that there are incentives to hamper the diffusion of information to the public domain. In general, the more uncertain the future is and the more information is tacit, the worse markets will function, and the more beneficial become alternative mechanisms of coordination. Three papers dealing with this issue of organisational choice. HANF focuses on governance structures within supply chain networks that are appropriate for allowing an optimal flow of information between the involved individuals while retaining the necessary hierarchy for efficient implementation of strategic decisions. MAACKâs analysis shows that there is strong mutual interest between producers and processors of berry fruits to reduce marketing and procurement risk, respectively. This can be achieved by switching from spot market exchange to contractual supply agreements. A prerequisite for such agreements is that a well-balanced distribution of risks and risk premiums between the farmer and processor is implemented. This means that processors, who â facing a multitude of small producers â are used to opportunities for exerting market power, have to agree to cover part of the production risk through appropriate contractual clauses. Finally, BALINT looks at the various marketing channels used by Romanian farmers and finds that a self-enforcing dualism exists. For commercially-oriented farmers who can supply large quantities, marketing directly to traders, wholesalers and processors is most favourable and involves relatively low transaction costs. Although this form of supply-relationship is usually not based on contractual agreements, it can still be characterised by a certain stability over time. In contrast, small farmers whose production does not considerably exceed the subsistence level incur relatively high (per unit) transaction costs in selling their produce on local markets and to other farmers. Another aspect of organisational choice is the question of whether ownership of production factors is transferred or only the right to use them temporarily. The uncertainty of future developments implies that the possession of resources cannot be only regarded from the point of view of income generation at a certain point in time. With perfect foresight, there is no difference whether a factor is rented or purchased, because the remuneration would be the same. This perfect substitutability is no longer given when the future is uncertain. Income generation, then, is only one feature of ownership. Additional aspects such as insurance, wealth, and speculation as motivations for possession affect the value of ownership and thus shift the demand and supply curves of the factor. HURRELMAN picks up this issue in her analysis of the Polish land market and shows the impact of additional grounds for valuing property on the decision to rent or to buy land. Uncertainty may also affect the specialization of factor use. Allocating a factor of production to different production activities reduces the risk of income instabilities, but at the cost of specialization gains through economics of scale. Moreover, the decision on income combination is â besides risk â affected by a complex interaction of other determinants. GLAUBEN et al., analyse these interactions for the case of part-time farming in China and show how the decision of income combination is affected by household characteristics, human capital and other variables. Incomplete and imperfect information not only causes individuals to choose optimal governance modes, often it is also understood as a call for government intervention. The selected papers in the chapter on policy intervention plead for careful selection and coherent implementation of policy instruments. BENNER, as well as KUHN, highlight the significance of information diffusion and argue in favour of government intervention in this area. However, both emphasise that these interferences should be used carefully and be adjusted to specific market failures. Both argue that setting up information systems would improve the functioning of markets. BENNER also discusses possible negative impacts if governments that engage in setting up and enforcing product and process standards try, at the same time, to foster a sector like agriculture through support in marketing. The latter activity affects the governmentâs (crucial) credibility in the first activity. KUHN points to negative welfare effects and budgetary requirements of an intervention system which is implemented to increase price stability. Moreover, when a government intervenes in market allocation or intends to provide rules that should facilitate the exchange on markets, it has to take into account that the new regulation has to be implemented in a coherent manner. This requires the various policy regulations and institutional settings to be complementary and not cause frictions which hamper the functioning of the system. LERMAN and SHAGAIDA highlight this aspect in their discussion of the Russian land market, where bureaucracy and high costs for the registration of property rights can be regarded as a major cause of the low number of land transactions. However, since economic activities take place in a dynamic environment, the comparative static point of view may lead to inappropriate policy formulation. WANDEL discusses this aspect in the context of competition policy. From a comparative static point of view, market power has to be assessed negatively because of the distortions of resource allocation. However, monopoly profits are an indicator of extra rents and thus provide incentives for market entry. On the one hand, this thread may lead to special pricing schemes and/or to the accelerated development of technological change so that a monopolist can consolidate its market position. But it is possible, on the other hand, that market entry may in fact happen. In this case, one would observe structural change, which would be accompanied by an improved use of resources. This in turn means that competition policy should not be oriented towards an optimal market structure but towards the facilitation of market entry so that competition can discover market opportunities and determine the optimal structure of the market. The present volume shows the wide range of interesting and controversial topics that are concerned when looking at co-ordination, particularly on markets in CEE agri-food sectors. It remains a hope that the heterogeneity and dynamics of the developments will decrease as successful constellations of framework conditions, organisational choices and individual behaviour become more and more obvious and widespread in the region. Conversion to sustainable, balanced patterns might take place, but this cannot be taken for granted. However, chances for such development are better the more stable and balanced political developments, as well as international co-operation, become. We hope that the academic community will contribute towards such goal.Agribusiness, Community/Rural/Urban Development, Industrial Organization, International Development, Labor and Human Capital, Land Economics/Use, Political Economy,

Agriculture in the Face of Changing Markets, Institutions and Policies: Challenges and Strategies

Since the late 1980s, agriculture in Central and Eastern European Countries (CEECs) has been under considerable adjustment pressure due to changing political, economic and institutional environments. These changes have been linked to the transition process, as well as the ongoing integration into the European Union and the world market. Reduced subsidies, increased environmental and food quality demands, as well as structural changes in the supply, processing and food retailing sector call for major structural adjustments and the improvement of farmersâ managerial abilities. Though such changes always carry significant threats to farms, they also offer new opportunities for the farms' entrepreneurial engagement. Upcoming changes in the agricultural environment and their possible consequences for farm structures across Europe are thus still timely subjects. The objective of the IAMO Forum 2006 is to contribute to the success of agriculture in the CEECs, as well as their neighboring countries, in todayâs increasingly competitive environment. Concrete questions the conference focuses on are: What are the most suitable farm organizations, cooperative arrangements and contractual forms? How to improve efficiency and productivity? Where do market niches lie and what are the new product demands? This book contains 33 invited and selected contributions. These papers will be presented at the IAMO Forum 2006 in order to offer a platform for scientists, practitioners and policy-makers to discuss challenges and potential strategies at the farm, value chain, rural society and policy levels in order to cope with the upcoming challenges. IAMO Forum 2006, as well as this book, would not have been possible without the engagement of many people and institutions. We thank the authors of the submitted abstracts and papers, as well as the referees, for their evaluation of the abstracts from which the papers were selected. In particular, we would like to express our thanks to OLIVER JUNGKLAUS, GABRIELE MEWES, KLAUS REINSBERG and ANGELA SCHOLZ, who significantly contributed to the organization of the Forum. Furthermore, our thanks goes to SILKE SCHARF for her work on the layout and editing support of this book, and to JIM CURTISS, JAMIE BULLOCH, and DÃNALL Ã MEARÃIN for their English proof-reading. As experience from previous years documents, the course of the IAMO Forum continues to profit from the support and engagement of the IAMO administration, which we gratefully acknowledge. Last but not least, we are very grateful to the Robert Bosch Foundation, the Federal Ministry of Nutrition, Agriculture and Consumer Protection (BMELV), the German Research Foundation (DFG), the Haniel Foundation and the Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO) for their respective financial support.Agribusiness, Community/Rural/Urban Development, Farm Management, Industrial Organization, International Development, Labor and Human Capital, Land Economics/Use, Productivity Analysis,

Development of small farms in EU 10 (CEECs) between 2005–2010

The paper deals with developments and possible future of small farms in EU with special respect to EU 10 (Central East European Countries, CEECs) analyzing the structure of small farms by economic and area size on one hand and, their Standard Output (SO) as well as labor use (Agricultural Working Unit, AWU) and the farm manager aspect on the other. The main conclusions of the paper underline that importance of small farms in rural development cannot be neglected by policy makers, although, trends of development indicate certain differences in concentration in economic size, area size, standard output (SO) and engaged labor between CEECs. It was pointed out that decline of number of farms and that of small farms especially has continued between 2005 and 2010 more in EU 10 than EU 27 and more in case of farms with less than 2 ha (UAA) in EU 10. Decline was much higher in case of small farms run by managers over 65. Labor use also went back in small farms more in EU 10 than EU 27 and more in case of farms with UAA below 2 ha. Standard Output grew faster in EU 10 than EU27, however concerning SO of small farms below 5 ha a higher declined was observed in EU 10 in compare with EU 27. Brief evaluation on effectiveness of CAP in 2006–2013 programming period and future policy towards small farms for 2014–2020 was also discussed