CAP Direct Payments and Distributional Conflicts Over Rented Land within Corporate Farms in the New Member States

This paper aims to investigate whether distributional issues within corporate farms in the New Member States will be exacerbated by the introduction of the CAP direct payments. The paper focuses on the specific impact of the payments on the land rented to the corporate farms by private landowners. If the latter are not satisfied with the level of rent they receive, they have the option to end their rental contract and withdraw their land from the farm. Before the accession to the EU the landowners did not have strong incentives to withdraw, as the other available opportunities were not associated with higher returns on land ownership. However, this situation might change as the landowners can now cash the direct payments themselves, providing they keep their land in good agricultural and environmental condition. Propositions generated by a simple game, representing the negotiations between a corporate farm manager and an individual landowner about the level of the rent, suggests that the CAP direct payments might induce more rent renegotiations but that overall withdrawals will be infrequent. The results from a survey of landowners in corporate farms in Slovakia and in the Czech Republic seemed to corroborate these a priori expectations. The investigation of the determinants of landowners' intended behaviour showed that what seems to be important in the decision-making is the relationship between landowners and managers. Landowners who have frequent contacts and close relations with the farm are less likely to withdraw.CAP direct payments, corporate farms, distributional conflicts, game theory, landowners, Agricultural and Food Policy, Land Economics/Use,

Could small dairy farms in Switzerland compete with their French counterparts? A metafrontier analysis during 1990-2004

The objective of the paper is to investigate whether Swiss farms specialised in dairy (the prevailing production of the country), which are small in international standards, would have a survival potential if they had to compete more directly with EU farms. More specifically, we investigate whether Swiss dairy farms would be able to compete with their French counterparts (located in mountainous areas, but larger than Swiss ones) in a future made of increased globalisation and reduced borders. For this we evaluate which country, during the period 1990-2004, would have been more able to use efficiently a common hypothetical technology, and would have had a more productive (own) technology. Efficiency scores and technology ratios are calculated using the concept of metafrontier and the Data Envelopment Analysis (DEA) approach. Results indicate that Swiss farms would have been slightly less efficient on average with respect to the common frontier, and that they had a less productive technology, the productivity gap with France being however only 5 percent. Regression results suggest that the efficiency differential and the productivity gap between Swiss farms and French farms were mainly due to larger Swiss farms with lower labour per livestock unit and higher proportion of family labour.technical efficiency, technology gap, Data Envelopment Analysis, dairy farming, Switzerland, France, Agricultural and Food Policy, Productivity Analysis, Q12, D24,

Credit access and borrowing costs in Poland's agricultural credit market: a hedonic pricing approach

The paper empirically investigates credit access and borrowing costs in Poland's rural financial market. We conduct an econometric analysis based on cross-sectional survey data including formal loans taken in the period 1997-1999. A hedonic regression of the effective interest rate, comprising both the nominal interest rate and additional transaction costs faced by farmers, allows the identification of the determinants of borrowing costs. These determinants can be interpreted as loan attributes and their implicit prices calculated. We proceed in two steps. In the first step, farmers' credit access is estimated by a Probit model. The second step is the hedonic regression, in which the Probit results are taken to test for selectivity. The results support the widely held view that formal lenders tend to discriminate against smaller farms. They also suggest that the presence of devices to screen and signal the quality of borrowers makes borrowing more likely and reduces borrowing costs. Furthermore, the analysis reveals that the choice of the type of bank has a significant effect on borrowing costs. All other loan attributes equal, the traditional institutions for agricultural lending (the cooperative banks and the governmentally controlled Bank for Food Economy) offer between 1.1 and 1.3 percentage point higher effective interest rates as compared with the most favourable terms available, which has implications for a potential future restructuring of the Polish rural banking sector. In addition, there is strong evidence that the government subsidisation of nominal interest rates is severely counteracted by increased transaction costs and an adverse selection of borrowers. However, there is still a net reduction of the effective interest rate by 1.4 percentage point on average, compared to non-subsidised loans. This raises the question whether lending procedures under the government programme are sufficiently streamlined and whether loans are effectively targeted. -- G E R M A N V E R S I O N: Gegenstand dieses Beitrags ist die empirische Untersuchung von Kreditzugang und Kreditkosten auf Polens ländlichen Finanzmärkten. Zu diesem Zweck wird eine ökonometrische Analyse von Querschnittsdaten durchgeführt, die Informationen zu formellen Kreditkontrakten für die Zeitperiode 1997-1999 beinhaltet. Mit Hilfe einer hedonischen Regression des effektiven Zinssatzes, der sowohl den nominalen Zinssatz als auch zusätzliche Transaktionskosten umfasst, werden die Determinanten der Kreditkosten analysiert. Diese Determinanten können als Krediteigenschaften interpretiert werden, was eine Berechnung ihrer impliziten Preise ermöglicht. Unser Vorgehen besteht aus zwei Schritten. Im ersten Schritt wird der Zugang zu Krediten durch ein Probit-Modell geschätzt. Der zweite Schritt beinhaltet die hedonische Regression, wobei die Probit-Ergebnisse für einen Selektivitäts-Test verwendet werden. Die Ergebnisse bestätigen die verbreitete Ansicht, dass formelle Kreditgeber kleinere landwirtschaftliche Betriebe tendenziell benachteiligen. Die Ergebnisse legen außerdem nahe, dass Verfahren zur Aufdeckung und Signalisierung der Nachfragerqualitäten die Kreditaufnahme wahrscheinlicher machen und die Kreditkosten senken. Die Analyse verdeutlicht, dass die Wahl der Bank einen signifikanten Effekt auf die Höhe der Kreditkosten hat. Bei sonst gleichen Vertragseigenschaften bieten die traditionellen landwirtschaftlichen Kreditgeber (die Genossenschaftsbanken und die von der Regierung kontrollierte Bank für Nahrungsmittelwirtschaft) um 1,1 bzw. 1,3 Prozentpunkte höhere effektive Zinssätze, verglichen mit dem günstigsten Angebot. Dies ist für eine künftige Restrukturierung des ländlichen Bankensektors in Polen von Bedeutung. Außerdem gibt es deutliche Hinweise darauf, dass die Wirkung der staatlichen Zinssubventionierung durch gesteigerte Transaktionskosten und adverse Selektion von Kreditnehmern stark verringert wird. Allerdings führt sie im Vergleich zu nichtsubventionierten Krediten immer noch zu einer Netto-Verringerung des effektiven Zinssatzes um durchschnittlich 1,4 Prozentpunkte. Es stellt sich daher die Frage, ob die Vergabeprozeduren des staatlichen Kreditprogramms hinreichend effizient sind und ob die Kredite effektiv plaziert werden.agricultural finance,credit policy,transaction costs,Poland,microeconometrics,Agrarfinanzierung,Kreditpolitik,Transaktionskosten,Polen,Mikroökonometrie

Subsidies, Production Structure and Technical Change: A Cross-Country Comparison

The effect of subsidies on production and technical change of crop farms in France and the United Kingdom (UK) during 1980-2006 is investigated. Subsidies were not neutral on production decisions, in terms of production intensity and type. Crop farms in both countries have experienced technical progress during the period studied, higher in France. Technical progress has favoured labour and chemicals in both countries, land in France, capital in the UK, while it has disfavoured land in the UK and capital in France. Technical change has been slowed down by crop area subsidies but increased by agri-environmental subsidies in both countries.technical change, subsidies, input bias, crop farms, Agricultural and Food Policy, Production Economics, Public Economics,

Farm performance and support in Central and Western Europe: A comparison of Hungary and France

The paper investigates the difference in technical efficiency and in productivity change, and the technology gaps, between French and Hungarian farms in the dairy and cereal, oilseeds and proteinseeds (COP) sectors during the period 2001-2004. The analyses are performed with national FADN data and the Data Envelopment Analysis (DEA) approach under each country’s respective frontier and under a metafrontier. Results revealed that in both the dairy and the COP sectors, Hungarian farms’ technology was the more productive, despite a technological deterioration. This suggests technological advantages for large-scale (Hungarian) over small-scale (French) farming in these two sectors. These findings may also be explained by the higher policy support in France. Subsidies received by farms have indeed a stronger negative impact on technical efficiency for French farms than for Hungarian farms, and a negative impact on the ability to lead the technology only for French farms.technology gap, technical efficiency, Malmquist indices, subsidies, farms

Technical efficiency and conversion to organic farming: the case of France

Using a panel of French crop farms, we test whether farmers’ technical efficiency under conventional practices is a significant driver of conversion to organic farming. An important issue is whether subsidies to organic farming could encourage inefficient farmers to convert. We find that the probability of conversion does depend on technical efficiency preceding the conversion, but that the direction of the effect depends on farm size. This result is found to be robust to the method of calculation of efficiency scores, either parametric or non-parametric. This study also confirms that farm’s characteristics impact the probability of conversion to organic farming.organic farming, technical efficiency, subsidies, adverse selection, France

Another look at the distribution of direct payments: The link with part-time farming

This paper contributes to the research about the relationship between off-farm employment and public support, by taking the issue upside down: does off-farm employment give an advantage to farms regarding the level of public support? Our hypothesis is that a higher degree of decoupling enables part-time farms to capture more easily direct payments than full-time farms. To test this, we compare the largely decoupled direct payment system in Switzerland in 2004, and the rather production-oriented payment system in France in 2003. Results show that Switzerland’s policy favoured farmers with an off-farm employment, while the French direct payment system had the opposite effect.direct payments, distribution, part-time farming, Switzerland, France

Converting to organic farming in France: Is there a selection problem?

Using a sample of French crop farms during the 1999-2006 period, we test whether less technically efficient farmers are more likely to engage in organic farming in order to benefit from conversion subsidies. Despite some limitations in our data, we find no evidence of such selection effect. On the contrary, our estimation results indicate that more technically efficient farmers are more likely to convert to organic farming. This finding is found to be robust to the method of calculation of efficiency scores, either parametric or non-parametric. This study also confirms that farm’s characteristics (education, farm size and legal status) and farmers’ practices under conventional farming do impact the probability of conversion to OF.Organic farming, technical efficiency, subsidies, selection, France, Agricultural and Food Policy, Crop Production/Industries, Farm Management, Land Economics/Use,

Short-term Marginal Costs in French Agriculture

Farm Management,