Economic Viability by Farm Size of Estonian Family Farms

Abstract

Small farms are subject to a wide range of influences on their viability including economic, policy and regulatory drivers as well as internal farm household drivers of change. Small farms have experienced a decline in numbers compared to large farms. The main task of the paper is to determine the share of viable farms of different size groups in Estonia, exploring the factors that are associated with economically viable farms. For determination of the share of viable farms of different size groups the opportunity-cost-based approach is used. Farm viability is estimated by using the data from the Estonian Farm Accounting Data Network. The results indicate that the economic viability of Estonian farms has slightly increased, but the share of viable farms has decreased. Smaller farms' economic viability is declining, many of them are economically vulnerable. Smaller farms' capability to survive and develop by using the available resources is lower compared to larger farms.

Konwergencja efektywności ekonomicznej w gospodarstwach rolnych Wielkopolski

“…Po wygaszeniu produkcji mogą one pełnić funkcje rezydencjonalne. Sytuacja taka obserwowana jest w wielu krajach UE (Nurmet, Omel 2020). Dochód porównywalny z dochodem z pracy poza rolnictwem możliwy jest do uzyskania w gospodarstwach co najmniej średnich, zaliczanych do trzeciej i wyższych grup wielkości ekonomicznej, a takie stanowią około 11% wszystkich gospodarstw rolnych w Polsce (Józwiak i in.…”

“…Należy przychylić się do wniosków innych badaczy (Józwiak i in. 2019, Nurmet, Omel 2020, że możliwości rozwoju mają gospodarstwa co najmniej średniej wielkości, a substytuowanie ziemi, np. praca, ma ograniczone znaczenie.…”

Economic Viability of Family Farms in Europe – A Literature Review

“…Choosing a reference income (threshold wage) is one of the key problems in analysing economic viability and can significantly influence the results of analyses, especially in the case of international comparisons. The most frequently used approaches include: the minimum wage, the minimum [Hennessy, Moran 2015] or average wage in agriculture [Ryan et al 2016, Nurmet, Omel 2020 or the average wage in the national economy [Goraj 2010, Vrolijk et al 2010, Coppola et al 2020, Kołoszycz 2020.…”

“…The opportunity cost of own capital is usually estimated with the use of long-term bond interest rates [Vrolijk et al 2010] or long-term interest rates provided by the European Central Bank [O'Donoghue et al 2016, Nurmet, Omel 2020. Given the strong decline in interest rates in EU countries in recent years, or even negative rates, this approach might also be problematic.…”

“…According to a study by Maire Nurmet and Raul Omel [2020], based on Estonian FADN data from the years 2006-2015, although the viability of Estonian farms has slightly increased, the share of viable farms has decreased from 59 to 37%, on average. A particularly strong decline was observed in the periods of global economic downturn in 2009 and 2014.…”