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From "Reports On Agriculture", exercise book 3 / September 2007, volume 85

Strategy evaluation based on rate of return figures in agricultural business planning

By HERMANN PEYERL and GÜNTER BREUER, Vienna

Increasingly difficult conditions within the agricultural sector require models for business planning which allow strategic alternatives to be compared. In the agricultural sector, quantitative business planning is often limited to cost calculation systems. However these methods do not sufficiently take into account cash flows and changes in the value of business assets. This paper presents a whole-business model for calculating profitability figures on the basis of the internal rate of return. It enables strategic alternatives to be evaluated consistently. Moreover, it also allows account to be taken of the often neglected interactions between the business sphere and the agricultural budget. Due to the importance of non-remunerated production factors in the agricultural sector, the data are aggregated at several levels. First, the components which influence payments are considered. In further steps calculation-related. components, such as labour time of family members or the agricultural land owned by the enterprise, are also included. The concept is illustrated using a model farm which is considering expansion through leasing of additional land.


Criteria for the documentation of Cross Compliance commitments of agricultural enterprises and other requirements regarding the development of single-farm management systems (under EC Regulation 1782/2003 and the framework plan of the German Joint Task for the improvement of agrarian structures and coast protection (GAK) for the period 2005 – 2008)

By NORBERT LÜTKE ENTRUP, Soest, JUDITH BECK, Dornburg and FRANZ-FERDINAND GRÖBLINGHOFF, Soest

The pilot project on the "development of a single-farm management system for North Rhine-Westphalia (NRW)" examined the usability of selected agro-environmental indicators and documentation of animal production. For each indicator tolerable ranges were fixed and assessed in a scale, the documentations had to be verified for sake of completeness. Supported by advisors to the Chamber of Agriculture of North Rhine-Westphalia, 101 agricultural enterprises of different types (arable farming, livestock farming, forage growing and mixed farming types) were selected.

The number of farms exceeding the tolerable range varied with the different indicators. The situation regarding the N-balance indicator was very critical; 79 % of the farms could not meet the requirements. The balances of the other nutrients was better: only 42 % were outside the P-balance ranges, 35 % outside the K-balance ranges and 47 % outside the humus-balance ranges. With regard to the indicators for soil conservation (erosion risk and compaction risk), only 2 % and 6 %, respectively, of the farms showed deficits. In respect of the use of pesticides, only 14 % farms had problems. 24 % of the farms were seen to have an insufficient number of crops. The energy balance is insufficient in 52 % of the cases, mostly due to high livestock density.

An advisory report was submitted to every participating farm. The deficits were shown and initial instructions were given to improve the management and the farming situation. A questionnaire was used to examine whether the results were correct and understandable for the farmer and whether the instructions could be implemented in farm management.

The evaluation of the results showed that the interpreted results of the surveyed indicators and documentation were useful for nearly all of the farms. Additionally, the project showed that at least three years of surveys are necessary to produce incontestable statements.
The results show that North Rhine-Westphalia has a system which conforms to article 13 EC Reg 1782/2003. In combination with the Chamber of Agriculture’s system for checking cross compliance, it is possible to offer a complete system of 'single farm Management' regarding the GAK framework plan 2005-2008.

Private transaction costs in the context of a repeated call for tender for ecological services in agriculture

BY MARKUS GROTH, Lüneburg

The article evaluates the farmers’ transaction costs defined as the weighted time spent on preparing their offer for two calls for tender for environmental services in agriculture which were carried out as a pilot project. Following a discussion of the specific need for research, the paper gives a brief introduction of the practical use of calls for tender and carries on to define the relevant transaction costs and introduce the methodological procedure. On the basis of three written interviews the time spent preparaing the offers and the individual monetary valuation of the time expended are discussed for both calls for tender. The results show the diverse individual transaction costs, their unequal relevance and also a decrease from the first to the second call for tender.


Selected aspects of the agricultural structure change in the Alps - A comparison of harmonised agristructural indicators at municipality level
within the Alpine Convention area

BY THOMAS STREIFENEDER and FLAVIO V. RUFFINI, Bozen

Studies on the change of agricultural structures across the Alps are difficult to perform because of the necessary acquisition and harmonisation of data. First results of the "Agralp" (www.eurac.edu/agralp) project show how the agrarian structural change in the Alpine area has developed between 1980 and 2000. Selected agro-structural indicators, such as farm abandonment rate, full-time and part-time farming and utilised agricultural area, were analysied at municipality level (6,000 municipalities) within the perimeter of the Alpine Convention. In order to make the data comparable for the entire Alpine area, the data were subjected to a comprehensive harmonisation process. To evaluate the results, the agricultural changes of the individual Alpine regions were compared with the change in the respective country as a whole. Furthermore, the relevant causes for the determined changes were investigated.

In the entire Alpine region, substantial farm abandonment (-40 %) over the 20-year period was seen to occur together with profound changes of operational structures. Alpine regions with a relatively stable situation (Austria, Switzerland) stand in contrast with regions with strong agricultural changes (Italy, Slovenia). This contrasting development is due to various cultural, agropolitical, economic and operational factors. The study examines what kind of changes have occurred and how strong the changes of the operational structures have been (enlargement of farm-size, abandonment of utilised agricultural areas, changes in the percentages of different socioeconomic farm types). Contrary to the expectations, mountain areas did not always experience a stronger structural change than non-mountain areas. For example, farm abandonment in the German and Austrian Alpine regions proved to be lower than the respective national average. Apart from large national and regional differences in the Alps, the analyses also highlighted parallels in the changes to their agricultural structures. Compared with the alpine-wide average, the Alpine areas of the respective countries (1980 – 2000) underwent moderate (Austria/Germany/Switzerland), dynamic (Italy/Slovenia) and uncorrelated (France) changes regarding the number of farms and the utilised agricultural area.

Presented for discussion: the "Pachtkreditvertrag" (lease credit agreement)

By ULRICH BODMER and KATHERINA KLIMOVA, Freising

The main way in which farms grow in Germany is currently by means of renting land. However, this tends to result in a deterioration in the ability of these enterprises to finance investment in expanding the business, as they have fewer and fewer securities of value to offer to lenders in the scope necessary.

The types of security that are commonly used in practice in such situations have a number of disadvantages for the lending banks, the landlords and those renting the land. The Leasehold Credit Act (Pachtkreditgesetz) was therefore developed in order to enable farms with a large amount of rented land to nevertheless obtain loans at comparatively good conditions. The Leasehold Credit Act creates a specific non-possessory lien for the obtaining of comparatively favourable loans, which is geared towards the needs of the agricultural sector, while still protecting the interests of the lenders and landlords. In practice, however, leaseholder credits are now largely unknown and have been replaced by securities, such as a transfer of ownership by way of security, which are problematic for both lender and borrower.
The paper aims to show some of the advantages of the leasehold credit (Pachtkredit) and to start a discussion about whether leasehold credits could not, given the growing importance of leasehold in the agricultural sector in Germany, be used to a greater extent, possibly in modified form with a register of pledges regarding movable property, as already used in new EU States.

Information society in the agricultural and food sector - challenges, potential and requirements for development

By REINER DOLUSCHITZ, Stuttgart

Today more than ever, agriculture, including up-stream and downstream sectors, face the overriding challenge of developing a sustainable connection between consumer protection, animal-welfare, quality assurance, and economic and ecological sustainability.
In view of this, this paper aims to analyse how information technology can contribute to this aim. The following areas must be analysed: the information needs of operators (within and outside their field of operation), the requirements of management, and the data and information requests made of the agricultural and food industry which result from quality assurance and traceability processes, and from legislative stipulations. This demand for information must be compared with information availability (both technical feasibility and practical application), in order to enable deficits to be identified. A synthesis is then used with the aim of allowing urgent development needs to be formulated, for the needs to be categorised based on technical and organizational parameters, and for possible avenues of research, training and consulting to be indicated.

In summary, it can be stated that, other than a few exceptions, the need for information in the classic fields of processes, enterprise sectors and companies, and also the need in these areas seen over space and time, has grown and will continue to do so. The requirements of value added chains at sectoral level create a clear net increase in information requirements, most notably due to the pertinent regulatory and legal frameworks and the justifiably higher quality assurance requirements.

With regard to the current potential, it can be confirmed that, from a technological perspective, precision agriculture can deliver almost unlimited data availability. However, on the other hand, there are comparatively large deficits in the fields of analysis and goal-oriented preparation and interpretation of this data, i.e. in the field of software and its application, as well as for the preparation and making of decisions. Countless studies have demonstrated that at both German and international level, the degree of penetration in agriculture and agriculture-related enterprises in respect of hardware infrastructure is high and is continuing to grow. In contrast, there is a need for improvement with regard to the implementation of e-business strategies and, in general, in the field of IT training.

Technical and organisational requirements can be distinguished based on IT-relevant development requirements. Key technical development requirements include the optimisation of networks, the integration of distributed data, functions and systems, the development and implementation of data standards and the general dissemination of key technologies (e. g. RFID). From the organisational point of view, e-business must be developed further, and data protection and security requirements must be clarified; further training campaigns aimed at the relevant stakeholders are also necessary.

With regard to the consequences for research, training and consulting, it can be clearly stated that research must be more interdisciplinary and must involve cost-benefit analysis. In addition to this, the factors influencing acceptance, as well as the possibilities and limits for the integration of IT into chains should be studied. Efforts in the field of training should have as a primary goal the increase of human capital in the fields of research, consulting and practice. Targeted advice should aim to promote acceptance of information technologies as well as showing the potential and advantages.


Good Governance in the Agri-Food Sector – Report on the 46th annual meeting of the German Society for Economic and Social Sciences in Agriculture (GEWISOLA) in Gießen in 2006 –

By RENÉ BORRESCH, JOACHIM W. HESSE, AIKATERINI KAVALLARI, FRIEDRICH KUHLMANN, NATALIYA MÖSER, KIM SCHMITZ, P. MICHAEL SCHMITZ and JULIANE STOLL, Gießen

From 4th to 6th October 2006 the 46th Annual Meeting of the German Society for Economic and Social Sciences in Agriculture took place at the Justus-Liebig-University of Gießen. The overall topic of the conference was "Good Governance in the Agri-Food Sector". The focal point of the conference and in particular of the four plenary sessions comprised the analysis and evaluation of policies and institutions as well as the importance of good or bad governance and administration in the efficiency of the agricultural markets and the competitiveness of the agricultural and of the agri-food sector from the perspective of the overall economy and of agriculture in particular as well as of the agri-food sector of industrial and of transition economies. Papers with individually selected topics were also presented. The studies addressed issues related to business strategies, consumer behaviour and quality management, emphasising the areas of investment, financing, allocation of resources, efficiency of production, agricultural liberalisation, as well as issues regarding the role of institutions and administration, impact on employment, structural effects and land use effects. Other aspects discussed during the meeting included ecological agriculture, sustainable development and risk reduction. For the first time, this year awards were given to the best paper contributed, the best paper presentation contributed and the best poster paper presentation.

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