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From "Reports on Agriculture", Exercise number 3, December 2009

Economic impacts of alternative agricultural developments on landscape conservation and potential contributions of price premiums for products produced in compliance with nature conservation guidelines in the district of Diepholz, Lower Saxony, Germany

By Christian Albert, Hannover, Joachim Aurbacher, Hohenheim, Christina von Haaren, Bernd Mahnkopf, Hannover, Cord Petermann, München

Landscape conservation faces unfavourable economic conditions due to high or volatile agricultural prices and low budgets for agri-environmental measures. Against this background and by using the example of the Diepholz Moor Lowlands, this article explores the borrowing requirement for landscape conservation based on two different development variants: optimum nature protection and minimum nature protection. The article also studies the extent to which price premiums for meat from animals bred in compliance with nature-conservation guidelines can contribute to the financing of nature conservation. Regionally-specific business data from farms were collected to determine average cost and revenue of landscape conservation with mother cow or sheep breeding. The borrowing requirements of landscape conservation under two alternative scenarios (reference and liberalization) were calculated. It is shown that sheep breeding in the Diepholz district today is financed by public spending only to a marginal extent. In the liberalization scenario however, the economic attractiveness of sheep breeding seems to be relatively more advantageous. In the liberalization scenario, the borrowing requirement in both nature-protection variants decreases against the reference scenario by 5 to 6 percent. The potential contribution that price premiums on meat from landscape-conservation measures could make towards covering the borrowing requirement would account for up to 96 percent in the liberalization scenario (assuming sufficient demand for all generated products). However, the establishment of a working sales network is complicated and has hitherto been effectively implemented only at regional level. This regional scope is far too insufficient for selling the whole production potential. The remaining borrowing requirement would have to be covered by public or private funding.

Sustainability of agricultural holdings - classification and strength-weakness analysis of evaluation systems

By Reiner Doluschitz, Stuttgart, Rita Zapf and Ute Schultheiss, Darmstadt

Undoubtedly, food and nutrition security, more efficient use of resources, the cultivation of renewable raw materials for producing bio-energy, the effects of climate change, the optimisation of water management and the preservation of biodiversity are core challenges which agriculture, agribusiness and agricultural policy must nowadays confront. In this context, the call for increases in production and intensification of agricultural production within limited resource budgets is growing louder. Such a course may only be taken in conformity with sustainability considerations. Against this backdrop, systems for evaluating sustainability at the agricultural operations level have been developed in German-speaking countries, among others. The KTBL regards this as an opportunity and has committed itself to making comparative analyses of such systems with the aid of an interdisciplinary task group.

This article is concerned with the classification and demarcation of the said systems vis-à-vis existing tools designed for examining or implementing individual aspects of sustainability. Operational management systems, certification systems, systems for supporting the self-monitoring of agricultural enterprises, EMAS/ agricultural ecological audit, life cycle assessments, indicator systems for measuring the environmental friendliness of agricultural enterprises, indicator systems for measuring animal welfare as well as simulation and optimisation models will be introduced in relation to their specialised functionalities and applications. Indicator systems for measuring operational sustainability will then be differentiated andtheir strengths and weaknesses, opportunities and risks identified.
Despite the limitations described,the operational assessment systems under review have the potential to map and assess the ecological, economic and social agricultural situation of an enterprise in accordance with the concept of sustainability. However, understandable reservations exist which have resulted in such systems findingvery limited acceptance in practice. Nonetheless, it appears in the long term that a growing necessity to take sustainability considerations in agricultural production into account could promote further expansion of enterprise assessment systems.

Assessment of sustainability - common requirements and comparative evaluation of the systems RISE, KSNL and the "DLG certification system for sustainable agriculture"

By Rita Zapf , Ute Schultheiss, Darmstadt, Reiner Doluschitz, Stuttgart, Hohenheim, Rainer Oppermann, Trenthorst, Helmut Döhler, Darmstadt

The assessment methods that are especially helpful in the assessment of farm business sustainability are those offering information to the farmer on the economic, ecological and social sustainability of his farm.

On the basis of a previously developed requirement profile, a KTBL working group tested three farm business assessment systems: Criteria System Sustainable Agriculture (known in Germany by the acronym KSNL), Response Inducing Sustainability Evaluation (RISE) and the DLG (German Agricultural Society) certification system for sustainable agriculture.

Indicators for assessing ecological sustainability should cover the areas soil, water, air/climate, resources and also biodiversity/habitat and landscape. The economic indicators should offer information on profitability, stability and liquidity and the social ones on the issues "individual work situation", "employment situation including career and social security" as well as "social integration". Alongside technical content, the three systems were also tested for further characteristics of practicability, usefulness and acceptance.

The Swiss system RISE is globally available as a tool for a first internal sustainability screening for identification of strengths and weaknesses. But it is less suitable for identifying differences between farms with similar local conditions and business structures in countries where the special legal requirements are high. Through the analysis of exemplary farm groups RISE can be used for assessing the sustainability of production across numbers of farms in different countries or regions.
For well-organised German farm businesses KSNL is appreciated as being an effective tool for identification of avoidable problems (weakness analysis) with sufficient selectivity to meet advisory requirements for precise managementoptimisation and strategic decision-making. However, an evaluation for animal welfare standards is still missing so far.

The DLG certification system for sustainable agriculture is also suitable as an instrument for creating a differentiated strengths-weaknesses analysis for well-organised German farming businesses. However, its usefulness for fine-tuning management decisions is limited and the animal production aspect is currently still incomplete.

For contact outside practical farming, both the latter systems offer a good prerequisite as a basis for communication of farm business sustainability with trade, banks, landlords or the authorities.

Development of the incomes, liquidity and stability of pig holdings

By Werner Kleinhanns, Braunschweig

The pig market is characterized by cyclical variations which are reflected in the income development of pig farms. On the basis of panel data from the German Farm Accountancy Network, the main developments for farms specialized in pig fattening or the production of piglets have been analysed since 1999/2000. Besides income, liquidity and stability criteria, the parameters of farms which exceed or fall short of the reference indicators are calculated as well. Until 2006/07 the price trend and income developments regarding pig fattening and piglet production were almost synchronous. Due to the divergent price trend for slaughter pigs and piglets, as well as the exploding feed costs in 2007/08, an opposite income effect arose in which the specialised fattening farms registered slightly higher income, while that of the specialised piglet producers decreased by about three quarters. A high portion of the piglet producers suffered losses, in particular in the lowest quartile. High incomes were reached only in farms in the upper quartile. Likewise, the examined liquidity and stability indicators point to the fact that the economic performance of a considerable number of farms is strongly endangered under such framework conditions.

Changes in land use and biomass availability resulting from rising mineral oil prices, food prices or increased agro-energy production

By Hilde Klauss, Philipp Grundmann, Potsdam and Mathias Schindler, Hannover

The profitability and development of the agro-energy sector are strongly influenced by changes in the oil price, food prices and agro-energy support schemes. Therefore, these factors have to be taken into account when assessing the competitiveness of energy crop production or when estimating the prospective availability of biomass for the agro-energy sector. This study examines changes in the use of land and resources for several regions in Germany and the effect on energy crop production caused by the resulting drastic increase in oil prices, food prices, and the expansion of agro-energy production. Optimization models are used that simulate land use as a result of decision-making at farm and regional level. The methodological procedure includes

  • a) the definition of the simulation scenarios,
  • b) simulation of future resources by means of multi-criteria optimization applying linear programming models for regionalized farms,
  • c) analyzing the effect that changing the underlying conditions has on energy crop production and the resulting availability of resources for energy production, and
  • d) assessment of the economic impacts of increasing oil prices, food prices and agro-energy production.

The results indicate that an increase in oil prices improves the competitiveness of food production in respect of the production of energy crops. Simultaneously, rising oil prices weaken the effect of support schemes for agro-energy production, as food production and energy crop production compete for scarce resources.
The results confirm that agro-energy support schemes are the main stimulus for the development of the agricultural energy sector. The changes in resource use and the resulting biomass availability for agro-energy production vary significantly, as they are subject to regional and farm operation characteristics and resources endowment. In accordance with this, chances and risks for the agricultural energy sector differ strongly from one region to another. Future research into the possibilities and risks of agro-energy production should therefore always take the regional distinctions into account.

Evaluation and handling of individual risks and the total business total risk of an investment in a biogas plant

By Christian Rießen, Rostock

The agricultural press indicates that at present many biogas plant operators do not achieve their predicted net yield goals and in some cases experience economic difficulties as a result. In view of the obviously unsatisfactory risk evaluation made at the time the investment decision was taken, this paper focuses on new aspects of risk management with regard to investments in biogas plants. Theses include the evaluation of uncertainties during the investment decision and the evaluation of the total business risk of an investment in a biogas plant. The strengths and weaknesses of the methods of investment calculation are evaluated to identify risks. The significance of a dynamic beginning is highlighted and the close-to-reality method of the complete financial plan is presented.

In order to represent risks completely, it is indispensable to record and consider the reciprocal effects between investment inputs resulting from the different causal connections. Based on the dynamic simulation model simulated in this way, an analysis of sensitivity is carried out to evaluate the single risks, and a Monte Carlo Simulation is conducted to represent the total business risk. With the help of this model-supported dynamic risk analysis, the single risks and the total risk of an investment in a biogas plant are examined and the influence of certain, causal factors on the result is analyzed. The analysis of sensitivity which was used indicates to an investor the different sensitivities and responsibilities of individual inputs in respect of the final result. The Monte Carlo Simulation proves that there is a risk of an imminent inability to pay and indicates probabilities for different investment results.

Coping with Risks in the Agricultural and Food Sector

Report on the 48th annual conference of the German Association of Agricultural Economists (GEWISOLA) in Bonn from 24 to 26 September 2008 by Ernst Berg, Monika Hartmann, Thomas Heckelei, Karin Holm-Müller, Ralf Nolten, Gerhard Schiefer, Bonn

The 48th annual conference of the German Association of Agricultural Economists (GEWISOLA) took place from September 24-26, 2008 at the University of Bonn. Its overall theme was "Coping with Risks in the Agricultural and Food Sector". The two plenary sessions of the first conference day were completely devoted to this general theme. Four invited papers approached the topic from a global perspective, and from the points of view of producers and consumers, respectively. Many of the 36 contributed papers and 27 posters also dealt with aspects of risk and risk management. Besides this, the contributions covered a wide range of topics including firm-level management strategies, consumer behaviour and quality management, market developments, and different aspects of policymaking and its implications. The closing plenary session on the last conference day finally addressed the possibilities and limitations of using indicators to measure research productivity. In this context, the results of the journal-ranking jointly initiated by the German and Austrian Agricultural Economics Associations were presented. The conference finished with awarding the three best contributed papers as well as the best contributed paper presentation and the best poster.

Water supply: a key problem for agriculture and food production in the 21st century

By Walter Kreul, Germering

Food security depends to a very large extent on water security. The amount of food produced globally through irrigation is growing continually. Pressure on agriculture, which uses about 70 percent of the world’s fresh water supply available to mankind, is mounting. "More crop per drop" is the motto. However, the industrial sector and private households, with their various demands for water, must contribute as well when it comes to being more careful with this vital resource. Water is not distributed equally on earth. Where it is scarce, it is usually of lesser quality, with all the negative consequences for human consumption. As can be observed in the Near East, water has already become a source of trouble between nations. With an ever increasing world population, the problem is getting bigger. National and international politics must therefore pay more attention to the issue of water; people’s awareness about water must be raised.

Why do we buy? Values as reasons for a consumers’ decision to buy food

By Astrid Rewerts and Jon H. Hanf, Halle/Saale

Nowadays, companies from the agricultural and food sector have to orientate their products towards the consumers’ wishes in order to be competitive. Hence, competitive advantages can be generated from knowledge about a consumer’s buying motives. Accordingly, the main question is: "Why do consumers buy?" To be able to answer this question, a qualitative study was conducted using the example of wine in February 2007. During this in-depth study, 20 women from Halle/Saale aged between 25 and 45 years, drinking wine at least twice a month were questioned about their buying motives using laddering-interviews based on Means-End Chain Theory. As a main result it can be stated that, among other factors, the values of a sense of well-being/satisfaction and association with local area are important motives when buying or drinking wine.

Efficiency of the Membership of Dairy Farms in a regional cattle-breeding organization in Turkey

By Duygu Aktürk, Çanakkale, Füsun Tatlidl, Ankara und Aynur Konyali, Çanakkale

The data used in this investigation were collected on the one hand from enterprises which were members of a cattle-breeding organisation in the province of Canakkale and on the other from enterprises located in this province that did not belong to any cattle breeding organization. In this study, the enterprises were compared in respect of their technical and scale-related efficiency, paying particular regard to output.

Although membership resulted in significantly higher average lactation length as well as higher productive life for the cattle (P <0.05), there were no significant differences between member enterprises and non-member enterprises in respect of their technical and scale efficiency (P> 0.05). However, bigger enterprises, with more than 10 livestock units, displayed on average greater technical efficiency than smaller enterprises.

The results indicated that the cattle breeding organization was not effective. Technical consultation would have an important role to play in increasing the effectiveness of the cattle breeding organization.

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