From "Reports on Agriculture", Exercise number 2, September 2009

Sustainable development as an overarching policy aim


One of the main features of the 21st century will be the sustainability of development. Production methods in industrial societies and consumer behaviour cannot continue as they are forever. The concept of sustainability unites, on a global scale and across generations, economic prosperity, social justice regarding distribution and opportunities, and protection of natural resources. This threedimensional concept is highly complex and must not be reduced in favour of the primacy of environmental concerns or short-term economic considerations. Sustainability is a guiding political principle. With its national sustainability strategy, the Federal Government has declared its support for sustainability as an inter-ministerial task. Nevertheless, conflict or contradictions in political objectives make it more difficult to achieve a balance between the three objectives of sustainability, global justice, and justice between the generations. For the agricultural, forestry and fisheries sectors, the rules of nature, of social affairs, and of economic efficiency, are elements of sustainable policy aims. The Federal Ministry of Food, Agriculture and Consumer Protection was the first ministry to draw up its own sustainability concept. Resource-conserving soil cultivation and high-quality plant production are of decisive importance in protecting the fertility of the soils for coming generations. Forests are gaining in importance as a source of raw materials, recuperation and biodiversity, andas a CO2 sink. Sustainability in handling resources is also necessary in the fisheries industry, so that marine resources are available to future generations as well. Providing a growing global population with food is also part of sustainable development. Greater yields, new technologies in plant and animal breeding and sustainable production are required throughout the world. The current economic crisis must not distract attention from sustainability as an overarching principle.

The European Dairy Market in Transition – New Challenges for Dairy Farmers and Dairy Cooperatives in Baden-Württemberg


The current EU milk quota system will most likely be terminated in 2015. This requires adaptation measures by the milk producers as well as the milk processors. These adaptations will presumably lead to structural changes at both the regional and at the enterprise level, especially in the mainly small structuredand heterogeneous federal state of Baden-Württemberg.
This contribution outlines the development of the milk quota system and its changes and adjustments since 1984. It describes the structures of dairy production and processing for Baden-Württemberg and derives the requirements for their structural adjustment. In addition, the attitudes of the actors of the dairy industry towards market changes and their consequences are presented.
Based on these findings, the author suggests that structural change of the dairy farms is needed and that the management and entrepreneurial skills of farmers will become more important in a liberalised market. Dairies are advised to make use of existing structural reserves and to strengthen confidence in the internal relationship with their members. Moreover, they should found strategic alliances with competitors in order to cope with increasingly global markets.
All actors claim that political support is vital for a sound structural adjustment to the new conditions; a difficult albeit extremely important task for policy-makers. It is recommended to clearly focus on the competitiveness of the Baden-Württemberg’s milk producers by supporting investments. In addition, dairy farmers of the most disadvantaged regions should receive compensatory allowances for grassland and pasture and additional options within the scope of agro-environmental measures should be used to mitigate the negative consequences of adaptation.

Fatty acid composition of forage plants: Consequences for the fat quality of milk and meat


The main objective the present work is to discuss changes in the fatty acid composition within the plant-animal production system and possibilities of influencing the fatty acid composition in milk and meat. The fatty acid composition in animal products is influenced by different aspects within the food production chain. It is not just environmental contrasts such as climatic conditions that alter the fatty acid composition of forages; grassland management practices (cutting frequency, forage conservation), animal husbandry (pasture/indoor feeding), the species composition of pasture-based production systems and the diet composition in the feeding of ruminants may also contributes to the different fatty acid composition. However, little is known about the relationship between species composition on grassland and the variation in fatty acid composition, as most work is done on single species. Along the food production chain, ruminants contribute substantially to the proportion of polyunsaturated fatty acids (PUFA) in milk and meat. The formation of conjugated linolenic acid (CLA) is unique for ruminants and CLA is claimed to be related to good health in human nutrition. Although PUFA content is found in animal products, the higher content of PUFA leads to a softer consistency of fat and consequently to higher susceptibility of meat and milk fat to oxidation, shortening the retail life time span of these products.
Animal products, especially beef from South America, are being imported and make up a large part of the European meat market. With regard to the fatty acid composition, only a few works confirm the assumption that it is not just the pasture-based feeding that may influence the fatty acid composition. Tropical and subtropical climatic conditions in the production countries reduce the amount of PUFA. In consequence, the fat tends to be of a harder consistency. However, there are few studies supporting this observation.

The Role of Bounded Rationality in Farm Financing Decisions – First Empirical Evidence


Farmers do not often change from their house bank to another bank, even if the competing banks offer better conditions. This “reluctance to switch” can be explained, on the one hand, by the transaction costs resulting from such a change. On the other hand, it may be the result of bounded rationality. The results of a survey of North German farmers show that they are indeed bounded rational borrowers. They greatly underestimate the monetary disadvantages which are caused by the higher interest rates for loans from their house bank. In other words: they do not switch banks even if their individually perceived transaction costs are already “covered” by the lower interest rates of the alternative loan offer.

The effect of price increases of heating oil on horticultural companies in Saxony.
Part II: Measures for saving energy costs in glasshouse companies


This study presents different strategies for reducing heat energy costs in horticultural glasshouse companies in Saxony, Germany, based on the initial energy situation (see part I, 8). Many of them relate to greenhouse construction. In respect of the plant-cultivation measures, there are also a number of different options for adjusting to the changed heat energy price situation. The conversions and adjustments in plant-cultivation measures must, however, always be customized to the market and to the situation of the individual company. Advantages of individual measures can only be generalized to a certain degree. Besides the strategies for increasing energy efficiency, the study also presents possibilities for switching to alternative heating energy concepts. The focus was on the extent to which different strategies are suitable to contribute to a sustainable reduction of heat energy costs under the given regional characteristics and individual conditions of horticultural companies in Saxony.
Moreover, it has been observed that, increasingly, plant-contracting solutions are being favoured. Several possibilities for heat utilization and production from both industrial and agricultural plants are shown.

Need for Risk Hedging in Crop Production Usingthe Northeast of Germany as an Example


Crop-yield fluctuations at four sites in northeast Germany were examined in the period from 1997 to 2006. Results showed correlations betweens low soil quality and low average yields of wheat and rapeseed crops, as well as between marginal location quality and high fluctuation in crop yields. Thus the economic risk for marginal sites is much higher than for good locations. Ex post analysis for a farm with 300 hectares (ha) of arable land shows that in the time period of one decade, up to 3.75 times more equity can be accumulated in good sites than in the marginal locations. There is a risk at marginal sites that losses may occur in certain years, even with the current practice of direct payments of about € 300/ha. This study examines revenue insurance and yield insurance, which has not been offered in Germany up to now, as an additional tool for risk management. With regard to the farms’ response to risk, revenue insurance may have significantly positive effects, as the results of ex post analysis and ex ante simulations show. The risk can be reduced considerably, and such revenue insurance could, in particular on marginal sites, also help to avoid bankruptcy. This could be an interesting business area for the insurance industry, especially if revenue insurance policies are offered for marginal locations. Agricultural policy should take into account the fact that the yield insurance under discussion, on which claims can only be made when yield loss reaches 30 % and more, will be applicable for only a few locations, as high yield fluctuations were not observed at the better locations. For the marginal sites, the ex ante simulations showed a subsidy amounting to up to 8 €/ha, if the state grant covers 60 % of insurance premiums.

Pay for performance in agriculture: types, indicators and perspectives

By ZAZIE VON DAVIER, Göttingen and ENNO BAHRS, Hohenheim

With a growing percentage of employees in German agriculture, human resource management has an increasing relevance for farmers and other interest groups. In economic literature, the question of optimal incentives and the effects of performance pay are discussed controversially. The empirical results of this article are based on a written survey of 260 agricultural employers. The analysis of financial incentives shows that pay for performance is of minor importance in agriculture, as it is complicated to find simple, measurable performance indicators that reflect the employees’ individual effort in an objective way. In part 4 of this article, possible performance indicators for different farm enterprises are shown and framework conditions for their use are discussed. In the long-term perspective, precision agriculture will lower the transaction costs for measuring performance indicators. As the influence of stochastic determinants on agricultural production will not decrease in the future, pay for performance in agriculture will continue to play a minor role.

Success in local supply chains for organic products – strengths, weaknesses, opportunities and risks for local supply chains for organic cereals and bread


The aim of this paper is to explore the success as well as the strengths, weaknesses, opportunities and risks for local food supply chains. A study from the province of Lower Austria in Austria, where organically certified cereals and bread are produced, processed and marketed locally serves to illuminate these issues. The interviewees themselves, their motives and visions, their products and their social relationships with their business partners and customers are the biggest strengths of the local food supply chains studied. These strengths are contrasted by weaknesses in the realm of business management, planning, marketing, product development, logistics and a shortage of skilled staff. The internal strengths and weaknesses found in this study seem to be typical for small, artisan and regionally operating enterprises, whereas the external opportunities and threats appear to be of a less general nature. Opportunities (being held in increasing esteem by urban consumers, exploitation of new distribution channels) as well as threats (a lack of willingness to innovate, a lack of appreciation by rural consumers, a conventionalised organic market, a lack of support by legislation and politics) are strongly related to the local organic market. Measures to support local food supply chains have to be taken by the actors in local food supply chains themselves but particularly by politics and administration.

Internationalisation of the food retailing industry and its impact on the agricultural and food industries


An analysis of the German food retailing industry and its development over recent years shows clear structural change. The structural change is expressed in concentration processes i. e. a decrease in the number of enterprises and a concurrent increase in company size, and a change in enterprises’ organisational forms, i. e. there is increasing differentiation in the forms that enterprises are taking. (14). These changes also affect the trading companies’ growth strategies. Whereas, 25 years ago, it was common for companies in the food retailing industry to operate only at national level, todaythe name of many enterprises, e. g., METRO Group, already indicates a certain internationality. The retail companies that traded at national level have now been transformed into multinational groups. Based on these changes, it must be accepted that the global concentration process in the retailing industry has had, or will have in the near future, considerable consequences for the food industry.

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