Economic and market research


Microeconomic farm analysis

Background

Economic analysis of a farm business involves developing tools for theoretical and quantitative analysis which meet the need to interpret and predict the real behaviour of agricultural businessmen, and also meet the need to formulate rules for optimum behaviour. This means criteria which entrepreneurs should observe when making decisions in pursuit of their objectives. In this context microeconomics studies the behaviour of each entrepreneur when making decisions about production of a single farm. A large or small farm is an infinitesimal part of the whole system. For this reason, the consequences of all the individual actions are the basis of macroeconomics, but are not studied in great detail.

A farm is an economic entity which is a heterogeneous and interconnected complex of people, capacities, materials, legal relationships and knowledge, which all come together in order to produce good and/or services, respecting the legal rules (Community regulations, national and regional legislation, product specifications,…) in the chosen activity and establishing the most suitable means of organisation. The result is a close functional relationship between business and organisation, in that the entrepreneur’s effectiveness and efficiency characterise the quality of his/her response to external demands, and these depend respectively on the congruity and type of his/her organisation.

Organic agriculture is a global system of farm management and food production based on the interaction between the best environmental practices, a high level of biodiversity, protection of natural resources and rigorous criteria of animal welfare. It therefore requires a careful and well-balanced business organisation, and microeconomic analysis is an excellent starting point for dealing with the problems posed by the use of organic farming methods.

Timing:
Starting: 2.01.2001
Scheduled ending: 23.09.2019
Real ending: 23.09.2019
Objectives:

Objectives

Microeconomic farm analysis has the following aims:

  • Understanding business performance through evaluation of productivity, efficiency and profitability, to identify strengths and weaknesses of  business choices, in order to improve and correct these within the particular environmental context.
  • Comparative evaluation of economic results of conventional and organic farms.
  • Evaluation of economic feasibility of the different types of  crop farming and production processes (types of machines and raw materials, time scaling and methods, …) within the same farm, even in application of the same organic production methods
  • Evaluation of economic sustainability of the farm in the context of its local area. 
Justification:

 Justification

In recent years, policy makers, researchers and entrepreneurs,….. have increased their demands in terms of  development of awareness, protection and valorisation of some rural areas and their agricultural products, of economic justification of rural planning and rural development programmes, and improvement of farming techniques based on experimentation which looks at economic as well as technical aspects. Specifically, demand has increased for:

·        an economic evaluation of the ways agricultural practices are carried out in the field, including experimentation (fertilisation, rotation, pest control, pruning, harvesting, …), and also on the use of by-products from olive processing (spreading of vegetation waters, composting, soap manufacturing from pomace oil….).

·        Economic evaluation of the farm’s business choices

·        Quantification of the economic and technical effects on the farm of some policy and programming choices (rural development programme with estimate of increased/reduced income caused by adherence to specific measures, estimate of the variation of cost/benefits for the application of cross-compliance, …).

·        Monitoring of profitability and evaluation of economic sustainability of farms in a particular area.

Potential:

 Potential

Demand for microeconomic business analysis in the organic sector will keep growing thanks to the support provided to rural development planning (Regional Rural Development Programmes 2007-2013, application of Regional Law 07.06.2007 to safeguard and valorise monumental olive trees, Cross-compliance, …) , to university research aimed at filling the gaps in economic studies at the regional level, to increasingly comprehensive and multi-disciplinary post-graduate training, like Master programmes, and also to entrepreneurial decisions made with technical and economic awareness and certainty. 

Results:
Notes:

      Remarks

  • Strengths

·  The research line contributes to understanding the economic sustainability of the organic farm in the landscape, environmental, and territorial context, in the local economy and in rural society.

·  It is easy to create multi-disciplinary working groups of experts from the Mediterranean Agronomic Institute to ensure the success of this research. The fact that the Institute has economists, agronomists, forestry experts, biologists, naturalists, IT specialists, and engineers means that its research work is highly qualified and is very much appreciated by the final users (public and private institutions, researchers, farms, associations….)

·  The last few years have seen growth in awareness of the importance and potential of this research to achieve the above objectives.

  • Weaknesses

Impossible to access data banks and information networks about farm accounts (like RICA in Italy) at the international and/or national level.

Reference person/s: Cardone Gianluigi /
Collaborators: Bteich MarieReine / Pugliese Patrizia /
Thesis:
Institutions involved:
 
 
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