Kleinhanss, W.


Object of this paper is to assess the level and share of farms able to fully remunerate (or not) fixed factors, referring to structural, local conditions in Germany, and the economic framework of the last nine years. The analytical work refers to a measurement concept, expressing the relation of income to the opportunity costs of farm owned fixed factors To consider both, family farms and Le- gal Entities, the indicator (Competitiveness Index: CI) is modified to take costs of external factors and the referring income indicator into account.
For the simulation approach data of the national Farm Accounting Data Network are used, representing more than 95 % of Standard Output. Opportunity costs for owned factors labor, land and capital are computed based on external factor costs. Farms are classified up to ten CI categories and income and balances of income minus factor costs are computed for the whole sector, by farming types, size classes and regions.
Farms with only partial remuneration of factors contribute to one fourth to one third of income, but the share of these farms is about half. Therefore, a large share of farms is in a rather difficult
economic situation, probably unable to sustain in the medium and long term. Of the farming types, ‘other cattle farms’ are in a weak position, as only one quarter to one third is able to fully remunerate factor costs. This is heavily influenced by price pressure due to shrinking demand and subsidy losses under decoupling, and the rather small farm size in the West. Of dairy farms about 40 % were competitive on average, but with a high variation between one-third and half during the years. Arable farms show the best performance, as they reached rather insignificant negative balances in only 2 years, but high positive values thanks to rising crop prices, inducing negative effects on livestock production via feed costs. The simulations are supplemented by a Generalized Linear Model approach to quantify fixed effects as years, farm size, and locations.

Keywords: Competitiveness, opportunity costs, representative farms, farm economics

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Author(s): Kleinhanss, W.


Organizations(s): Thünen Institute of Farm Economics