Productivity in agriculture Christine Holleran Department for Environment Food and Rural Affairs...
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Transcript of Productivity in agriculture Christine Holleran Department for Environment Food and Rural Affairs...
Productivity in agricultureProductivity in agriculture
Christine HolleranDepartment for Environment Food and Rural Affairs
Agricultural Statistics and Analysis Team
Productivity in agricultureProductivity in agriculture
• Key component of competitiveness; how well an industry turns inputs into outputs.
• Total Factor Productivity (TFP) shows the volume of output leaving the industry per unit of all inputs.
• TFP = (Total output at market prices) /
(Total inputs+entrepreneurial labour)
Productivity in UK agriculture - trendProductivity in UK agriculture - trend
Total Factor Productivity of the agricultural industry up to 2006 with projections up to 2011
0
20
40
60
80
100
120
140
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
ind
ex 2
000=
100
Actuals to 2006
Baseline projection
Assuming high productivity gains
Research project on productivity in Research project on productivity in agricultureagriculture• Efficiency and Productivity at the Farm
Level in England and Wales 1982 to 2002 (David Hadley)
• Productivity and International Competitiveness in European Union and United States Agriculture (Eldon Ball, Jean-Pierre Butault and Carlos San Juan Mesonada)
• http://statistics.defra.gov.uk/esg/reports/productivity%20research/default.asp
Efficiency and Productivity at the Farm Efficiency and Productivity at the Farm Level in England and Wales 1982 to 2002 Level in England and Wales 1982 to 2002 • Farm level data for England and Wales.
• Productivity growth results from technical change and change in efficiency.
• Relative technical efficiency.
• For eight different farm types; cereal, dairy, sheep, beef, poultry, pig, general cropping and mixed farms.
• Most farm types close to efficient frontier.
The frontier production functionThe frontier production function
X
Y
0 X1
Y1
Y2
ResultsResults
• Majority of farms close to the efficient frontier.
• Frontier of efficiency is being pushed out by technical change.
• Returns to scale close to one implying that the average farm for each type is close to optimal scale.
Technical change and returns to scaleTechnical change and returns to scale
Technical change (%)
Returns to scale
Cereals 5.8 0.909
Dairy 2.0 1.068
Sheep 2.0 0.972
Beef 3.3 1.011
Poultry 1.6 0.977
Pigs 3.5 1.006
Gen Cropping 4.2 0.977
Mixed 5.2 1.073
Mean efficiencyMean efficiency
Cereals 0.765
Dairy 0.899
Sheep 0.776
Beef 0.815
Poultry 0.905
Pigs 0.887
Gen Cropping 0.785
Mixed 0.745
Efficiency changeEfficiency change
Cereals 0.00%
Dairy - 0.43%
Sheep - 0.76%
Beef - 0.24%
Poultry 0.00%
Pigs - 0.48%
Gen Cropping - 0.95%
Mixed - 0.95%
Factors effecting efficiencyFactors effecting efficiency
• farm debt
• farmer age
• levels of specialisation
• ownership status
• proportion of gross margin derived from subsidies
CaveatCaveat
• Whilst these results seem reasonably robust…
ConclusionsConclusions
• technical change is pushing the frontier outwards for all farm types
• but, average levels of efficiency are declining
• generally, the average farms represented in these samples are close to optimal scale
• scale of operation is the most obvious difference between efficient and less efficient farms
Productivity and International Productivity and International Competitiveness in European Union Competitiveness in European Union and United States Agricultureand United States Agriculture• Productivity is important to international
competitiveness
• International comparisons of TFP for 11 EU countries and the USA
• Measure of international competitiveness
International Comparisons of International Comparisons of productivityproductivity
TFP relative to 1996 US level
0.20
0.40
0.60
0.80
1.00
1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Source: Defra Statistics
Ireland Netherlands SpainItaly Belgium UKFrance Denmark US
International CompetitivenessInternational Competitiveness
• Total Factor Productivity
• Relative prices of outputs
• Exchange rates
International CompetitivenessInternational Competitiveness
• Purchasing power parities (PPP)
• Relative prices of output
• Units of national currency required to purchase the same amount of output as purchased by one dollar
• Divide by the exchange rate
• PPP in terms of relative prices in dollars
• International Competitiveness
Results relevant to UKResults relevant to UK
• 1973 - UK price 95% of the US price implying a competitive advantage relative to the United States in 1973
• European inflation in the 1970s led to a peak in US competitiveness by 1980
• Temporary European advantage by 1984
• UK least competitive country in the sample by 2002, with prices 40% higher than the US
Input pricesInput prices
• higher intermediate input prices are one reason for the high EU output PPPs.
• Capital inputs were more expensive in the EU countries than in the US
• European agricultural wage averaged only 50% of the US level
To summariseTo summarise
• … international competitiveness depends on the price of output, which is a function of the domestic output price and the exchange rate. The domestic output price will depend on input prices and TFP
Possible further researchPossible further research
• Identify the characteristics of UK farms at the efficient frontier
• Assess the regional variation in farm level productivity
• Determine the extent to which UK farms move to, remain at, or drop back from, the frontier
• Consider the future productivity response of UK farms that would follow further CAP reform
Possible further researchPossible further research
• Assessment of the environmental and animal health and welfare performance of farms at the efficient frontier
• Widen the farm level analysis of productivity to cover other EU Member States
• Use data published on farm level accounts from countries exporting in a free-trade environment
Productivity in agricultureProductivity in agriculture
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