The conflict between capital-intensive agriculture, often called industrial agriculture, and sustainable farming is ongoing, and not because of Western European countries, where intensification is increasingly sustainable. It is caused by several million small farms in Central and Eastern Europe that must choose a long-term development path. This is also a dilemma for agricultural policy: Are small farms so environmentally friendly that they should play the role of ‘landscape guardians’ at the expense of public support and economic vegetation, or should they strive to improve productivity through investments? This study offers a methodological contribution to the value-based sustainability approach by computing indicators of environmental sustainable value (ESV). The authors have attempted to combine the value-oriented approach with frontier benchmarking. They then tested how the European Union Common Agricultural Policy (CAP) schemes contribute to ESV using a long-term panel of regionally representative farms from Farm Accountancy Data Network (FADN) with regard to factor endowments, for the years 2004–2017. The seminal within–between specification was employed to control the time variant and time invariant space heterogeneity of European regions. The main finding is that higher investment support is beneficial to ESV. Regarding factor endowment influence, there was a positive impact of the capital–labour ratio. Except the cross-sectional impact of environmental subsidies, the payments exert a negative effect on ESV.

There is a consensus that farmers are subject to farm price-cost squeeze (PCS) when commodity prices fall and costs of production rise long-term. Willard Cochrane was the first to examine this phenomenon, introducing the notion that farmers are on a market treadmill. PCS is still a principle economic problem in agriculture touching farms in all over the world. It results from flexible prices but also from monopsony structures where recipients of commodities seize the opportunity of suboptimal pricing. Many studies indicate increasing retail farm price spreads but this lacks empirical studies on the effects of different types of subsidies on PCS. This work attempted to model EU Common Agricultural Policy (CAP) impact on PCS using the Constant Elasticity of Substitution (CES) production function, specified as in most CGE models. However, the authors tested the assumption of flexible prices reacting to changes in productivity. This approach is novel, while supported with an input-output analysis used to precisely decompose price and volume (productivity) effects at the level of a FADN representative farm. The results help to shape CAP shedding light on the present treadmill mechanism and showing that provision of public goods may be a remedy for market imperfections, whereas decoupled payments have the opposite influence.

The aim of this paper is to determine the influence of the Common Agricultural Policy’s (CAP) subsidies on the level of economic sustainability of farms by means of three-fold study. To determine the economic sustainability of farms the authors applied the income gap ratio. Next, the level of income differentiation between farms of various economic classes was established. The last part consisted of the recognition of statistically significant CAP schemes that shape agricultural income in farms of different size and in assessing how the respective subsidies should increase or decrease to fill the recognized gap, based on the coefficients of panel regression. The spatial scope covered all EU countries in 2005–2015. Results show that due to the CAP’s support the average income of farms has approached the average non-agricultural income, but distribution of this support favored the largest farms, increasing disparities within the sector.

Determinants of farm profitability in the EU regions. Does farm size matter? | Łukasz Kryszak, Marta Guth, Bazyli Czyżewski | Agricultural Journals