Volume 115 - Issue 1

This paper seeks to define the relationship between interest rates and decisions to insure among agricultural producers using the financial methodology. The choices are ultimately reduced to two options: to insure or to limit and absorb risk. Each choice produces a complex cash flow that is compared to the alternative and discounted by several factors. The difference between the options produces a quantitative measure of the financial incentive to insure. Some discounting factors of the cash flows follow the key interest rate to an extent for the latter to influence the decision to insure along with demand for insurance. The proposed method is tested on data from the emerging economy of Ukraine and the United States for the period 2002-2011. All participants of agricultural insurance markets can use the proposed methods to maximise efficiency. The research shows that ceteris paribus agricultural insurance requires bigger government subsidies to be viable under higher interest rates. Further empirical research is suggested.

This paper examines the effects of territorial differentiation of damage to wheat, maize, barley, sunflower and rapeseed production caused by drought and heavy rain. Our study evaluated the differences between LAU1 micro-regions in Hungary in the effects of the weather on agricultural production and found that there are extremely high differences in the probabilities of damage occurring. Therefore the design of agricultural insurance products should be based on different absolute deductibles and different insurance premiums for micro-regions. Furthermore, we found that within a micro-region individual producers face a very high diversity of risks which implies that in the long term only a bonus-malus system developed for individual agricultural producers can mitigate different risks, and that this can be the basis of a well performing risk management system that is suitable for a wide risk community.

This paper illustrates the regional diversity in terms of the agricultural income of economically weak farms in Poland (i.e. from 2 to 8 ESU). The results, expressed as average values for 2005-2009, indicate that farms are finding themselves in a very difficult situation. Furthermore, the assessment included farms that gained their income not only through agricultural activity, but also through doing non-agricultural work. The diversification of income sources created the opportunity to sustain less profitable agricultural production while providing a higher standard of living for farmers and their families. Such factors as the intensity of production, and the productiveness of current expenditures and fixed capital, as well as the financial position of the farms and the level of their debt, have been analysed. An important aim of the study was to identify the influence of the Common Agricultural Policy on the performance of farms.

In 2004 and 2007 twelve countries joined the European Union (EU), bringing about significant changes in the field of European agriculture. One of the major changes was the transformation of the agri-food trade of these countries. This paper analyses the effects of EU enlargement on the competitiveness of fruit spirits in six Central and Eastern European countries (CEECs), especially regarding geographical indications, by using the theory of revealed comparative advantages. Although the majority of the studied CEEC fruit spirits was both competitive and had a comparative advantage in the EU-15 beverages market in the period 2001-2011, during this time the competitiveness in terms of quality and price of fruit spirits in the region declined. The results indicate that these countries are losing their market positions in their traditional fruit spirit sector in the EU-15 beverages market in spite of the fact that the majority of these products have a geographical indication. These changes are in line with the overall trend of an increasing trade deficit in the overall beverages, spirits and vinegar market of the six CEECs with the EU-15 after 2003. By contrast, the well-known grappa of Italy is shown to be competitive in terms of both price and...

This article demonstrates and highlights the conceptual limits of current empirical market integration (MI) time series models (threshold models) and their implications on market efficiency and competitive equilibrium conclusions. The complexities and diversities that characterise the analysis of the concept of market integration are evaluated within the framework of EnkeSamuelson-Takayama-Judge (ESTJ) spatial equilibrium theory. The efficiency and competiveness implications drawn from MI models are limited by how the data generation process (DGP) is influenced by equilibrium conditions, by the tradability restrictions of the inter-markets relationships and by the presence of unobserved transactions costs. However, empirical applications scarcely address these limitations. Two sets of synthesized data with varying levels of non-linear complexity implied by alternating equilibrium conditions are generated to demonstrate conceptual limits of current threshold models in market integration analysis. Inconsistent conclusions that linear representations imply for threshold propagated DGP will also apply for conclusions derived from threshold models if markets are characterised by switching equilibria conditions.

Innovation in agriculture ensures the widespread use of the most up-to-date technology. One such technology is precision crop protection, which meets the requirement of environmental and economic sustainability. The applicability of precision crop protection has been verified by several studies and in practice, but its uptake is very slow. Examining the economic relationships between potential savings and pests at the European Union level, this paper shows that the savings in pesticide use following the adoption of precision plant protection can be 30,000 tonnes (calculated using the current dose levels) per annum. If approximately 30 per cent of the crop producing and mixed farms larger than 16 ESU apply this new technology, the environmental burden will be reduced by 10-35 per cent. From a survey of 72 Hungarian farmers we found a positive correlation between the size of the farm and the adoption of precision farming technology, and those farmers in the survey that had implemented precision crop production estimated that the consequent change in income had been positive. Thus, at a certain farm size and farming intensity, precision crop production is a real, environmental friendly farming strategy option, through which each farm can generate an income that covers at least...

The paper aims at exploring further the potential of organic agriculture by increasing the knowledge about consumers’ perceptions of organic products. The United States (Florida) and Poland are interesting examples in which the level of organic market development varies and this allows us to test whether consumer perceptions of organic food products vary with market development. A survey was conducted amongst students at the University of Florida (United States) and at the Warsaw University of Life Sciences-SGGW (Poland). The results obtained from an online survey were analysed through econometric modelling. The model used for this study was the ordered probability model, which was used to compare the frequency of organic consumption between the United States and Polish students. The findings indicate that students from the two countries have different perceptions of organic products. The less the market is developed (such as in Poland), the more important is basic knowledge about the products. With a higher level of market development (for example in the United States), consumers already have this basic knowledge about the products, such as origin or organic label, and are more focused on their qualities, such as taste or variety. These differences should be taken into account by...

A monopolistically competitive agricultural market structure has some features of competition and some features of monopoly. Monopolistic competition has the following attributes: (a) many sellers; (b) product differentiation; and (c) free entry. In the long-run equilibrium, price equals average total cost, and the agricultural firm earns zero economic profit. The aim of this paper is to construct a relatively simple chaotic long-run monopolistic competitor’s agricultural output growth model that is capable of generating stable equilibria, cycles or chaos. A key hypothesis of this work is based on the idea that the coefficient plays a crucial role in explaining local stability of the monopolistic competitor’s agricultural output, where d is the coefficient of the marginal cost function of the agricultural monopolistic competitor; b is the coefficient of the inverse demand function; a is the coefficient of average cost growth; m is the Pigovian tax rate; and e is the coefficient of the price elasticity of demand.