Agricultural and Resource Economics (Mar 2018)
Non-traditional approach to assessment of efficiency of agricultural production
Abstract
The purpose of the study is to substantiate some features of planning and analysis of the efficiency of crop production based on the coefficient of advance of the threshold of profitability, as well as the development of practical recommendations for their direct use by specialists of agricultural enterprises (a case study from Moldova). It is emphasized that the indicators of the efficiency of products in agriculture, such as profit per one hectare of crop land or one centner of production, can be calculated precisely without requiring data for crop yield and total production volume of cultivated crops. It is established that the indicators of economic efficiency of produced and realized production depend on the degree of removal (deviation) of the actual yield from the break-even point (profitability threshold). An indicator named as the break-even excess coefficient is used for evaluating the given degree of deviation. An inter-relationship between the value of the break-even excess and the indicators of profit per one hectare of land and one centner of production is determined. The given interrelationship is presented in formulas, in a table and on a graph. Based on the example of a specific agricultural enterprise the calculations of given inter-relationships for leading crop types are performed. In order to identify whether the given inter-relation is specific for the conditions of agricultural production in a particular enterprise, the calculations of analogous indicators are made for two neighboring enterprises likewise. Besides, the inter-relationship between the financial safety margin and operational leverage on the one hand and the coefficient of exceeding the break-even level on the other hand is presented. Our research will allow the professionals at agricultural enterprises to determine the degree of revenues per one unit of area or unit of production as well the values of financial safety margin and operational leverage across of all product nomenclature based on the values of coefficient of exceeding the break-even level.
