Measuring the economic sustainability of Italian farms using FADN data

Abstract

In recent literature, the issue of sustainability and its measure has been addressed with different approaches that depend on the multidimensional nature of the concept and the specific sector and context to which it applies. The present work focuses on the economic sustainability component and suggests an operative measure at the farm level. The measure of economic sustainability has been applied to Italian family farms using Farm Accountancy Data Network (FADN). Based on this data, an efficiency indicator (EI) and two income indicators [a factor profitability indicator (FPI) and a comparable income indicator (CII)] expressing the ability to remunerate the entrepreneur's production factors at their opportunity cost and the farm's income capacity have been used in a principal component analysis (PCA) to build an economic sustainability index (SI). The index was used to describe Italian farms' economic sustainability levels but was also the cue to discuss problems related to identifying economic sustainability thresholds and the trade-off between efficiency and income components.

Profit and viability persistence: Evidence from the Spanish agricultural sector

“…This lack of specificity means there is no normative reference level with which to compare the income actually obtained by farms, leading to multiple academic debates about the concept of farm viability, as evidenced by O'Donoghue et al (2016) and Loughrey et al (2022). However, most authors (e.g., Argilés, 2001; Coppola et al, 2022; Spicka et al, 2019; Vrolijk et al, 2010) conceptualize this term as the farms' capacity to generate sufficient income to cover all fixed and variable costs, as well as to remunerate the factors of production provided by the farmer. According to this approach, the only farms that have the potential to maintain their production activity over time are those whose income can cover all accounting costs and properly remunerate all the opportunity costs incurred by the farmers due to the use of internal resources (i.e., factors of production owned by the farmer) in his/her farming activities.…”

Economic and Environmental Sustainability Trade-Off Analysis in Sheep Farming Using the Farm Accountancy Data Network Database

“…Data were extracted from the FADN database, which has been used in recent years to evaluate the sustainability of the agri-food sector [31,[62][63][64][65][66]. Its principal purpose is to provide data for the EU Commission to assess the economic performance of farms and the impact of the Common Agricultural Policy (CAP) [67].…”

“…The economic dimension includes six indicators describing agricultural productivity, cost, and profitability, which have already been used in previous research [5,17,37,64,70,71]. The procedure for calculating points based on FADN standard output codes (specifically indicated) is shown.…”

A Multipurpose Sustainable Farming System for Tobacco Crops in the Mediterranean Area

“…It is a very complex concept which can vary across regions of the world, according to different soils and climates, or crops. It must be analyzed from numerous points of view (i.e., social, environmental, economic), often related to each other [10][11][12], and needs to be adapted to each specific cropping and/or farming system. In agriculture, as well as in other contexts, it is urgent to quantitatively measure it.…”

“…In agriculture, as well as in other contexts, it is urgent to quantitatively measure it. For this purpose, indicators were selected [11,[13][14][15] which consider, as far as possible, most of interactions among economic, social and environmental aspects [16][17][18]. Among the indicators, diversification of products and profitability improvement were frequently reported as economic ones, while fertilizer use efficiency and soil, type or quality, as environmental indicators [18,19].…”