The role of subsidies in managing the operating risk of agricultural enterprises

Abstract

169Agricultural production has always been exposed to many risks. The main groups of risks result from the specific characteristics of the agricultural sector and from the trends in the agrarian policy -the risks connected with the effectiveness of the market, the risks connected with adverse weather conditions and livestock infections, the financial risks and the institutional risks resulting from policy modifications.Since the second half of the 90 s of the 20 th century, discussions on the topic of risk management in agriculture have been taking place at a global level. From that time, it has been possible to quote papers focused on the spectrum of the most frequently used risk Abstract: The paper examines the relationship between the farmers' operating risk and current subsidies. Focused at the commodity level, the analysis is based on a sample survey of costs and yields of two crops (winter wheat and rapeseed) and two livestock commodities (cow milk and fattening cattle) carried out in [2005][2006][2007] in the czech republic. The risk analysis relates to the growing conditions, crop yields and the livestock productivity. The future role of the subsidies as the risk management tool in the farming business, as well as the position of this instrument against the other risk management instruments is analysed. The break even analysis and the Monte carlo simulation are used as analytical tools. The results indicate that the current subsidies have an impact on the stability of the farmers' income. Partially or fully decoupled payments serve as a "financial pillow" increasing the level of the farmers' income and extending the farmers' decision-making possibilities. Furthermore, the current subsidies reduce the variability of the farmers' income. The current subsidies are a suitable complement to other commonly used risk management tools primarily designed to reduce the farmers' and farm income variability. Key words: risk management, agricultural policy, direct payments, income stability, Monte carlo simulationAbstrakt: Příspěvek zkoumá vztah mezi provozním rizikem zemědělců a provozními dotacemi. Analýza byla provedena na komoditní úrovni a vychází z výběrového šetření nákladů a výnosů dvou komodit rostlinné výroby (pšenice ozimá a řepka) a dvou komodit živočišné výroby (mléko a výkrm skotu), realizovaného za roky 2005-2007 v České republice. Analýza rizika je vztažena k výrobním oblastem a úrovni výnosů plodin, respektive k užitkovosti zvířat. Analýza zohledňuje současnou i budoucí roli provozních dotací jako nástroje řízení příjmových rizik v zemědělském podnikání se zřetelem na vymezení jejich pozice vůči ostatním používaným instrumentům "risk managementu". Pro účely analýzy byly využity analýza bodu zvratu a simulace Monte carlo. Výsledky ukazují, že provozní dotace mají přímý vliv na stabilitu příjmů farmářů. Platby částečně nebo plně oddělené od produkce působí jako "finanční polštář" zvyšující úroveň důchodu země-dělců a rozšiřující prostor pro rozhodování. Provozní dotace rovněž snižují variabilitu příjmů...

Analysis of the impacts of Common Agricultural Policy on plant production in the Czech Republic

“…Štolbová and Hlavsa (2008) point out the increasing dependency of economic results on the volume of subsidies paid out. The results of the analysis by Špička, Boudný and Janotová (2009) evidence that operating subsidies have a direct eff ect on the level and stability of the revenue of farmers. The authors state that payments partially or fully separated from production function as a "fi nancial cushion", as they help to lower the risk of income variability and ensure farmers a steady income.…”

Sources of Return on Equity in Economically Diversified Agriculture of the European Union Countries

“…As previously mentioned, the main source of income (profit) should be operating activity, but due to high price volatility in agriculture and biological nature of this activity, farmers often point to problems with obtaining income from production, which indicates some limitations in making decisions. However, according to Špicka, Boudný and Janotová (2009), payments partially or totally unrelated to the volume of production serve as a "financial cushion" which helps to increase income of farmers and helps them make decisions regarding their day-to-day operations and investment activities. The latter may be a source of income in the following years, because, as Bórawski and Brodziński (2006) believe, high values of the return on equity ratio indicate the profitability of investments in assets of the enterprise.…”

Identification of Financial Strategy in Small and Medium-sized Entrepreneurship

“…The results of the research (Špička, Boudný, Janotová, 2009) indicate that the current subsidies have an impact on the stability of the farmers' income and furthermore, the current subsidies reduce the variability of the farmers' income.…”