Assessment of economic efficiency of conventional and organic agricultural enterprises in a chosen region

Summary

The present paper is aimed at assessing the economic efficiency of organically farming agricultural enterprises in a chosen region of the Czech Republic. It strives to analyze as well the viability of organic farms and their contribution to sustainable agriculture and environment. At the same time, one of the paper's aims is to analyze whether the recent databases of organic farms and their structure contribute to meeting the above objectives.
In order to assess the economic efficiency in a comprehensive manner, firstly the production base has been analyzed (equity, assets, liabilities). Secondly, the profit indicator has been employed while monitoring different kinds of profit and chosen financial ratios. The data for organic farms were recorded for a period of consecutive three years (2008, 2009 and 2010) in the South Bohemian region. Subsequently, their results were compared not only with conventionally farming enterprises but also with those of the FADN database.
Primary data (for organic and conventional farms) were drawn from corporate financial statements. Both the FADN CZ database and annual statistical surveys of the Institute of Agricultural Economics and Information were used for the sake of comparison.
It stemmed from the analysis that conventionally farming enterprises (legal entities) have higher average assets per hectare than the organic farms. As for the structure of assets, fixed assets record higher values than current assets in all samples surveyed (organic farms, conventional farms and FADN CZ farms).
In order to assess the enterprises' economic performance and efficiency, profit indicators were chosen. Profits were recorded in absolute values, i.e. the share of profit-making and loss-making farms was monitored. Subsequently, profits were calculated per hectare of farmland (three different profit indicators were employed) and then used for designing suitable efficiency ratios. The research showed that the share of profitable organic farms was (in all three years surveyed) much higher than in conventional agriculture. However, this result was conditioned by including subsidies in the total yields. As for the profit per hectare of farmland, organic farming also recorded higher average figures.
The return on assets (ROA) ratio definitely recorded higher average figures than in the conventional farming sector while the return on equity (ROE) was not so much in favour of organic farming. The following financial ratios were adopted in order to assess the economic and financial situation of agricultural enterprises: return on assets, return on equity, liquidity, indebtedness, interest coverage and total assets turnover. All concrete results including detailed commentaries can be found in the present paper.