4. The worse the conditions of AgOs development, the lower the level of the development of peasant (farm) holding in a region, and the higher the role of family holdings in agricultural production. While in the first group the share of employees engaged in agricultural production in family holdings was 49.8%, in the last group it was 69%.
The impact of the basic factors on the gross agricultural output in a region (in all categories of enterprises) is graphically illustrated by the regression model based on the data on 77 regions of Russia. In AgO regions, financial conditions, volume of production, the area of agricultural land, and the number of employees do not significantly influence the development of agricultural production in the plots of population. Only the production facilities of AgOs were important for the development of the plots of population.
8. Large and Small Business in Agriculture: Comparative Analysis of the Efficiency The comparative analysis of the efficiency of large and small agricultural business let draw the following conclusions.
— The most efficient use of land resources is typical for the plots of population in which the output per hectare is 8-9 time higher then in AgOs and peasant (farm) holdings. These figures seem to be over-valued, because a part of land area, which is actually used by the plots of population, is legally possessed by AgOs, and livestock production is developed mainly due to the forage provided by collective enterprises.
Despite this, the efficiency of the use of land in the plots of population is obviously much higher than in the enterprises of the other types. This can be proved by the data on the output per hectare of agricultural land reflecting the same efficiency gap between the plots of population and AgOs as for the output.
The higher land use efficiency in the plots of population can be explained by the fact that their product patterns are absolutely different from ones of agricultural enterprises and peasant (farm) holdings. In individual subsidiary plots, the most intensive crops prevail (potatoes, vegetables, fruit, and berries), while in peasant (farm) holdings and AgOs the less intensive crops dominate (cereals, industrial crops, and forage crops).
— The output per capita of average annual worker in the plots of population is much lower (2.22.3 times) than one in AgOs and peasant (farm) holdings. As for livestock production, this gap is even more serious. Taking into consideration the primitive technology used by the major part of the plots of population and the prevailing of manual labor, a conclusion on the low labor productivity in the plots of population is not a surprise.
— In peasant (farm) holdings, the output per hectare is slightly lower than in AgOs. Peasant (farm) holdings use 8.7 % of agricultural land, and provide only 3.7% of agricultural output. In Russia, the opponents of farm sector have wrote about it time and again, trying to demonstrate the inefficiency of farm holdings compared with AgOs. Such a comparison is incorrect, because peasant (farm) holdings are compared not with AgOs, but with all enterprises including the plots of population. In comparison with AgOs, peasant (farm) holdings are more efficient in crop production and less efferent in livestock production.
Taking into consideration the fact that the major part of livestock output is produced in large complexes which are very efficient in the use of resources, peasant (farm) holdings should be more likely compared with a group of AgOs with the lowest volume of sales. For example, in 2002, the output of AgOs that have received from the sales of products and services not less than 4.1 billion rubles (47% of the total number of AgOs), was nearly equal to the output of peasant (farm) holdings. These AgOs possessed 58 million hectares of agricultural land, i.e., the efficiency of the use of land was 3.4 times lower than one of peasant (farm) holding.
9. The AgOs’ Efficiency in the Use of Resources For the analysis of the use of resources, the Goscomstat of the RF data on AgOs were used for the calculation of the parameters for seven Cobb-Douglas functions (three functions for the total number of AgOs, two for crop production and two for livestock production). The correlation of the return on sales with land area, the number of workers, and the value of fixed and working capital (Model 1), with the effect of state subsidies, and total material costs (Model 2), and material costs by items (Model 3) was analyzed. The methodical issues of calculations are represented in the report, and below the main conclusions are formulated.
All the functions for AgOs demonstrate rather high coefficients of determination (0.824, 0.876, and 0.826), all the factors which are included into the model are statistically relevant (except arable land area in Model 1, and subsidies and compensations in Model 2). Model demonstrates the negative influence of arable land area on the return on sales: the more the land area, the lower the return.
— In all functions, the coefficients for working capital are the highest. In the first model, the growth of working capital by 1% causes the growth of return by 0.667%. In the second model, the growth of material costs by 1% causes the growth of return by 0.793%.
Financial conditions is the key factor that influence the efficiency of AgOs, the balance of factors of production and the return on resources. Those AgOs that have not sufficient working capital and for which debt financing is not available, lose labor resources, but maintain land and material resources. This leads to the further worsening of their financial performance.
— The second relevant resource is the number of employees. The growth of this factor by 1% provides the growth of return by 0.71% in the third model and by 0.593% in the first model. This is the evidence of relative deficiency (compared with other resources) of labor resources.
— To determine the influence of production facilities and groups with various financial conditions to the efficiency of AgOs, the corresponding variables were used in regression functions.
The calculations showed that limited societies and stock holding companies were the most efficient, and agricultural production cooperatives and state enterprises were the less efficient;
— The functions for crop and livestock production prove the conclusions about the highest relevance of working capital and labor resources. As in the models 4 and 5 (crop production) coefficients for arable land was positive, the marginal product of land (i.e., the value of land) was calculated by the groups of enterprises. Even in the advanced groups of enterprises, the marginal product of land was extremely law.
— The calculation of marginal product of labor showed that the compensation for labor in AgOs is undervalued, particularly in the enterprises with good financial performance, in which it was significantly lower than marginal product.
— On the whole, material costs are not repaid: the return on a ruble constituted 0.8 rubles. The playback of some items of material costs (products and services, spare parts, electricity, fuel and oil products) is rather high. The use of mineral fertilizes provide the highest return (6.0 rubles per 1.0 rubles of costs). Regardless this fact, 35.4% of AgOs did not buy and use mineral fertilizes.
10.Agricultural Organizations: the Trends in Resource Use Efficiency For the analysis of the trends of the efficiency of the use of resources by agricultural enterprises, a panel of data for the period from 1995 to 2002 was used. On the basis of this data, the parameters of production functions were calculated for the models 1, 2, and 3.
The calculations showed that the coefficient of resource efficiency was rather sustainable during this period.
The calculations for the model 1 showed, that the average annual number of employees was the most relevant resource during all the period. Moreover, during all the period the increase of the number of employees by 1% led to the growth of the return on sales of products and services by more than 1%.
During all the period, the efficiency of fixed capital stock also was high (although lower than one of labor), and varied from 0.206 to 0.456.
During the period under the study, the land remained to be the excess resource. In the function, the negative coefficients show that the growth of land resource by 1% led to the decrease of the return on sales by 8.9-12.9%. Sum total of the positive coefficients in the regression function that was significantly higher than 1, provided serious economies of scale.
The analyzed factors explained 73.8-82.8% of variation of the return on sales gained by the enterprises.
The calculations within second and third variants prove the conclusions mentioned above: the values of coefficients correspond to the average data by years, land is the most important factor, land is the excess resource, the economy of scale seriously influence the efficiency of AgOs.
In model 2, another three independent variables were added: the number of cattle, budgetary subsidies and compensations, and material costs. The addition of these variables significantly changed the values of coefficients in the regression function for land, labor and fixed capital and let draw a set of new trends in the dynamics of the resource use efficiency.
During all the period, material costs (working capital) remained to be the most important and the most deficient resource. From 1995 to 2002, the deficit of working capital has permanently grew.
The growth is proved by the values of coefficients in the function for this independent variable (growth from 0.701 in 1995 to 1.0 in 2002), as well as by the growth of t-statistics for this variable (growth from 144 to 384).
The growth of the deficiency of working capital led to the decrease of the influence of the other important resource such as labor. If in 1995 its influence was rather serious (the growth of the number of employees by 1% led to the growth of the return on sales by 0.655%), in 2002 its influence decreased by more than 3.5 times (to 0.206).
11.The Relative Efficiency of Agricultural Organizations The analysis let assess the average efficiency of the use of resources of all agricultural enterprises in Russia. However, it did not answered the question: “Are the available resources used efficiently”. To answer this question, it is necessary to accomplish the analysis of relative (technical) efficiency of agricultural enterprises. The methodology of such analysis was elaborated by M. Farrell, T. Coelly and A. Charns. In Russian, it is described in details in the articles of A. Lisits and T. Babicheva8.
The basic concept of the method of relative efficiency assessment is the determination of sample agricultural organizations, which completely and efficiently use their resources. In these enterprises none of the factors of production can be decreased without the decrease of the output of one ore more products, or the increase of other factors of production. An vice versa, the production of none of the products can be increased without the increase of one or more factors of production or the decrease of the production of other products.
If the efficiency of sample enterprises is equal to 1, the efficiency of all the other enterprises will be less than 1, i.e., they are able to produce more products within the same quantity of resources, or to increase the input of resources for the existing output.
Within the concrete calculations, the results of which are represented below, the resourceoriented model with variable economy of scale was used. In the model, the factors of production included the area of arable land used by enterprise, average annual number of workers, fixed capital, and working capital (material costs).
The basic outlet parameters included the volume of sales of crop production, livestock products and non-agricultural kinds of activity.
The calculation of the efficiency of AgOs was accomplished across the groups of specialized enterprises. To compare the dispersion of AgOs by their efficiency in dynamics, the calculations Lisitza А., Babitcheva Т.. Teoreticheskie osnovi analysa productivnosti i effectivnosti selskohozyaistvennyh predpriyatii. Halle, IAMO, Discussion Paper No 49, 2003г.
were accomplished for the period from 1995 to 2002.
The results of the calculations of the efficiency of the AgOs specialized in cereals production and industrial crops, potatoes and vegetables, and poultry products let draw a set of the following conclusions.
1. In Russia, agricultural enterprises are highly differentiated by the efficiency. The relative efficiency of the major part of AgOs is less than 0.5.
2. Among the AgOs producing potatoes and vegetables, poultry, and pork there are large groups of enterprises with the efficiency equal to 1 (as for pork-growing complexes, the share of such enterprises slightly exceeds 20%, for poultry plants and enterprises specializing in potato and vegetables production — 12-14%). However, alongside with these “leading lights” with the efficiency close to maximal (0.7-0.9) there are very few enterprises. In Russia, the allocation of producers close to a group with maximal efficiency that is typical for developed countries, is not observed. “Leading lights” are far away from the major part of enterprises.
3. During the analyzed period, the weighted average ratios of the efficiency of the use of resources remained constant (excluding enterprises that specialize in grain production which faced with serious decrease of average efficiency — from 0.39 in 1995 to 0.24 in 2002).
However, during the same period the differentiation of AgOs by their relative efficiency took place. The share of enterprises with maximal and minimal efficiency has grew and the share of enterprises with moderate efficiency has decreased.
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