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Productivity and farm profit - a microeconomic analysis of the cereal sector in England and Wales

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  • David Hadley
  • Xavier Irz

Abstract

This article implements the profit change decomposition methodology developed by Grifell-Tatje and Lovell (1999). Profit change over time is first decomposed into a price effect and a quantity effect; the quantity effect is then decomposed into a productivity effect and an activity effect; in turn, the productivity effect is subdivided into a technical efficiency effect and a technical change effect, while the activity effect is divided into a scale effect, resource mix effect and product mix effect. The end result is therefore a measure of six distinct components of profit change. The methodology is used to investigate profit changes for a sample of cereal farms drawn from the Farm Business Survey in England and Wales for the period 1982 to 2000. The results of the analysis show an overall decline in profit levels for the period at the average speed of £4400 annually, with the major part of this decline attributable to a negative price effect amounting to £7000 annually on average. However, this was to some degree offset by a positive quantity effect largely driven by the positive contribution of technical change to profit growth, worth £4000 annually on average.

Suggested Citation

  • David Hadley & Xavier Irz, 2008. "Productivity and farm profit - a microeconomic analysis of the cereal sector in England and Wales," Applied Economics, Taylor & Francis Journals, vol. 40(5), pages 613-624.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:5:p:613-624
    DOI: 10.1080/00036840600707209
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    References listed on IDEAS

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    1. Lovell, Knox, 2001. "Future Research Opportunities in Efficiency and Productivity Analysis," Efficiency Series Papers 2001/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
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    Cited by:

    1. Islam, Nazrul & Kingwell, Ross & Xayavong, Vilaphonh & Anderton, Lucy & Feldman, David & Speijers, Jane, 2018. "Broadacre Farm Productivity Trajectories and Farm Characteristics," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 26.
    2. Nazrul Islam & Vilaphonh Xayavong & Ross Kingwell, 2014. "Broadacre farm productivity and profitability in south-western Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(2), pages 147-170, April.
    3. Cechura, L. & Hockmann, H. & Malý, M. & Žáková Kroupová, Z., 2015. "Comparison of Technology and Technical Efficiency in Cereal Production among EU Countries," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 7(2), pages 1-11, June.
    4. Ana María Reyna & Hugo J. Fuentes, 2018. "A cost efficiency analysis of the insurance industry in Mexico," Journal of Productivity Analysis, Springer, vol. 49(1), pages 49-64, February.
    5. Xinru Miao & Shaopeng Wang & Jiqin Han & Zhaoyi Ren & Teng Ma & Henglang Xie, 2024. "The Regional Heterogeneity of the Impact of Agricultural Market Integration on Regional Economic Development: An Analysis of Pre-COVID-19 Data in China," Sustainability, MDPI, vol. 16(5), pages 1-33, February.
    6. Cechura, Lukas & Hockmann, Heinrich & Malý, Michal & Žáková Kroupová, Zdenka, 2015. "Comparison of technology and technical efficiency in cereal production among EU countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7(2), pages 27-37.
    7. Islam, Nazrul & Xayavong, Vilaphonh & Anderton, Lucy & Feldman, David, 2014. "Farm productivity in an Australian region affected by a changing climate," 2014 Conference (58th), February 4-7, 2014, Port Macquarie, Australia 165842, Australian Agricultural and Resource Economics Society.

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