Modelling of Production Factors Return in Agribusiness

The country farm structure is based on different specializations and distribution of farms in different size groups; and the productivity growth in each particular group can be different from that reflecting a mean performance of entire sector. In order to improve targeting of policy measures for economic development of agricultural sector, the analysis of factors productivity by taking into account the diverse inner structure of farm should be done. Purpose of the paper is to present the methodology for complex assessment of production factors return in agribusiness based on use of production functions and cash flow models.The methodology applied includes several of existing methods for empirical analysis – production functions for assessment of factors return in terms of single-factor and total factor productivity; and cash flow models in terms of profitability. The EU Farm Accountancy Data Network (FADN) data at individual farm level has been used as informative base for estimation of parameters for production functions. The same data are used for cash flow models where different economic policy measures and capital funding sources can be determined for different scenarios. Present value of money flow shows the total profitability in the long run period. In different scenarios change in factor productivity and their possible substitution depending on technological development level can be assumed as well.The results obtained from production functions estimated for field crops, dairying, pigs and poultry; and mixed farming show that there are different production technologies implemented at the level of different farm size groups. The results show the positive relationship between farm size and the total factor productivity, that means the higher return on production factors. The most efficient are large field crop farms. Policy impact upon the profit of farms differ mostly due the structure of production factors in different specialisations and less due to the size of farms.