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Analysis of the economy of farms with ecological agriculture in the light of profitability and risks

Author

Listed:
  • Daniel Kopta

    () (University of South Bohemia in České Budějovice)

  • Jindřiška Kouřilová

    () (University of South Bohemia in České Budějovice)

Abstract

This paper presents the results of the assessment of profitability and risks of agricultural holdings with the ecological agriculture. The first part deals with the rate of profitability. These results indicated improving economic situation for both ecological and organic agricultural holdings. The values for ecological holdings started to overreach the values for conventional farms approximately in 2003. Overall accrued revenue reached 8.2% for ecological and 4.3 for conventional farm during 5 years of investigation. In case of ecological farms, these values are approximately the same as the level of inflation so that they do not bring any revenue to the owner. In case of conventional farms, low profitability does not allow even a simple reproduction of assets. At the same time, the farming risk was analysed. The variability of the profit/loss was investigated together with the assessment of possibilities whether this variability may endanger the farm. The debt ratio and liquidity indicators were also taken into consideration within this analysis. The investigation revealed lower fluctuation of the profit/loss of ecological farms. The profitability of these farms is more stable so that these farms are not endangered by economic fluctuation as much. This development may be assessed as positive, especially in connection to the development of the indicator of interest coverage; when ecological farms are able to cover cost interests with higher reserves. The stabilization of revenues of ecological farms is caused both by higher volume of eligible subsidies (as a safe source of income of a farm) and by lower fluctuation of operation incomes itself caused by higher share of less risky animal production in the structure of production. This paper is a part of MSM 6007665806 project.

Suggested Citation

  • Daniel Kopta & Jindřiška Kouřilová, 2008. "Analysis of the economy of farms with ecological agriculture in the light of profitability and risks," Acta Universitatis Bohemiae Meridionales, University of South Bohemia in Ceske Budejovice, vol. 11(2), pages 33-40.
  • Handle: RePEc:boh:actaub:v:11:y:2008:i:2:p:33-40
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