Die Bodenkultur - Journal for Land Management, Food and Environment

W. Schneeberger und M. Eder:

Influence of direct payments on the farm classification system


The standard gross margin of an agricultural enterprise is used both for classification purposes and as a measure of the economic size of the enterprise. It’s also the basis used for dividing farm enterprises into different size classes in income records. Regression analysis using data provided by those Austrian forage enterprises keeping voluntary accounts demonstrates that the correlation between this standard gross margin and profit (net income) is low. There are various reasons for this. Farms in mountainous areas receive a supplementary payment whose size depends on which mountain zone they find themselves in. Those measures within the Austrian Agro-Environmental Program (ÖPUL) that lead to lower livestock numbers also reduce the enterprise’s standard gross margin – the premia paid as part of ÖPUL are not included in the calculation. Nor does this calculation cover other economic activities important to smaller farms, such as direct marketing or earnings from farm holiday accommodation. The failure to account for such issues when determining farm economic size classes distorts income records.

The paper presented attempts to prove this hypothesis using data from the forage enterprises. The current system for selecting reference enterprises using standard gross margins is compared with two others. In one, supplementary payments are included in the determination of economic size. In the other, both supplementary payments and ÖPUL premia are included. Direct marketing and farm holiday accommodation could not be included in the comparison because of a lack of appropriate data.

The results show that including the supplementary payments increases the proportion of enterprises from mountainous areas in the total number of enterprises eligible to be included in the network of reference enterprises. The average incomes generated from agricultural and forestry by farm enterprises in the more disadvantaged mountain zones sinks, since more of the smaller enterprises are now eligible for selection as reference enterprises. If ÖPUL premia are included in determining economic size, then even more enterprises satisfy these eligibility requirements and average incomes fall further, but the relative incomes achieved in the different mountain zones change very little compared to the effect of supplementary payments. The current system for defining economic size needs to be examined and modified on an EU basis.

Keywords: Standard gross margin, classification of agricultural enterprises, economic enterprise size, eligibility requirements, income records, forage enterprises.