FACTORS DETERMINING PROFITABILITY OF PRODUCTION OF SELECTED AGRICULTURAL PRODUCTS BY 2020

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FACTORS DETERMINING PROFITABILITY OF PRODUCTION OF SELECTED AGRICULTURAL PRODUCTS BY 2020

Journal Title: Zagadnienia Ekonomiki Rolnej - Year 2015, Vol 342, Issue 1

Abstract

The projection results drawn up for 2020 under average conditions, i.e. following from long-term trends, point to an improvement in the production and price results of researched cereals, namely winter wheat, winter rye and spring barley. Annual growth rate of yield will probably range from 0.5% to 1.6% and grain price: 2.2-3.2%. Whereas the annual increment of production costs may range from 3.4% to 4.3%. In these conditions, wheat and barley production will be characterised by stronger growth rate of costs than revenues thus, against the input data for the projection, it is possible that there will be a drop in the production, respectively, by 2.4 pp and 8.6 pp. Rye production profitability will be probably higher by 6.2 pp given the stronger growth in revenues.It is estimated that by 2020, winter rape yield will grow by ca. 1%, the price of grain by ca. 3% and the production costs will range from 3.4% to 4.2%. This will result in stronger growth rate of revenues than costs and a growth by 4.8 pp in rape production profitability.It is expected that by 2020 the annual growth rate of sugar beet yields will fluctuate around 2% and sales prices of roots around 1.8%. On the other hand, the expected annual increase in the costs will total 3.6-4.2%. Under the conditions, the economic efficiency of the production of sugar beets will basically be the same, and the profitability index may increase by only 0.8 pp.However, there might be various unforeseeable annual deviations from the general trends, for instance, because of mutability of weather conditions or especially strong fluctuations in product prices or means of production. Their impact on production and economic results of researched crops may be significant.Rye and rape are the most sensitive to fluctuations in yield and sales price of products. This means that, under favourable production and price conditions, a significant increase in income may be expected, but, simultaneously, their cultivation is very risky. The research results prove that fluctuations in sales prices of researched products, following from variation over the years, have a definitely stronger impact on the level of income than yield fluctuations. A strong drop in the price of rye grain caused unprofitability of its cultivation. But farmers will rather not incur losses from production of the other crops, despite the expected quite high drops in sales prices. Rye is also characterised by high sensitivity to cultivation costs, unit change in their level has a very strong impact on income fluctuations. This entails that a rise in the prices of means of production will have an even stronger negative impact on the amount of income from rye cultivation than from other researched crops.The results projection for 2020 and its variants demonstrate benefits but also possible threats. Nonetheless, knowledge thereof is very useful as it reduces uncertainty and can contribute to greater accuracy of decisions taken and thereby to elimination of losses that can otherwise occur.

Authors and Affiliations

Aldona Skarżyńska

Keywords

cultivation costs Cereals production profitability yields production value Development trend projection model direct costs

EP ID EP68343
DOI -
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