Comparing Scottish Farm-level Efficiencies with Other UK Countries
Published on 12 August 2010 in Sustainability and Communities
Introduction
Improving resource use efficiency is an important goal for UK agricultural policy and, as it underlines the amount of wastage of inputs within the food production process, provides a key indicator for debates surrounding food security, environmental improvement and climate change.
An aspect of efficient resource use is technical efficiency, which measures the amount of physical output obtained from a set of physical inputs. The modelling and estimation of technical efficiency of a farm relative to others has become an important area of economic study. This note present results of a Defra funded project aimed at measuring and comparing efficiency growth across UK and EU countries.
Key Points
Scotland demonstrates a high level of technical efficiency across all farm types, indicating that, on average, farms operate near best practice levels. This infers that farmers are adopting newer methods and techniques to maintain an efficient agricultural production system.
All farming types have farms which are on the technical efficiency frontier, meaning that they are operating at their optimal activity levels. Whilst still impressive, LFA specialist sheep farms rank lowest, in terms of mean efficiency levels, and mixed farming types have the highest mean levels of efficiency.
When compared against other UK countries, average technical efficiency scores are lower. However, Scotland is ahead in the dairying sector and has high relative scores across most livestock sectors when compared against English, Welsh and Northern Irish farms.
Scotland performs poorly against other UK countries for its cropping sectors. Average technical efficiency scores are low for cereals and also general cropping. This may be due to structural factors, but also relates to the attitudes of farmers towards agricultural production and the trade-offs between efficiency and uptake of non-productivity enhancing technologies, which may conflict with the goals for an efficient agricultural system.
This analysis has also found fairly stable rates of technical efficiency growth for most farm types over the period 1989 to 2008. When examining each farm individually over time, around 60% have maintained the same efficiency levels over this period. This may be evidence of the resilience of the agricultural economy as a whole to assimilate the market, policy and disease related shocks which have occurred over this period. However, a number of farms have remained in the lower efficiency bracket throughout this time period and there may be underlying factors which constrain the lower performing farmers from achieving higher levels of efficiency.
Research Undertaken
A large number of studies have measured technical efficiencies within various regions over a number of time scales. This method constructs a frontier representing best practice, and then compares the distance between a farm and that frontier. A score of 1 means that a farm is on the frontier and therefore operating at its optimal level of efficiency for that period, most farms are below this frontier but scores of 0.8 to 0.9 are indicative of farms operating close to that frontier.
Very few studies have attempted to compare efficiencies across regions because farms in other countries may experience different technology possibilities and this presents a challenge for standardised measurement. This project compiled extensive data series and applied novel econometric techniques to understanding how performance compares across regions.
Generally, Scottish farmers perform well when compared against their own technology within Scotland and this reflects the adoption of techniques and technologies to improve resource use efficiency over this period. However, scores are lower when Scottish farmers are compared against other UK countries. Nevertheless, dairy farmers within Scotland are generating higher technical efficiency scores than the rest of the UK, indicating itself as a leader across the UK. On the whole livestock sectors perform well against the rest of the UK, but Scotland shows lower scores in the cropping sectors. This is could be due to structural factors, such as access to investment, but may also relate to the attitudes of farmers towards uptake of technology.
Policy Implications
These findings have advanced understanding of technical efficiency measurement within Scotland and presented an objective indicator which can be applied within policy arenas focused on food security, environmental enhancement and climate change mitigation. These can also be used as a marker for progress in resource use efficiency for each sector.
Generally, Scotland is doing well in terms of livestock, and the dairying sector is performing well against its UK counterparts. However, it performs less well in cereals and general cropping sectors which may be a cause for concern for policy makers when encouraging uptake of technologies and techniques for reducing wastage.
An analysis of the trends in individual farms found that around 60% of farms tended to stay in the same efficiency category from one year to the next. Underlying this, of course, will be the loss of less efficient farms, which has wider social and cultural implications. Consequently, under a partial policy analysis approach focused on maintaining and improving resource use productivity there is some comfort that there has been a maintenance of productive use of resources throughout this period.
Work not detailed here also investigated the role of the UK as a whole against EU partners and this has to be explored further to understand Scotland's particular place against other EU agricultural systems.
Author
Dr Andrew Barnes and Dr Cesar Revorado-Giha andrew.barnes@sac.ac.uk
Topics
Sustainability and Communities
