Economic efficiency of agricultural production and ways to improve it

Economic efficiency of agricultural production is the ratio of the result obtained to the resources expended. In the context of the constant rise in prices for fertilizers, plant protection products, fuel, and machinery, the farm that survives is the one that receives maximum output for every ruble invested. Increasing efficiency reduces production costs, ensures an increase in net income, and allows the enterprise to develop even at low market selling prices.

• Profitability level — 25 %
• Profit per 1 rub. of costs — 25 kop.
• Revenue per 1 rub. of costs — 1 rub. 25 kop.

To evaluate the performance of a farm, agronomists and economists use two groups of indicators. The first group shows the result (economic effect) regardless of costs: gross output, gross and net income, profit, and cost savings. The second group reflects the invested resources: production and realization costs, the value of fixed and working assets, and the volume of capital investments.

Efficiency always has two sides: economic (the degree of resource utilization) and social (the completeness of satisfying human needs for material and non-material goods). Both directions are closely interconnected.

From field level to farm economics: how to correctly evaluate results

The starting points for calculating economic efficiency are crop yield and livestock productivity. An analysis of production economics is performed at several interrelated levels:

• the country's agriculture as a branch of the economy;
• a specific agricultural enterprise;
• internal farm units (farms, teams, workshops, departments);
• branches and sub-branches (crop production, livestock production, field cropping, horticulture);
• production of individual crops and types of products (grain, potatoes, vegetables, sugar beet, forage crops, milk, eggs, meat of livestock and poultry, wool);
• specific measures (agrotechnical, land reclamation, veterinary, environmental, organizational).

To obtain an objective picture, the obtained efficiency indicators are compared with three benchmarks. First, with the threshold of minimum efficiency, below which production becomes impractical. Second, with the farm's planned standards. Third, with the indicators of leading farms operating under similar soil and climatic conditions.

Maximum efficiency is achieved when reaching the production possibility frontier. This is a state in which all farm resources are fully utilized, and it is no longer possible to increase the output of one type of product without reducing the production volume of another.