A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Walther, Simon Research Report Determinants of competitiveness of agriholdings and independent farms in Ukrainian arable production Thünen Report, No. 15 Provided in Cooperation with: Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries Suggested Citation: Walther, Simon (2014) : Determinants of competitiveness of agriholdings and independent farms in Ukrainian arable production, Thünen Report, No. 15, ISBN 978-3-86576-119-4, Johann Heinrich von Thünen-Institut, Braunschweig, http://nbn-resolving.de/urn:nbn:de:gbv:253-201403-dn053389-9 This Version is available at: http://hdl.handle.net/10419/97132 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Zitationsvorschlag – Suggested source citation: Die Verantwortung für die Walther S (2014) Determinants of competitiveness of agriholdings Inhalte liegt bei den jeweiligen and independent farms in Ukrainian arable production. Braunschweig: Verfassern bzw. Verfasserinnen. Johann Heinrich von Thünen-Institut, 230 p, Thünen Rep 15 The respective authors are responsible for the content of their publications. Thünen Report 15 Herausgeber/Redaktionsanschrift – Editor/address Johann Heinrich von Thünen-Institut Bundesallee 50 38116 Braunschweig Germany [email protected] www.ti.bund.de ISSN 2196-2324 ISBN 978-3-86576-119-4 DOI:10.3220/REP_15_2014 urn:nbn:de:gbv:253-201403-dn053389-9 D100 Determinants of competitiveness of agriholdings and independent farms in Ukrainian arable production Simon Walther Thünen Report 15 Simon Walther Fladengreuth 1 91622 Rügland E-Mail: [email protected] Thünen Report 15 Braunschweig im März 2014 Preface This work was accepted as a doctoral dissertation by the Faculty of Agricultural Sciences at the University of Hohenheim on the 26th of August 2013. The date of submission was the 12th of June 2013, the date of the oral examination was the 18th of October 2013. The examination committee was: Supervisor and reviewer: Prof. Dr. Drs. h. c. Jürgen Zeddies (University of Hohenheim) Co-reviewer: Prof. Dr. Folkhard Isermeyer (Thünen Institute and University of Göttingen) Additional examiner: Prof. Dr. Enno Bahrs (University of Hohenheim) Vice dean: Prof. Dr.-Ing. Stefan Böttinger (University of Hohenheim) The research was conducted in the context of the agri benchmark project at the Institute of Farm Economics of the Johann Heinrich von Thünen Institute in cooperation with the Institute of Farm Management at the University of Hohenheim. My warmest thanks go to everyone in Braunschweig, Hohenheim and Ukraine who supported me in this endeavor, as well as – especially – my family. It is you who made this possible in the first place. Simon Walther Contents I Contents Preface 1 Introduction 1 1.1 Problem statement 1 1.2 Research objectives 2 1.3 Approach and data 2 2 Literature review 5 2.1 Definition of agriholding 5 2.2 The role of agriholdings in Kazakhstan, Russia and Ukraine 6 2.3 Explanations for the development of agriholdings 11 2.4 Structure of arable producers in Ukraine 16 2.4.1 Private household production (“households”) 16 2.4.2 Private farms 17 2.4.3 Independent agricultural enterprises 18 2.4.4 Agriholdings 19 2.5 Competitiveness of agriholdings 22 3 Development and application of a research concept 25 3.1 Development of a research concept 25 3.1.1 Delimitation of the research subject 25 3.1.2 Definition and analysis of competitiveness 25 3.1.2.1 Definition of competitiveness 26 3.1.2.2 Approaches to competitiveness analysis and methodological choice 27 3.1.2.3 Sampling strategies 30 3.1.3 The agri benchmark typical farm approach 32 3.1.3.1 The typical farm concept 32 3.1.3.2 The agri benchmark panel process 33 3.1.3.3 Requirements with regard to farmers and advisors in the standard panel process 36 3.1.4 Adaptations of the panel process to challenges in Ukraine 38 3.1.4.1 Challenges to the panel process in Ukraine 38 3.1.4.2 The modified panel process 41 3.1.5 Selection of typical farms 46 3.1.5.1 Selection of typical farms in agri benchmark 47 3.1.5.2 Selection of typical farms for this research 47 3.2 Derivation of research hypotheses on determinants of competitiveness 52 3.2.1 New Institutional Economics as a theoretical framework 52 II Contents 3.2.1.1 The four levels of social analysis 53 3.2.1.2 Transaction cost economics 54 3.2.2 Derivation of hypotheses at the four levels of social analysis 58 3.2.2.1 Embedded level 58 3.2.2.2 Formal institutions level 58 3.2.2.3 Governance level 59 3.2.2.4 Resource allocation and employment level 66 3.2.2.5 Summary and conclusions 70 3.3 Preparation and application of the modified panel process 72 3.3.1 Preparation 73 3.3.1.1 Recruitment of panel participants 73 3.3.1.2 Selection of a research region 75 3.3.1.3 Preparation of an interview and discussion guideline 76 3.3.2 Face-to-face interviews in the first panel round 79 3.3.3 Drafting of the typical farms 79 3.3.3.1 Data basis for the drafts 80 3.3.3.2 Technical considerations 81 3.3.3.3 Establishment of the drafts 83 3.3.4 Separate focus groups in the second panel round 85 3.3.5 Joint focus group in the third panel round 85 4 Results 87 4.1 Competitive advantages and disadvantages of agriholdings and independent farms 87 4.1.1 Management performance level represented by the participants and the derived typical farms 88 4.1.2 Net competitive advantages of agriholdings 88 4.1.2.1 Access to and cost of capital 89 4.1.2.2 Terms in input purchases and output sales 95 4.1.2.3 Risk 103 4.1.3 Net competitive disadvantages of agriholdings 105 4.1.3.1 Lower efficiency 105 4.1.3.2 Overhead costs 109 4.1.4 Inconclusive issues 110 4.1.4.1 Political clout 111 4.1.4.2 Access to land 114 4.1.4.3 Motivation and performance of managers 118 4.1.5 Factors determined to be of no relevance for the competitive position of the two organizational forms 119 4.1.5.1 Subsidies and agricultural policy 119 4.1.5.2 Motivation, performance and cost of workers 119 4.1.5.3 Economies of scale in operative production 120 4.1.6 Effects of vertical integration 120 Contents III 4.2 Further characteristics and performance of the typical farms 123 4.2.1 Key characteristics of the typical farms 123 4.2.1.1 Crop rotation 123 4.2.1.2 Production systems 124 4.2.1.3 Labor organization and cost 125 4.2.1.4 Mechanization and grain handling 127 4.2.1.5 Capital costs 129 4.2.1.6 Crop yields 129 4.2.2 Economic performance of the typical farms and quantification of differences between the organizational forms 130 4.2.2.1 Economic performance of the typical farms 130 4.2.2.2 Quantification of differences between the organizational forms 132 4.2.2.3 Required yields of typical agriholding farms to draw level with the typical independent farms 134 4.2.3 Sensitivity analysis 135 4.3 Development of key results in the modified panel process 139 4.3.1 Summary of the development of the key assessments and indicators 139 4.3.2 Analysis of the effect of key methodological aspects on the development of the results 143 4.4 Future adaptations of the two organizational forms to maintain and increase their competitiveness 145 4.4.1 Goals of the investors 145 4.4.2 Future adaptations of agriholdings 146 4.4.2.1 Business consolidation 146 4.4.2.2 Improvement of management capacity 147 4.4.2.3 Reduction of management requirement by simplification 148 4.4.3 Future adaptations of independent farms 149 4.4.3.1 Organization of cooperatives