During the last few decades, European agriculture has been intensifying its production practices. In order to reduce the negative impacts derived from intensive farming, some environmental friendly production methods have been promoted by EU public authorities. Organic farming, which has increased substantially in recent years, has received important attention within the Common Agricultural Policy (CAP). The CAP has provided support to organic farming since 1991 by means of a premium subsidy program in which farmers receive a fixed payment per crop and year.
The aim of this paper is to assess the factors that influence the decision to adopt organic farming practices. The following tasks are therefore set: 1) to compare the results of similar studies of the other countries within the European Union; 2) to make a logit model which could evaluate probabilities to switch to organic farming; and 3) to assess the influence of farmers’ expectations on the probability to switch to organic farming.
Factors influencing farmers’ decision on adopting or not were analysed. Many studies (Laajimi and Albisu (1998), Pietola and Oude Lansink (2001), Darnhofer, Schneeberger and Freyer (2005), Genius, Pantzios and Tzouvelekas (2006), Acs, Berentsen and Huirne (2007), Ferto and Forgacs (2009), Mala and Maly (2013)) have been reviewed. According to those, the most relevant factors that influence the decision to convert from conventional to organic farming include farmer characteristics, farm structure, farm management, exogenous factors, and attitudes and opinions.
A logit model was estimated on a cross-sectional data set of Lithuanian farmers for the period 2011. In total there the sample. The logit model was chosen based on these advantages:
- Although the probabilities (of necessity) lie between 0 and 1, the logits are not so bounded.
- Although the logit model is linear in independent variables, the probabilities themselves are not. This property is in contrast with the linear probability model, where the probabilities increase linearly with regressors.
- As many regressors as may be dictated can be added by the underlying theory in the logit model.
- When values of variables are known, it is easy to calculate probabilities.
Hypotheses based on previous empirical literature were tested by models explicitly accounting for theeffects of farm-specific variables like farm size, farm type, farmers’ age, subsidies, farm employees and income.
The model had a multicolinearity problem. The correlation coefficient was significantly high between variables of income and employees, and the factor of farm employees was thus eliminated in order to solve the multicolinearity. Farmers’ age was not a statistically significant regressor, so it was also eliminated from the logit model. All other variables were significant with a 95% probability, except for farm size (with a probability of 90%).
The results of tests of the model goodness to fit were positive and led to a conclusion that this model is acceptable for further analysis. In addition, 93% of predictions with this model were correct. That shows quite a high accuracy.
Conclusions:
- Research exploring the factors of organic production method selection can be divided into two groups. The first group of scientists shows greater importance to the non-economic factors, while the second to economic factors. The former group includes farmer’s attitudes, opinions and objectives. In the later group we mainuly find market prices and public support. However, the authors argue that both non-economic and economic factors are equally important and farmers’ decisions depend on the overall effect of all of them.
- Subsidies have the strongest influence on farmers’ decision to adopt organic production. In order to promote organic farming in Lithuania, increasing subsidies to an average of 1149 Lt / ha would be effective.
- The direct impact on the choice of the organic production method also has economic value. This can be explained by the fact that larger farms produce a higher output, its realization can be more easy and at a higher price. In addition, larger farms have more revenue per employee, as well as such farms being capable of deploying advanced technologies.
- Farmers’ ages are not important to their decisions to switch to organic production method. The hypothesis that often young farmers choose organic farming in Lithuania was rejected.
- The relationship between farm income and the probability of adopting organic production is reverse. The main reason is that the higher prices of organic products does not compensate the lower production volumes.
- The probability switching to organic production is considered to be nearly 70 per cent lower in the case of animal farming compared to crop farming. It is likely that these results led to relatively lower support for the livestock sector. This suggests that farms propagating animal farming should receive more support.
Keywords: organic farming, expectations, logit model.
Kriščiukaitienė, I.; Eirošius, Š.; Namiotko, V. 2013. Ekologinės gamybos būdo pasirinkimą lemiančių veiksnių vertinimas. Ekonomika ir vadyba: aktualijos ir perspektyvos. 2(30): 37-43, ISSN 1648-9098 [IndexCopernicus nuo 2006].
