Efficiency Analysis of Czech Organic Agriculture

Organic agriculture is the fastest developing branch of Czech agricultural production. Nevertheless, foreign research indicates that it is not being dealt with using efficient production technology. This research has not yet been undertaken in the Czech Republic, and therefore the aim of the proposed paper is to evaluate the technical efficiency of Czech organic farms, including determining which factors are causing the inefficiency. A partial aim is also to identify the determining factors in choosing organic production technology. The primary methodological tool for achieving these aims is an analysis using a frontier production function estimated by the maximum likelihood method. The determinants for choosing organic production technology are analyzed by means of an estimation of a probit model, which is also quantified by the maximum likelihood method. These analyses are conducted on the basis of unbalanced panel data from 129 organic and 379 conventional enterprises obtained over the time period 2004 – 2008. Farms, whose data was entered into this database, represent legal entities concentrated primarily on mixed agricultural production. Results of the analyses indicate the inferiority of organic production technology, because they document that conventional producers operate, on average, closer to the frontier production function than organic producers. Moreover, conventional production technology enables all organic producers to increase their production. This inefficiency is determined by the endowment policy of the Czech Republic and the European Union. The completed research documents that subsidies for support of organic agriculture deepen the technical inefficiency of organic producers. However, at the same time, those subsidies are an important stimulus for converting producers to organic production technology. In reaction to these conclusions, the submitted paper suggests changes in the endowment policy which would enable organic producers to increase their efficiency.