Technical Efficiency and Changes in Alentejan Farming Systems

Abstract

Following the entrance of Portugal into the EC in 1986, the agricultural sector faced important challenges in implementing the agreements for the first stage of the transition period, the rules that were agreed for the second stage, and the 1992 CAP reform. These last two developments accelerated the integration of Portuguese agriculture into the Community, and their long term impact will differ from region to region and will probably demand improvements in management skills and efficiency, adjustments in farm size and in the crop-livestock activities, and changes in the path and pattern of farm growth.

The objectives of this study were: 1) to analyze the characteristics of farm growth, 2) to estimate and measure the levels of technical efficiency, and 3) to predict farm development under the CAP reform for the period 1992-2000. This analysis was undertaken on four of the ten agricultural systems (intensive, semi-intensive, extensive and poor lands) that comprise the Alentejo region. The methodologies employed were a covariance model to analyze the characteristics of farm growth, parametric and non-parametric methods to estimate and measure technical efficiency and a multiperiod growth model to predict farm performance on 9 farms in the four selected farming systems.

The results showed that: 1) the process of farm growth of Alentejan farms was farm and farming system specific and that small farms grow faster than larger farms, 2) there is room to improve technical efficiency in converting inputs into agricultural outputs and that it will be more important for farms belonging to the extensive and semi-intensive farming systems to show improvements in efficiency, and 3) farm income will decrease for all the farming systems analyzed and extensification will probably take place based on livestock activities (sheep and cattle). The intensive farming system is the one that shows a higher ability to survive in the long run. The capacity to survive of the other three farming systems will depend on farm size, with larger farms showing a better performance. These predicted changes will affect farm size structure in the long run and the capacity of agriculture to employ agricultural labour at the present levels