Assessing the Economy of Small Scale Farm Forestry at The National Scale: The Case of Austria

Abstract

The Common Agricultural Policy of the European Union relies on empirical data provided by farm accountancy data networks. In Austria, this sample is representative not only for agriculture but also for farm forestry and does provide some forestry-specific information. However, sector statistics as well as a specific assessment of profitability and efficiency are hampered by the fact, that most inputs are not differentiated between the two lines of business. This deficiency is now overcome by means of a set of models, which are derived from the network of farm forests, which is in fact a small sub-sample of the agricultural network. Ultimately, representative results in terms of full cost accounting for farm forestry in Austria can be achieved. The paper explains the approach and highlights the significance of the results.

Appendix

Detailed Description of the Models Used for Assessing Individual Types of Cost

The approaches for deriving absolute values for each type of cost as proposed by Brenner (2010) were reconsidered; in the cases of tractor hours, depreciation and contractors, they were modified and ultimately specified for practical application in regard to the data of 2012. The respective framework comprises two steps: In regard to family labour and tractor cost the estimation of monetary values refers to physical inputs which are in turn to be derived by means of specific linear regression models. The statistical quality of these regression models is indicated by values of R ². Where appropriate, the correlation of the assessed value from the FADN with the documented value of the SSFN is specified in terms of Pearson’s coefficient of correlation (r).

Inputs in Physical Terms as Preliminaries for The Estimation of Cost

Family Working Hours

Family working hours (FWh) are not documented directly, but are instead presented in the manner of family working days (FWd). According to the documentation of the Austrian Report on the Situation of Agriculture (BMLFUW 2014a), FWh are the sum of all FWd of a family member (i) times 8 h times the age dependent working force reduction factor (RF), which is part of the general accounting framework of the FADN and varies in the range of 0.05 to 1.0 (Eq. (1)).

$${\text{FWh}}\left[ h \right] = \sum {\left( {{\text{FWd}}_{\text{i}} \left[ d \right] \times {\text{RF}}_{\text{i}} \times 8\left[ h \right]} \right)}$$

(1)

Coefficient of correlation for Eq. (1): r = 0.835.

The total input of family working hours has to be split up according to cost centres, different wage rates being applied for harvesting and other forest-related activities. The family working hours for logging (FWh_logging) are estimated by means of a linear regression, fitted with the total FWh of the SSFN. A side condition defines, that in case the result for FWh_logging is negative, it is set zero, implying that only family working hours for other activities (FWh_other) in the term of fixed cost occur. In Eq. (2) variable c = −a/b and is the threshold value for the minimal work input to forestry. As Eq. (3) shows, FWh_other is calculated as the difference of FWh and FWh_logging.

$${\text{FWh}}_{\text{logging}} \left[ h \right] = \left\{ {\begin{array}{*{20}l} {0\left[ h \right]} \hfill & {{\text{FWh}}\left[ h \right] < {\text{c}}} \hfill \\ {{\text{a}} + {\text{b}} \times {\text{FWh}}\left[ h \right]} \hfill & {{\text{FWh}}\left[ h \right] \ge {\text{c}}} \hfill \\ \end{array} } \right.$$

(2)

Coefficients for Eq. (2): a = −8.667, b = 0.819, c = 10.579; R ² = 0.896; r = 0.794

$${\text{FWh}}_{\text{other}} \left[ h \right] = {\text{FWh}}\left[ h \right] - {\text{FWh}}_{\text{logging}} \left[ h \right]$$

(3)

Coefficient of correlation for Eq. (3): r = 0.487.

Tractor Hours

The tractor hours (TRh) are estimated using the productive forest area (PFA), cutting volume (CV), FWh, and employee working hours (EWh) as independent variables (Eq. (4)). Two side conditions assign TRh a value of zero: (1) in case the result of TRh is negative or (2) in case neither FWh nor EWh exist, implying that the use of machinery is connected to the input of an operator.

$${\text{TRh}}\left[ h \right] = \left\{ {\begin{array}{*{20}c} {0\left[ h \right]} & {\sum {e \times {\text{PFA}} + f \times {\text{CV}} + g \times {\text{FWh}} < - d\parallel \left( {{\text{Fwh}} = 0{\& \& }{\text{EWh}} = 0} \right)} } \\ {{\text{d}} + {\text{e}} \times {\text{PFA}} + f \times {\text{CV}} + g \times {\text{FWh}}\left[ h \right] + h \times {\text{EWh}}\left[ h \right]} & {\sum {e \times {\text{PFA}} + f \times {\text{CV}} + g \times {\text{FWh}} \ge - d{\& \& }\left( {{\text{FWh}} > 0\parallel {\text{EWh}} > 0} \right)} } \\ \end{array} } \right.$$

(4)

Coefficients for Eq. (4): d = −4.119, e = 0.242, f = 0.043, g = 0.198, h = 0.137; R ² = 0.622; r = 0.738.

Eliciting Values for Individual Types of Cost

The estimation of some cost elements refers to the monetary input of family labour and machinery (tractor) which are considered as major cost drivers, so that a stepwise approach is applied to a certain extent also within the monetary sphere. For this reason these two elements are considered in the first place, whereas the sequence of the remaining types of cost corresponds to the scheme of profit accounting as applied in the section presenting the numerical results.

Wages

Cost for wages in forestry (W_F) occurs for dependent employment. They are assessed from the total cost for wages (W_total) using the forestry-related share of total working days (d). Working days are recorded for agriculture (WD_A), forestry (WD_F), agricultural auxiliary activity (WD_AAA), commercial auxiliary activity (WD_CAA) and farm holidays (WD_FH). W_F are calculated according to Eq. (5).

$${\text{W}}_{\text{F}} \left[ \EUR \right] = {\text{W}}_{\text{total}} \left[ \EUR \right] \times \frac{{{\text{WD}}_{\text{F}} \left[ d \right]}}{{{\text{WD}}_{\text{A}} \left[ d \right] + {\text{WD}}_{\text{F}} \left[ d \right] + {\text{WD}}_{\text{AAA}} \left[ d \right] + {\text{WD}}_{\text{CAA}} \left[ d \right] + {\text{WD}}_{\text{FH}} \left[ d \right]}}$$

(5)

Coefficient of correlation for Eq. (5): r = 0.966.

Energy and Material

The cost for energy and material (EMC) consists of the elements: Energy, material, plant protectives, fertilizer and forest plants. Whereas the cost for forest plants (CFP) is recorded specifically, the other elements are assessed in terms of a fixed ratio to FL and TC, as shown in Eq. (6).

$${\text{EMC}}\left[ \EUR \right] = {\text{CFP}}\left[ \EUR \right] + \left( {{\text{FL}}\left[ \EUR \right] + {\text{TC}}\left[ \EUR \right]} \right) \times i$$

(6)

Coefficients for Eq. (6): i = 0.046; r = 0.835.

Contractors

Starting with the fiscal year 2012, the cost of contractors rendering forest-related services is recorded specifically, so that no additional model is required.

Other Contracted Services

The cost for other contracted services (OCS) includes maintenance, legal advice, rental and cost for cars. As defined in Eq. (7) OCS is assessed in terms of fixed ratio to FL and TC (j).

$${\text{OCS}}\left[ \EUR \right] = \left( {{\text{FL}}\left[ \EUR \right] + {\text{TC}}\left[ \EUR \right]} \right) \times j$$

(7)

Coefficients for Eq. (7): j = 0.026; r = 0.312.

Tractor Cost

Assessment of tractor cost (TC) is based on TRh, average tractor power (TP) and the common hourly rates for tractors, according to the evaluation instructions for the FADN (LBG 2013). In case an enterprise operates more than one tractor, the average TP is calculated as there is no assignment of tractors to forestry available. This imputed hourly rate, derived from the rates provided by the Austrian council for agricultural engineering and rural development (ÖKL 2013), includes elements of depreciation and interest. Due to the amendments in the enquiry depreciation of capital assets belonging to forestry are documented directly and must be excluded to avoid double counting. In average depreciation of capital assets count 25 % of the hourly rate and imputed interest 12 %. The rate for tractors for the fiscal year 2012 is 0.47 [€/kWh]. TC are calculated according to Eq. (8).

$${\text{TC}}\left[ \EUR \right] = \frac{1}{n}\sum\limits_{i = 1}^{n} {\left( {{\text{TP}}_{i} \left[ {\text{kW}} \right] \times 0.47\left[ {\frac{\EUR}{\text{kWh}}} \right] \times 0.63} \right) \times {\text{TRh}}\left[ h \right]}$$

(8)

Coefficient of correlation for Eq. (8): r = 0.822.

The remaining TC can be subdivided by cost types. In average 51 % belong to fuel cost, 23 % to cost of repair and maintenance, 13 % to cost of lubricants and 13 % to cost of accommodation and insurance.

Taxes

Cost for taxes (TaC) include taxes and charges dependent on the assessed tax value of forestry (ATV_F) as well as additional taxes and charges. The cost for taxes and charges that is not based on ATV_F is derived as an inflation-adjusted fixed value per ha of PFA (k). TaC based on ATV_F is calculated with an average collection rate of 1875 % according to the guidelines for the SSFN. For the first €3,633.64 of the ATV_F, the collection rate is applied to 1.6 ‰ of the ATV_F and for the remaining value to 2.0 ‰ of the ATV_F (see Eq. (9)).

$${\text{TaC}}\left[ \EUR \right] = \left\{ {\begin{array}{*{20}c} {{\text{ATV}}_{\text{F}} \left[ \EUR \right] \times 0.0016 \times \frac{1875\left[ \% \right]}{100} + {\text{PFA}}\left[ {ha} \right] \times k\left[ {\frac{\EUR}{ha}} \right]} & {{\text{ATV}}_{\text{F}} \left[ \EUR \right] \le 3633.64} \\ {{\text{ATV}}_{\text{F}} \left[ \EUR \right] \times 0.0016 \times \frac{1875\left[ \% \right]}{100} + \left( {{\text{ATV}}_{\text{F}} \left[ \EUR \right] - 3633.64\left[ \EUR \right]} \right) \times 0.0004 \times \frac{1875\left[ \% \right]}{100} + {\text{PFA}}\left[ {ha} \right] \times k\left[ {\frac{\EUR}{ha}} \right]} & {{\text{ATV}}_{\text{F}} \left[ {\EUR } \right] > 3633.64} \\ \end{array} } \right.$$

(9)

Coefficients for Eq. (9): k = 0.367; r = 0.953.

Other Cost

The item other cost (OC) includes insurance premiums and any kind of other cost. OC is assessed in relation to FL and TC (l) (Eq. (10)).

$${\text{OC}}\left[ \EUR \right] = \left( {{\text{FL}}\left[ \EUR \right] + {\text{TC}}\left[ \EUR \right]} \right) \times l$$

(10)

Coefficients for Eq. (10): l = 0.020; r = 0.290.

Depreciation

Due to enhancements in the enquiry starting with the fiscal year 2012 the depreciation of assets (DoA) is documented specifically. DoA is even differentiated according to the four main cost units: logging (DoA_logging), silviculture (DoA_silviculture), roads (DoA_roads) and administration (DoA_{administration}). DoA is therefore calculated as the sum of the cost units’ DoA (Eq. (11)).

$${\text{DoA}}\left[ \EUR \right] = {\text{DoA}}_{\text{logging}} \left[ \EUR \right] + {\text{DoA}}_{\text{silviculture}} \left[ \EUR \right] + {\text{DoA}}_{\text{roads}} \left[ \EUR \right] + {\text{DoA}}_{\text{administration}} \left[ \EUR \right]$$

(11)

Coefficient of correlation for Eq. (11): r = 0.943.

Family Labour

The estimation of the imputed value of family labour (FL) is based on the assessed FWh_logging and FWh_other. The hourly wages for logging and other activities are annually rated for the evaluation instructions for the FADN (LBG 2013). For the fiscal year 2012 following hourly wages are defined: logging €14.59, other activities €8.84.

Nonwage labour costs are calculated in terms of a 50 % charge to performance linked wages. FL is calculated as the sum of wages and nonwage labour costs for logging and other activities (see Eq. (12)).

$${\text{FL}}\left[ \EUR \right] = {\text{FWh}}_{\text{logging}} \left[ h \right] \times 14.59\left[ \EUR \right] \times 1.5 + {\text{FWh}}_{\text{other}} \left[ h \right] \times 8.84\left[ \EUR \right] \times 1.5$$

(12)

Coefficient of correlation for Eq. (12): r = 0.832.