Membership in agricultural producer organizations and farm technical efficiency in Slovakia

Abstract

Research background: EU National Rural Development Programs (RDPs) support food chain organization, including the establishment of agricultural producer organizations (APOs) to assist the cooperation among small- and medium-sized farms and improve their performance. Purpose of the article: We assessed how membership in an APO affects technical efficiency in a sample of Slovak farms. We break down our results by the type of membership (non-members, long-term members, and members of newly established APOs, benefitting from the RDP support) and production specialization of farms (crops, livestock, unspecialized). We expected a positive effect of membership on farm performance, although with differences by production specialization. Methods: We analyzed cross-sectional data of 645 farms in Slovakia in 2014, when the 2007–2013 RDP support was over. We applied a DEA-based two-stage metafrontier approach. During the first stage, we estimated group-specific efficiency and calculated adjusted (target) values of inputs, given the outputs. During the second stage, we estimated the meta-technical efficiency of farms relative to the metafrontier derived from pooled adjusted inputs and outputs of farm groups by their membership within production specialization. The meta-efficiency indicates farm efficiency associated with membership in a producer organization. We examined the differences between meta-efficiency by membership groups by the Kruskal-Wallis and post hoc Dunn’s tests. Findings & Value added: Members of APOs were mainly large farms. Membership in newly established APOs, benefitting from of the RDP support, contributed significantly to higher technical efficiency of livestock and crop farms. Their performance was, however, affected by managerial and scale inefficiencies. Well-performing farms with good farm management had joined APOs already before the year 2007. However, the long-term APO membership did not improve farm technical efficiency significantly. Public support of farm cooperation should be designed to improve the governance, sustainability of the APO activities, and performance of their members.