Reliable statistics as a component of a successful agricultural sector

This almost rhetorical question can be rephrased into a more general question: will we have a European model of agricultural policy? It is known that up to 60 percent of all the EU budget issues are linked to agriculture and rural areas in specially designed policies: the common agricultural policy (CAP) and rural development policy.

But let us try to move away from the more general issue to concrete things. What do we need to establish a sound economic policy? Obviously, objective information is the first thing. With no information base, no real sense of what is happening in the agrarian sector, it is impossible to first form a strategy or a concept, and later — the actual agricultural policy and its implementation program. There is an astounding informational asymmetry in agriculture: most products are still produced by individual farms, while statistics traditionally focuses on agricultural enterprises. But there’s more: even if the accuracy of statistical data changed, it went in the direction of incomplete objectivity. However, one also needs economic indicators which are not included in the official accounts. Information should encompass all manufacturers, at least representatively.

In Europe they found an interesting, original, and fairly effective way out of this conundrum. In most countries there is a European system of collection and economic of accumulation information: the Farm Accountancy Data Network (FADN). To ensure providing the EU agricultural policy with information, the European Commission (EC) in 1965 decided to create a unified system for collecting, processing, and using information on agricultural producers — the FADN. The effects of this information system covered the EU member states, so together with the expansion of the community its geographical coverage increased significantly. The FADN, together with Eurostat (the main EU statistical agency) and other ancillary information systems, is one of the main instruments of developing, monitoring, and controlling CAP implementation. The FADN now serves 27 countries in Europe and covers more than 90,000 so-called tested entities. The FADN’s main tasks are to collect, accumulate and process economic and other specific information on tested agricultural subjects; annual assessment of economic performance and state of agricultural producers; analyzing the results of the activity of agricultural manufacturers, and assessment and forecast of possible consequences of agricultural policy, especially its new items, changes, and additions.

Tested farms and enterprises are the basis of the European system of agricultural accounting. Following a special sampling algorithm they select a number of all types and kinds of agricultural producers so that it adequately reflects the general population. As it is commonly practiced in democratic, free-market economies, the participation of agricultural producers in the FADN is voluntary and compensated. Everything that a manufacturer counts, estimates, or calculates, costs a certain amount of money. We know that when doing something for money, responsibility, quality and reliability all increase. Persons who will be responsible for accounting are taught and provided with necessary forms, communications, and computers.

There are some more important principles: the FADN accounting data on any individual producer is secret and not subject to any disclosure (including for taxation or other purposes), and accounting is performed following a uniform methodology for all countries without exceptions. Only statistically processed information, which cannot identify any individual characteristics or values, can be disclosed.

Tested farms and enterprises periodically submit the necessary information in an encrypted form to regional centers of the FADN. The regional centers are established at NUTS-II level (domestic analogue – between oblast and raion). The main form of reporting is the so-called standard results in a tabular form (a total of 14). After processing the spreadsheets, beginning with the regional level, the following information can be obtained: a description of the research subjects sample; selected information about the production; cost of proucts; production costs and taxes; bonuses and subsidies; balance: surcharges/taxes; income per entity; income per person; final annual balance; and financial performance.

Based on standard results of agricultural activity many parameters and options necessary to assess the effectiveness of agricultural policies at local, regional, national, and union levels are determined. One of the important parameters, the role and value of which is significantly different from the usual, and acceptable on the post-Soviet area, economic efficiency indicators, is an indicator of economic performance. Indeed, under the conditions of widespread and multilevel subsidizing and differing economic preferences in the EU, the level of profitability reflects not only the effectiveness of production and commercial activities, but also the efficiency and effectiveness of economic support.

Regional centers transmit the processed information to a national one. As a rule it is a specialized division of the Research Institute of Agricultural Economics. National centers provide information for the central office in Brussels, and distribute it among national institutions. In fact, anyone can obtain collected and processed data stored in a national office. It is important to note that all costs associated with the preparation, implementation and maintenance of the FADN, even regarding countries outside the EU, are covered by the EU. In other words, it is a pleasure for which we do not pay. Why not try?

Surely, many of those who use economic information will be glad to have it diversified and harmonized. Already now many familiar indicators are defined somewhat differently. For example, the size of a producer is shown not by the area of land or livestock available, but the so-called standard amount of added value. And how can one exclude a significant number of allowances and privileges in determining effectiveness — often it turns out that not only the owner, but also the state budget is a “father” of success.

There are many arguments confirming the need for a gradual implementation of the FADN in Ukrainian agriculture. Long before joining the EU the post-socialist countries of Central and Eastern Europe tested, to the benefit of their own economies, this information and accounting system. Since Ukraine officially recognized the necessity and inevitability of European integration, joining the FADN is necessary and mandatory. This will facilitate the necessary and urgent harmonization of agrarian policy of Ukraine and the EU. There are no methodological and economic obstacles in implementing the FADN, because the principles and methods of accounting are close to the ones existing in agricultural enterprises. Other participants of the system can receive effective training and consulting, at first perhaps even involving senior students. Fortunately, we prepare many accountants. Finally, the emergence of another source of information, reliable, tested, and with a methodology that is widely recognized on the European continent, will promote the harmonization of economic systems and create conditions enhancing the comparability of economic indicators.