Relative return on assets in farms and its economic and environmental drivers. Perspective of the European Union and the Polish region Wielkopolska

Abstract

The article aims to recognise the relative return on net profits from assets in farms compared to the alternative return offered by the market, taking into account economic and environmental drivers. The analysis is conducted on two levels – international (farms from the European Union Member States are examined) and regional (a sample of 120 farms from the Wielkopolska region in Poland is assessed). We compare the return on the assets from agricultural activity with the potential, risk-adjusted rate of return which farmers could achieve from the market. The Classification and Regression Trees method was adopted. The return on assets in farms is generally low, so they are not competitive units from an economic point of view. The return on net profit from assets (ROA) is mainly sustained by subsidies, without which the business would in many cases prove unprofitable. The most important factors favouring the achievement of at least a market rate of return, in the studied group of farms from Wielkopolska, were relatively high productivity and scale of production. These activities are accompanied by greater environmental pressures. On the other hand, the economic results of farms with higher ROA are more favourable.