Operational Subsidies and Financial Stability of Farms in the European Union

Abstract

The purpose of the article was to identify financial situation if farms operating in the European Union Member States, account taken of operating subsidies, as well as factors that influenced the financial surplus (cash flow in operating activities). The ability to earn a positive financial surplus was recognized as a manifestation of a farm’s financial stability. The data was sourced from FADN database and the research period covered the years 2009–2015. The quartile method was used for grouping Member States; economic size of a farm was the variable used for the classification of a farm to a relevant quartile. Econometric models have been used for panel models with fixed effects. The research showed that farms operating in the European Union differed in terms of production factors, especially land and capital, which was reflected in the achieved economic and financial results. Direct subsidies have been an important element of income over the years in almost all the Member States. Without subsidies, almost half of the EU farmers would not be able to generate any income from farming. The models constructed indicated that the amount of financial surplus was influenced by various factors depending on the economic size of a farm. Regardless of the quartile, the direct subsidies were the inhibitor of financial surplus.