Financial performance of connected Agribusiness activities in Italian agriculture

Abstract

The Rural Development Policy combines measures that favour the growth of the productive dimension of farms and their specialization, and measures aimed at supporting diversification paths, with the expansion of the productive functions performed. The evaluation of the economic and financial results of farms engaged in activities of the second type can help to calibrate the intervention between the two options. To this end, we have studied a constant sample of FADN farms in the period 2014-2016, identifying the units engaged in organic farming or other forms of quality production, or engaged in direct sales or processing of their products or, again, in the management of farmhouses. We discuss the condition of financial sustainability of the farms involved in those activities by evaluating their ability to generate cash flows to offset for the depreciation of the farm production system. We used the ratio Free Cash Flow on Equity on Depreciation to compare the results of farms engaged in those activities and farms which are limited to conventional agriculture. The analysis of this comparison and of some structural, technical, and economic characteristics of the farms involved in those types of activities resulted in various considerations on their characteristics and conditions of financial sustainability. Our attention has focused above all on the financial results of farms within the sectors of Italian agriculture in greater financial difficulty. The main objective was, in fact, to verify whether to diversify the farm’s commitment with these activities has contributed to improving the financial sustainability in those agricultural sectors. Various considerations have arisen that can help fine-tune policies to support the types of diversification examined in this study.