Abstract
The competitiveness of private farms is investigated by using gross and netvalue-added and farm income extrapolated from the Slovene Farm Accountancy Data Network (FADN) sample of farms. We also provide three measures of international competitiveness for farms and food processing activities in Slovenia: domestic resource cost, private cost ratio, and social cost-benefit ratio calculations. Additionally, a policy analysis matrix was constructed for each analysed product. Slovene farms and food processing activities, as they are currently structured, are not likely to be competitive in regional and global trade. There are, however, relatively few farm products and food processing activities competitive and largely integrated into regional and world trade. The results also suggest that the measures of profitability based on domestic prices are often misleading when compared to world market conditions suggesting considerable distortions on domestic agricultural and food markets. Such distortions impede the transmission of world market signals to domestic markets for both agricultural and food products, and for primary domestic resources. Under distorted circumstances the differential between domestic and international prices does not accurately capture differences in quality and competitiveness. The financial indicators based on domestic Policy conditions are likely to be misleading measures of competitiveness as they are strongly biased to impediments and distortions which influence both allocation of resources and distribution of incomes. Improved external price transmission on domestic markets and thus less distorted signals for allocation of resources in agriculture and the food sector can assure more desirable reallocation and restructuring towards those activities which are more viable in an open international environment. This suggests that the restructuring of farms and food processing activities is the largest challenge facing the Slovene farming sector for it to become effectively competitive on the Single European Market.
