Role of support payments for farms of various sizes in Latvia

Almost LVL 1.7 billion has been paid as support for agriculture and rural development in Latvia in the period of 2004-2010, which positively affected the development of agricultural industry. The value added of the industry reached LVL 460 million in 2010, accounting for 4% of total value added in the country, which was the pre-crisis level. The research aim is to assess the effect of support payments on the economic performance indicators of farms of various sizes in Latvia in the period of 2004-2009. The methods of analysis and synthesis, the logical and constructive method, and the statistical analysis methods – correlation and regression were employed to perform the research tasks. The paper presents an assessment of the effect of support payments on the economic performance indicators of farms of various sizes based on the FADN data for the period of 2004-2009. The total annual amount of support per farm was LVL 10.7 thousand on average in 2009 and ranged from LVL 3.6 thousand for very small farms to LVL 315 thousand for very large farms. The use of financial support is more efficient on large farms, as a larger quantity of agricultural goods is produced by means of a smaller amount of support. Over the recent years, the financial dependence of farms on support payments increases with the rise of the share of support in the net turnover of farms, and it exceeds the net income of farms several times. The strength of relationships between the amount of support payments and nine economic performance indicators was determined for farm groups of various sizes by means of correlation and regression analyses