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ARE LITHUANIAN FAMILY FARMS PROFITABLE AND FINANCIALLY SUSTAINABLE? EVIDENCE USING DUPONT MODEL, SUSTAINABLE GROWTH PARADIGM AND INDEX DECOMPOSITION ANALYSIS
Tomas Balezentis, Lina Novickyte

ABSTRACT. This article examines the Lithuanian family farms profitability and growth throughout the period of 2005-2015. This research relies on the aggregate data from the Farm Accountancy Data Network database for different farming types and regions. The DuPont identity was applied to analyse the profitability (returns on equity) of family farms and its determinants in terms of profit margin, asset turnover, and equity multiplier (leverage). The methodological contribution presented in this paper is the integration of the DuPont model into index decomposition analysis framework based on the Shapley value. Therefore, on is able to decompose the changes in profitability with respect to the explanatory factors. Following Calandro and Lane (2007), the research applies a competitiveness matrix to evaluate competitiveness of family farms. Sustainable growth ratio and sustainable growth challenge (SGC) ratio are used to test whether Lithuanian family farms growth had been sustainable. The results show that Lithuanian family farms have negative profitability growth. The profitability and sustainability growth analysis show that farmers must better to exploit all internal resources, used cost control and to improve the scale of operations. Competitive analysis revealed that specialist cereal, oilseeds and protein crops, general field cropping, and horticultural family farms are characterized by a relatively higher profitability and growth if opposed to the other farm types .

KEYWORDS:  DuPont method, profitability, sustainable growth, family farms, index decomposition analysis.

JEL classification:  Q01, Q12, Q14.