Technical efficiency and farm size in the context of sustainable agriculture

This article aims to highlight the importance of climate and environmental challenges for agricultural economics and policy. Empirical research based on the Data Envelopment Analysis (DEA) method determined the average technical efficiency and scale efficiency of farms in the European Union in total and in economic size classes in the period 2004-2020. The results indicate that agriculture is generally characterised by high technical efficiency and scale efficiency. Analysis by economic size classes of farms, defined by the standard sum of their agricultural output, shows that the relationship between the scale of production and technical efficiency of farms is U-shaped. The highest technical efficiency and scale efficiency are characterised by small, large and very large farms economic classes. Economies of scale shift the burden of food production to large farms, which provide food security and are technically efficient but excessively burdensome for the climate and the environment. Small farms produce environmentally friendly food but on a small scale. Therefore, increasing the technical efficiency of medium-sized farms can contribute to more sustainable food production that meets both food security and climate and environmental objectives. The Common Agricultural Policy 2023-2027 provides greater access to financial support for moderate-scale farms and farms undertaking ecosystem restoration activities. This may affect the strength and direction of the relationship between farm scale and productivity, including technical efficiency.