Productivity and Efficiency of Precision Farming: The Case of Czech Cereal Production

Abstract

The paper deals with the sources of competitiveness of Czech cereal production by considering precision farming technology and employing micro-level data collected in the FADN database for the period 2005–2018. The analysis is based on the stochastic frontier modelling of an input distance function in the specification of the four-component model, which currently represents the most advanced approach to technical efficiency analysis. To provide a robust estimate of the model, the paper employs methods which control for the potential endogeneity of netputs in the four-step estimation procedure. Furthermore, the total factor productivity change is calculated using the Törnqvist-Theil index. The results reveal that Czech cereal producers took great advantage of their production possibilities and experienced technological progress, which contributed considerably to productivity dynamics and consequently to an increase in their competitiveness. Precision farming, which is associated with a large number of innovations reflected in technological change and optimal resource use, contributed to higher technical efficiency connected with cost savings in Czech cereal production.