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UDC 633.853.494:631.576.331.2:658.62:339.13:664.3
FORMING THE PRICE POLICY OF MARKETABLE RAPE GRAIN CONSIDERING THE MARKET OF OIL AND FAT PRODUCTS
Suhocheva N.A.*, Candidate of Economic Sciences Plygun S.A., Candidate of Agricultural Sciences Orel State Agrarian University, Orel City, Russia
Glinushkin A.P., Doctor of Agricultural Sciences Orenburg State Agrarian University, Orenburg, Russia
*E-mail: [email protected]
ABSTRACT
Increased attention to the production of rape is caused by a number of energy and economic factors. The first relates to the limited production of the traditional forms of energy, ensuring environmental security, bioenergy development. The second factor is defined by the fact that conditions of managing are encourage agricultural producers to look for different ways to improve the economic efficiency of their production, to ensure the competitiveness of their products. Forming pricing policy and supporting pricing system is a key and priority function of the participants of oil and fat subcomplex. It contributes to achieve sustainable output production and solvent demand of population; overcome the disparity in prices; regulation of relations between the spheres of agriculture. Only taking into account the indicated conditions, it is possible to effectively use of resource potential and changes in the structure of the food complex due to the priority in the production of the most valuable and energy-intensive products and raw materials.
KEY WORDS
Rape; Pricing policy; Oil and fat products; Effectiveness; Agrarian economy; Selling price; Commodity; Market.
Efficiency of agricultural production requires its translation to industrial methods, renovation of industrial and economic activity, the reorganization of the payment systems and work stimulation. In addition, economic well-being of each organization depends largely on the quality of the goods, which are in demand and brings a certain mass of profit, allowing realizing expanded reproduction. At the same time questions of the pricing policy formation of commodity rape grain becoming one of the main problems of the agricultural sector. The solution to this problem will significantly reduce dependence of industry on imports oils and other oil-containing foods, and will boost food security.
Determining the size of cultivated areas and the identification of reserves of its extension, studying the features of the structure of sown areas has great importance. Structure of sown areas shall comply with the accepted system of agriculture and its specialization; ensure the most effective use of arable land in these soil and climatic and economic conditions [3].
Area under oil crops in Russia in the last 2 years have expanded to record levels. At the same time, due to the increased demand for alternative oilseeds, changing the structure of sown areas in favor of soybean and rapeseed is observed (Table 1) [4].
The current structure of the sown areas of oil crops in region also has changed: for several years a dominant position held by sunflower for grain, on which share prior to 2003 had an average of 80% of the cultivation of oil crops in the Orel region. Since 2003 there has been a surge of increasing the area of rape, in 2006 the share of its crops accounts for 95% of oilseed wedge in Orel region. Since 2011, the area under sunflower have sharply increased, and in 2013 amounted to 41.2 ths ha (34%) in the total structure of sown areas of oil crops in the region. Overall, the share of oil crops in 2013 in the sown area was 10.8%.
Vetnik OrelGAU, 4(49), August 2014 Table 1 - Structure of the sown areas of oil crops in the Orel region (farms of all categories)
Indicators 1999 2005 2006 2012 2013
ths ha % ths ha % ths ha % ths ha % ths ha %
Oil crops - all, including 18,8 100 34,0 100 62,8 100 107,8 100 121,3 100
Sunflower for grain 14,4 76,9 0,06 0,2 0,06 0,05 31,7 29,4 41,2 34,0
Soy 0,4 2,3 0,4 1,2 0,6 0,9 25,0 23,2 26,2 21,6
Mustard 1,0 5,4 1,9 5,6 2,5 4,0 2,7 2,5 2,2 1,8
Rape (winter and spring) 2,9 15,4 31,7 93,0 60,1 95,09 48,4 44,9 51,7 42,6
Thus, there is a slight decrease in the sown areas of spring and winter rape in the Orel region, but, in general, in Russia sown areas of this oil crop increased by 11.3% and amounted to 1,325 thousands hectares. However, despite the diversity of the forms of ownership and management involved in the cultivation of rapeseed, its main producers in Russia are the agricultural organizations. On their share in the total harvest of rape falls in 2013 - 91%; the share of farmers (peasant) farms - 9%, but it's worth noting that the proportion of rapeseed production by farms is gradually increasing. Households are not involved in the production of rape (Table 2) [5].
Table 2 - Rape production by types of farms in Russia
Forms of farming Years
19911995 19962000 2005 2006 2012 2013
Agricultural enterprises, including agricultural cooperatives: ths tons % 939 91,9 726 96,2 279 91,8 474 91,0 935 90,3 1226 90,9
Peasant (farmers) farms:
ths tons 8,3 28 25 47 101 122
% 8,1 3,8 8,2 9 9,7 9,1
In the Orel region rape is grown in all climatic zones. However, the greatest sown areas of rape concentrated in the south-eastern and central zones of the region - 55.7% and 33%, respectively. In the northwestern zone rape crops occupy only 11.3% of the total crops in the area. This is due to the fact that in the first two zones are the most fertile soils - leached, ashed chernozems and grey forest soils.
After analyzing the selling prices of commodity rape grain, we can confidently state that the pricing policy is unstable, with annual fluctuations. We investigated the dynamics of change in indicators of realization of rape using the index method of analysis. Necessary calculations are shown in Table 3.
Table 3 - Average sales price and the amount of realized rape in agricultural organizations of
Orel region
Kind of product Amount, centner. Sales price of 1 centner, rub. Revenue from the sale, th. rub.
90 91 P0 P1 gûPû 91P1 P0 91
Rape 700000 586000 1300 850 910000 498100 761800
Calculate the individual indices:
Pi
a) price - l = —; irape =0,65 times (1) Po
In 2013, compared with 2012 sales price of one hundredweight of commodity rape grain decreased by 0.65 times or 35%.
g
b) physical volume - 1 = —; irape = 0,84 times (2)
go
Consequently, in 2013 compared with 2012, the volume of rape production decreased by 16%.
For the establishment absolute change of production indicators we calculate overall indices.
1. The overall index of revenue:
Jr = SPi 'g ; I= 0,55 (3)
S Po • go
Absolute change in revenue:
A(r) = Z Pi • gi "SPo • go or - 411900 th. rub. (4)
In 2013, compared with 2012 revenue from sales of rape decreased, which made up 411.9 million rubles respectively.
2. The overall price index:
Jc = SPi ^gi ; I= 0,65 (5)
S Po • gi
Absolute change in revenue due to changes in sales prices defined by the formula 2.7: A(p) = S Pi • gi - S Po • gi or - 263700 th. rub. (6)
In the reporting year, compared to the reference, due to lower prices for rape an average of 0.55 times revenue decreased to 263.7 million rubles, respectively.
3. The overall index of the physical volume:
S Po • gi . ,_
JPhv. = v ; l= °<84
S Po • go
Absolute change in revenue due to changes in the number of sold products we defined by the formula 8:
A(g) = S Po • gi " S Po • go or -148200 th.rub. (8)
Due to the reduction in sales volume of rape by 16%, revenues from sales decreased to 148.2 million rubles respectively. 4. Interrelation of the indices:
Jr = JcJph.v. (9)
Rape: 0,55 = 0,65x0,84
A(r ) = A(p )+A(g ) A(r)panc = -263,7- 148,2 = - 411,9 mln. rub. Thus, rapeseed production in 2013, on the one hand, was effective, but on the other hand, in relation to 2012: there was a decrease in sales volumes of commodity rape grain by 16% and reduction in selling price by 35%.
Naturally, from the point of view of economy, price formation is extremely important for farmers. Well-established pricing mechanism - an essential condition of production efficiency as a whole. Researches by a method of the statistical groupings of data 36 agricultural organizations of the region have shown that the relationship between profitability commodity rape grain production of and the cost of its implementation is close to linear (Table 4).
Table 4 - Influence of the selling price of rape on production efficiency in the agricultural organizations of Orel region
Groups of farms by an average sale price of 1 centner of commodity rape grain, rub. The number of organizations in the group Profit from sales , rub. Level of profitability,%
Up to 620 8 - 7352 -42
621-690 11 -249 -5,2
691-760 8 2049 26,7
761-830 5 230 12,9
Over 830 4 1829 29
In average 36 X X
Furthermore, the study of these same 36 organizations showed that agricultural organizations that interact with the processing enterprises of oil and fat industry, have better results of economic activity than those that manufacture and sell commercial rape grain by other trade channels.
Investigation of the development of rape production primarily associated with the study of the current state, the characteristics and trends of its development, an objective assessment of the efficiency of production, taking into account cost factors. At the same time, a powerful factor in a significant increase in sown areas is that rape - one of the most highly liquid crops. The final price of the season more than the initial price of at least 2-2.5 times in the currency. This situation encourages agricultural producers to expand sown areas.
High economic efficiency rape growing allows agricultural organizations to cover losses from the production and sale of other cultures. As a result, in 2013, not only agricultural organizations, but also peasant (farmer) farms are increased production of rape.
The instability of rape market requires continuous monitoring of all the factors that ensure the production of rape and its level of profitability. We consider it necessary to note, that at the present time, the economic efficiency of agricultural production is largely determined by external and internal factors.
External factors do not depend on the economic activity of the enterprise. This is pricing, taxation, crediting, inflation processes, subsidies and compensations, agrarian legislation and others.
Internal factors - the yield of rape, cost price of production, technology and organization of production.
In our opinion, the second group of factors is largely forms the level of economic efficiency.
Our studies confirm the urgent need to regulate the price policy, which is the most actual for agriculture. We note that in the United States, Canada, the European Union subsidizing of farmers who grow oil crops is carried out by the state, special trade programs aimed at strengthening the oil and fat production and especially its foundations - the production of oilseeds are set.
The system of the state regulation of agricultural production in countries with developed market economy is complex and multifaceted; it is formed and developed over ten years. This diversity allows agricultural producers to work equally well in terms of different years, which characterized by a sharp excess of demand over supply, and vice versa.
In our country, the system of the measures of state regulation (and especially in price formation) of agriculture is in its infancy and development. A significant place in this system should be occupied by the system of organizational-economic measures to support and stimulate innovation activity in the agricultural sector. In the conditions of world economy globalization, the scientific and technological innovations often determine the level of competitiveness of domestic technologies, products and services. Moreover, the current state of the world economy is characterized by a continuous progressive increase in
technological innovation. The current state of the organization of state regulation of scientific innovation activity agrarian and industrial complex in our country is still at an initial stage. Adopted and implemented at the federal and regional level, innovative programs often do not address the basic laws and principles of the state regulation of innovative activity in the marketplace and do not have the economic and administrative legal mechanisms for their implementation.
In the system of state regulation two directions are defined:
The first direction, which provides indirect economic levers and incentives. At the federal level it is pricing policy, which creates conditions for profitability of agricultural production, maintain price parity between the agricultural sector and other sectors of the economy, the application of the system of guaranteed, security and collateral prices.
Credit system, which take into account the market economic principles, promote the development and improve production efficiency, must also be clearly debugged. Credit mechanism should be considered with the specifics of agricultural production and have a relatively high level of state support in the framework of a special regulatory - legal framework for authorized banks, including rural cooperatives. It should include the regulation of the rate of refinancing of commercial banks, the change in the rate of national currency, etc.
An important lever of state economic regulation is a tax policy. Development of an optimal amount of tax and other payments will allow to form own sources of investment, raise funds of financial markets and create conditions for the development of the agricultural sector.
At the regional level is possible to use normative relations between the cost of raw materials and the price of the finished product, the limit of profitability ratios. The financial support for regional programs and instruments of organizational mechanism: integration and cooperation, system of contractual relations, market infrastructure forming is also required. Determining the optimal size of the intervention, ensuring interest in the search for the free and profitable channels of sales, improving the technological level of production and reduce costs.
To the second direction we assign economic measures in the field of investment policy and direct budget allocations. Directed lending, establishment of credit «ceilings», direct control over the level of interest rates are among the instruments of direct government influence. To overcome the technological crisis, introducing of modern equipment and technology, increase production and product quality, yield growth, for the innovative development of agricultural production, state impact on the structure of the credit flow is necessary.
Important direction of state regulation is the creation and implementation of adaptive system intensification of agricultural production based on the maximum use of the resource potential and climatic conditions of the region. Also in the region is necessary to establish a fund to support agri-industrial complex.
Thus, government regulation of agricultural producers should be a set of forms and methods, consisting of the system of interconnected levers and incentives of impact on the economic interests of rape producers for improving efficiency. The main purpose of state regulation should be to ensure food security, market saturation, the development of domestic production.
In our view, state regulation in the realization price formation of commodity rape grain is needed for the following reasons: a number of agricultural organizations, where sale price of rapeseed was below 800 rubles for hundredweight, have losses; by forecast the price of rape will fall and the price of vegetable oil to rise, for agriculture - a negative situation - the price disparity; low selling price is not sufficient for reproduction.
By confirming the need for state regulation of the sale prices of commodity rape grain, let us calculate prices of rape from the farmer opposite way.
So, one of the approaches of price formation is based on the use of the production costs, which are formed at the stages of product movement: agricultural production -processing - realization. In the calculations you can use the normative or actual database. Methodologically, price formation is based on the actual cost, but it should be noted that in the current economic conditions, the level of prime product cost in many agricultural
organizations unreasonably high for what would its use as an economic benchmark. For this purpose allocate an organization where production of rape is at a high level with an optimal level of prime cost.
Practical application of the price approach has drawbacks. The main drawback is that the chain of settlement prices can give the result that have a significant deviation from the actual practice. In other words, the estimated price of agricultural organization will be different from the current market price. In order, to estimate prices in the technological chain eventually match with the market price, it is necessary to carry out various variant approaches, changing the price formation parameters [2].
Thus, we apply the methodology with the use of the price formation parameters, but with a different sequence of calculations: from the projected level of the market (retail) price of vegetable (rapeseed) oil, and ending with the price of agricultural raw materials.
Note that during cleaning oil perlite, bleaching earth or «diatomaceous earth», lye and citric acid are used.
The starting base of calculation - the retail price of vegetable (rapeseed) oil «Liola»
(Pi).
1. Calculation of the selling price of vegetable (rapeseed) oil «Liola» (P2)
p
P2 =-1-, (10)
2 1 + (H : 100)
where H - trading margin by product,%.
2. Calculation of the wholesale price of the product (P3)
p
P3 =-2-, (11)
1 + (F : 100)
where F - the VAT rate.
3. Calculating the cost of raw materials expended on the production of 1 ton of rapeseed oil (S)
S = P3 + C - Z (1 + (R: 100), (12)
where P3 - the wholesale price of vegetable (rapeseed) oil; C - value of returned products (waste); Z - own cost of producing 1 ton of oil; R- normative product profitability of oil processing plant in relation to the costs of processings
4. Price calculation of 1 ton of rape (P4)
S
P4 = 77, (13)
N
where S - the cost of raw materials; N - normative technological index of rape consumption for the production of 1 ton of oil.
Initial data for determining the settlement price of 1 ton of rape are presented in the appendix. The methodology of calculation will reflect in the form of table 5.
Our studies suggest that established sales prices for commodity rape grain are too small. If the lower level of the sales price of rape amounted in 2013 1110 rubles per hundredweight, then many agricultural organizations was able to recoup the costs and make a profit. If we consider the 2014, the price of commodity rape grain, which is on the elevator or other storage is 13 rub/kg, whereas at the time of harvest, it barely reached 8.5 rub/kg. Naturally, not every agricultural organization can afford to store grain reserves to almost next year's harvest. There is a disparity in prices: the retail price of rapeseed oil is 60 rub/l, and rape seeds - 8.5 rub/kg. We call attention to the fact that before sell their products, a number
of organizations conduct market research, as result of successive study of the needs and demand, carrying out the SWOT-analysis, the formation of price formation strategy, the definition of product sales process, the definition of a set of criteria for the creation and stimulation of consumers necessities, development of marketing budget [1].
Table 5 - Determination of the settlement price of 1 kg of marketable rape grain
Name of items calculation Type of rapeseed oil
unrefined refined
the retail price of vegetable (rapeseed) oil «Liola» (P1), rub/kg 57 60
trading margin by product (H), % 10 10
the selling price of vegetable (rapeseed) oil (P2), rub/kg 51,8 54,5
the VAT rate at the wholesale price of the product (F), % 15 15
the wholesale price of the oil (P3), rub/kg 45,0 47,4
value of returned product (bagasse) (C), rub 1,2 1,2
own cost of producing 1 ton of oil (Z), rub 14,4 10,9
normative product profitability of oil processing plant in relation to the costs of processing (R), % 24 24
the cost of raw materials expended on the production of 1 ton of rapeseed oil (S), rub 28,3 33,9
normative technological index of rape consumption for the production of 1 kg of oil (N). 2,8 2,8
estimated price for 1 kg rape (P4), rub 10,1 12,1
The average estimated price of 1 kg of commodity rape grain, rub 11,1
In our opinion, the formation and support of the price system is a key and priority function. It contributes to achieve sustainable output production and effective demand for it, to overcome the disparity in prices, the regulation of relations between the spheres of agro-industrial complex.
Particular importance has the principle of the state support warranty through: ensure parity of the prices of agricultural and industrial products, acquired by rural areas; support for innovation-investment activity on the technical maintenance of agro-industrial complex.
Thus, the main limitations of economic growth of rape production in the medium term are: heterogeneity of technological space of industry, and as a consequence, declining quality in technological chains; insufficient number of innovative organizations in providing production services. Therefore, the problem of price policy formation in the present conditions cannot be solved only through a better use of the resource potential of the region, it is necessary to regulate effective pricing mechanism. This is possible only by comparing the projected level of the retail price of rapeseed oil to the value of the raw product. Using this methodical approach to the formation of the pricing mechanism, manufacturers of rape could sell the goods at the best possible prices and earn higher profits from sales.
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