Basel III Basel III [2] (hereafter - Consultation Paper) significantly tightens the requirements for the structure and quality of the capital base of the bank: introduces
N. Gerasymchuk, PhD, Associate Professor,
National University of Life and Environmental Sciences of Ukraine, Kiev, Ukraine
RESOURCE POTENTIAL OF ENTERPRISES' PRODUCTION PROCESS
Abstract
Purpose – This article is dedicated to the determination of place and role of resources in the production process of enterprises, particularly agricultural.
Methodology – Since agriculture production has a unique distinction features from all other branches of economy, the development of resource saving strategy needed to be built upon them. For better understanding of the role in the production process we analyzed at each kind of resources separately.
Originality/value – Agricultural production is carried out with the appropriate resources: land, material, technical, human and financial. However, great importance has not only the quantity, but also the quality.
Resources cover a variety of agricultural means of production, heterogeneous in their quality characteristics and methods of influence on the development of agricultural production.
Findings – The effective use of land, labor and capital depend on financial results of the enterprise. Since 2014 year crisis agricultural producers suffer from shortage of equipment, drop the level of mechanization, constant price surges in the supply of fuel, spare parts, disparity in prices for industrial and agricultural products, application of old technologies in the manufacture of products. Also, absence of virtually any measures to improve soil fertility, structure of sown areas due to the absence of any control and property on land, giving the possibility of easy replacement of used soil by new one on other region. However, one good thing in crisis that agricultural producers do not count on substantial financial support, therefore, in these conditions, the role of the rational, economical and efficient use of available resources is highly increased along with importance of research on the development of resource saving in agriculture.
Key words – resources, resource potential, production process, features of agricultural resources, resource saving.
Before proceeding to the study and solution of problems resource saving it is necessary to disclose its economic substance. To clarify the economic meaning of resource and links with others components of production efficiency we should clarify the concept of "resources", their place and role in the production process.Now agriculture is on crossroad. Today's advance technologies and uprising demand on world market for Ukrainian agriculture products are forming favorable conditions for intensive agriculture. If previously the task of resources saving was just one of the planned indexes and often was neglected, in market economy the need of economy of scarce resources was adamant. In the system of intensive agriculture the resources needed for agriculture production remaining the same as extensive, however, their role is drastically changing.
Main goal of the article – to perform short but complete analysis of typical for Ukrainian agricultural enterprises resources potential in enterprises production process, its presence and role.
Analysis of recent research and publications. The role and place of resources in agriculture development was thoughtfully studied by prominent national and foreign scientists, such as Aleksiichuk V.M, Artykulnyy L.A. [1], Andriichuk V.G.,Bilous'koIu.K. [10], M. Malik [2], Gryshko V.V. [3], Zaburanna L.V., Ronald Kay, William Edwards, Patricia Duffy [5], Tonha O.L.[8], VasylenkoIu. V., , Tolstop'at V.L. [10], William Meyers [12], Melnyk A.M. [10], P. Sabluk [2], Yurchyshyn V. [1], Zinovchuk V.V. [2], and many others whose research served as the basis for this article.
Resources in economics – it is the fundamental concept of economic theory, naming, in general, sources and means ensuring production. Economic resources usually divided into natural, labor (human capital),
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capital, working capital (inventory), information resources, financial resources (monetary capital) [1, p.135].
However, such a division is only one of its kind. Marx pointed out that resources are means for solving tasks that humanity has set itself on a particular stage of development [3, s.336].
According to Malik M.I. and Zinovchuk V.V., factors of productionhuman labor, land, water, means of labour and objects of labor which are necessary in agriculture and used in the process of production, act as its resources. Consequently, the agriculture production resources labor, land, water and material resources prepared for use (or used) in the process of agricultural production. Productive resources of all kinds together constitute to the resource potential of agriculture "[2, p.116].
Analyzing the opinions of the authors, we believe that the resources of agricultural economy –it is the means of production which are used inproduction process. Agricultural production is carried out with the appropriate resources: land, material, technical, human and financial. However, great importance has not only the quantity, but also the quality. Having high quality resources and the skillful use of them may increase their production propertiesin agricultural production.
Resource potential of the agricultural enterprise – it is aggregate of labor, natural and material resources, which is determined by the quantity, quality, and the internal structure of each resource.
Production potential of agricultural enterprise - an objective the company's ability to produce agricultural products, depending on the amount and correlation of material, labor and natural resources, as well as their level of impact, determined by objective conditions of functioning of the economy. Calculation of production potential needed to determine the potential amount of products that the agricultural enterprisecouldproduce with these resources [5, p.213].
In the process of agricultural production involvedland, labor and capital make up the productive capacity of agriculture enterprise. Resources cover a variety of agricultural means of production, heterogeneous in their quality characteristics and methods of influence on the development of agricultural production. For better understanding of the role in the production process we look at each kind of resources separately.
Land resources include agriculture land area, which could be in private ownership ortenure, and used by agricultural enterprises to produce agricultural products. As the material basis of agricultural production, land resources are the basic factor of production, fundamental for unitingall other components [2, p. 118].
Land in agriculture is a main andobligatory mean of production. All directions of development of agriculture in one way or another connected with the rational use of land, increasing its fertility. Land is the most important condition for the existence of human society, a means to satisfy a variety of its needs. In different sectors of the economy the role of land varies. Land in agriculture functions as the subject of work and as a means of labor. Crop production is directly related to the cultivation of land, because soil is the nutrient medium in which plants are grown. At first glance, livestock is not connected to the ground,however it has the most direct connection, since forage supplied to the animals is grown on land.
Land as a means of production differs from other means of production a number of specific features.
1. Land is a product of nature, while the other means of production – the result of human labor. Land appeared much earlier than the man himself and is not the product of his labor (only fertile top - soil - depends on the outcome of labor). Consequently, the land is not artificially reproducible.
2. Land is limited on area. This concept in the economic sense means not just the limitations of the land surface, but shortage of suitable territory, possessing a certain combination of properties and environmental conditions which are most favorable for agricultural production. Conditions restricting economic activity of man, act as natural barriers that put a stop toagriculture production.
3. Land cannot be replaced by any other means of production, without it could not be production process in agriculture, especially in crop production.
4. Land is not homogeneous in quality, resulting in different amountof the manufactured products with equal investment in the unit of area.
5. Results of agricultural production depend on the location, size and topography of the site.
6. Land has a territorial continuity and permanent location of sites, allowing widespread use of agriculture mobile machines.
7. Nature of land use in agricultural production has many aspects. Enterprises usually cultivate a large number of different types of crops: cereals, industrial crops, fodder, fruit, etc.
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8. When used properly, land does not wear, not get impaired, but rather improves its properties, while other means wear in the production, became morally obsolete and replaced in the labor process. This feature is present due to the land most valuable property - soil fertility [2, p.120].
Soil fertility is the ability to meet the needs of plants cultivated in nutrient solid matter and thereby provide the desired product yield. There are three types of fertility: natural, artificial and economic.
Natural (potential) fertility is seen as the result of long-term soil-forming process. It is determined by the supply of nutrients and their availability to plants, physical, mechanical and other properties of the soil layer formed on the source rocks in a certain climate.
Artificial fertility is the result of human impacts on the soil by its processing, application of mineral and organic fertilizers, soil protection and implementation of recovery works and other activities.
Economic (effective) fertility – a unity of natural and artificial fertility. Arises from the use of natural resources of soil, replenish missing nutrients, improving its physical and other properties. Economic fertility largely depends on the level of scientific and technological progress.
In agriculture, as already noted, the main means of production is land. Quantitatively, it cannot be replaced, but the level of fertility of land in the course of their use varies. At the highest equipping agriculture means of industrial production, but with a lack of or poor quality of the means of production, reproduced in agriculture (seeds, feed, livestock, and organic fertilizers) productivity of agriculture and livestock will be reduced [8].
Land, like any natural resource, with which the enterprise interacts in the production process undergoes structural and qualitative changes. The pace and nature of these changes depends on many factors. These include the economic development of society, the level of development of productive forces, the organization of land usesystems, etc. Considering the changes currently taking place in the structure and the qualitative change of land resources, it must be noted that their focus, especially in the agricultural land destination, is clearly negative.In a relatively short period (1991 to 2010) for various reasons is observed reduction of areas of agricultural land per capita in Ukraine. Over the past three decades, agricultural area lands in Ukraine decreased by more than 2 million hectares, including arable land - almost 1 million hectares. Expert estimates indicate, if the pace of destruction of arable land remain, then in 20-30 years a third of arable land will be destroyed [8].
As a result, economic activity qualitative changes lead to a drop in the fertility of the land and their complete degradation. Data from the State Statistical Committee shows humus content constantly lowering to the dangerous low values (Table 1).
Table 1 – Dynamic of balance of nutrients in agriculture of Ukraine
Balanceindexes Nitrogen N Phosphorus P2O5 Potassium K2O Total (NPK)
1971-1975 years.
Incomekg/ha 65,2 35,5 65,3 166,0
Pass, kg/ha 69,6 23,8 77,5 170,9
Balance, kg/ha -4,4 11,7 -12,2 -4,9
1976-1980 years.
Incomekg/ha 75,5 42,4 86,7 204,6
Pass, kg/ha 77,3 26,8 82,9 187,0
Balance, kg/ha -1,8 15,6 3,8 17,6
1981-1985 years.
Incomekg/ha 81,5 48,8 90,0 220,3
Pass, kg/ha 79,5 26,5 83,9 189,9
Balance, kg/ha 2,0 22,3 6,1 30,4
1986-1990 years.
Incomekg/ha 89,5 56,1 102,7 248,3
Pass, kg/ha 92,6 31,2 103,2 227,0
Balance, kg/ha -3,1 24,9 -0,5 21,3
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Incomekg/ha 26,0 10,4 15,3 51,7
Pass, kg/ha 56,5 18,2 53,7 128,4
Balance, kg/ha -30,5 -7,8 -38,4 -76,7
2001-2003 years.
Incomekg/ha 21,8 5,9 8,7 36,4
Pass, kg/ha 70,1 24,7 76,7 171,5
Balance, kg/ha -48,3 -18,8 -68,0 -135,1
Made by author based on [8]
According to data of Center of land protection of Ukraine, the annual loss of humus in arable land nowadays is estimated at 0.62 tons per 1 ha, and in the whole country, more than 81 million tons due to a sharp reduction in the use of mineral and organic fertilizers in most regions formed negative nutrient balance [8].
However, even with such drastic change in soil fertility, natural fertility still remain quite high in the Steppe area, where located 15960,3 thsd ha of arable land, which is more than 46 % of all arable land in Ukraine (table 2).
It is not that only the land determines the results of agricultural production. Important role in the production plays also labor and capital.
Table 2 – The current state of soil fertility in Steppe of Ukraine
Index The level of provision, % of total area
Very low low medium increased High and very high
Humus content 1 34 32 18
Content of movable phosphorus 2 31 42 10 16
Content of exchange potassium 1.7 7 21.3 35.6 33.4
Made by author based on [8]
Labor is the main source of wealth of the society and the main factor in creating material and spiritual wealth of mankind. English economist XVII B. Petty in his work called the labor the father of wealth. Labor is a purposeful human activity aimed at modifying and adapting the objects of nature to meet their needs.
Labor process includes the following points: the actual work as purposeful human activity, the object of labor, means of labor and the result of labor. Without the means of production the labor process cannot imagined, but without human labor means of production cannot create anything. Labor only actuates the means of production and facilitates the goal. Thus, the work is not only an important source of wealth, but also is the basic condition of all human life.
The concept of "labor process" narrower than the concept of "production process." Last is performed on the basis of the whole complex of labor processes, each of which expresses a certain stage in the preparation of the finished product. In this production process is sometimes also occurs under the influence of natural factors without the participation of human labor [2, p.168].
With the acceleration of scientific and technological progress improving the means of labor. But no matter how developed science and technology, work has not lostits defining role in the production process, and the man of their role in the labor process. Character of labor is determined by the relations of production, which are formed during the manufacturing process.Efficiency of agricultural production depends to the greatest extent on the availability, composition, skill level and the efficient use of resources.
Agricultural labor has some specific features. In contrast to industry in the labor process has to deal with living organisms - plants and animals. Therefore, in the production process need to know and take into account the biological laws of development of plants and animals.
Great influence on the efficiency of labor in agricultural production have climatic conditions and land
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quality. So with the same labor expenditures in different areas of production are achieved different results.
Efficiency of labor depends from the seasonality of agricultural labor, especially in agriculture. In this regard, during the sowing and harvesting of crops demand for labor greatly increase, and in the winter to the contrary there is an excess, especially in crop production.
In agriculture, there is no specialization, so workers have to combine a number of job functions.Agriculture has always differed by low level of mechanization, and in recent years the agrarian reform that level dropped it even more. So many jobs in crop and animal production have to be performed manually or have partial mechanization.
Important feature of agricultural labor are the worst conditions of work compared to the rest of economy, especially to the industry. Manyjobs have to perform in the open air and under different climatic conditions.In addition, agricultural production workers have to combine social work with the work in private farms. This is particularly evident in the transition to market conditions, when an increasing number of products produced in private farms of rural population.
Increase of economic efficiency of agricultural production depends largely on the skills and the extent of their use. Reforms of last years destroyed large mechanized production and led to the impoverishment of the rural population. At the village appeared unprecedented unemployment problem. Instead civilized, scientific and organized labor, we confess a return to manual labor, due to the disposal of fixed assets in agriculture and the inability to renew under the existing disparity in prices between the products of agriculture and industry.In spite of everything, human resources have been and remain the main productive force able to set in motion all the other factors of production, with constantly growing productivity (Figure 1).
Increase of economic efficiency of agricultural production depends largely on the skills and the extent of their use. Reforms of last years destroyed large mechanized production and led to the impoverishment of the rural population. At the village appeared unprecedented unemployment problem. Instead civilized, scientific and organized labor, we confess a return to manual labor, due to the disposal of fixed assets in agriculture and the inability to renew under the existing disparity in prices between the products of agriculture and industry.In spite of everything, human resources have been and remain the main productive force able to set in motion all the other factors of production, with constantly growing productivity (Figure 1).
Figure 1 – Dynamics of labor productivity, % [6]
Capital as a factor of production is considered primarily as a combination of resources that may be used to meet future business needs, in other words, buildings, machines, animals, fertilizers or the cash equivalent of all productive resources [10].
Important condition of the production process is the availability of the means of production, which consist of cash and objects of labor. Expressed in value terms, the means of production are the productive assets, which are divided into fixed and circulating.
Fixed assets - it means work which repeatedly involved in the production process, while maintaining its natural shape, and their cost is borne by the agricultural products as the parts wear. They are instruments of labor with a lifetime of more than one year and cost more than 1000 UAH.Agriculture accounts for about 13% of the
1991 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total 85 60 53,7 68,6 80,8 75,4 125, 144, 166, 175, 252, 260, 263, 327, 316, Crop production 82,6 76,9 86,2 74,3 131, 144, 164, 159, 239, 233 224, 287, 261, Animal production 88,6 42,7 57,5 66,4 87,6 116, 142, 184, 225, 276, 316, 361, 417,
0 50 100 150 200 250 300 350 400 450
%, 1990 = 100
Figure 1 – Dynamics of labor productivity, % [6]
Capital as a factor of production is considered primarily as a combination of resources that may be used to meet future business needs, in other words, buildings, machines, animals, fertilizers or the cash equivalent of all productive resources [10].
Important condition of the production process is the availability of the means of production, which consist of cash and objects of labor. Expressed in value terms, the means of production are the productive assets, which
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are divided into fixed and circulating.
Fixed assets – it means work which repeatedly involved in the production process, while maintaining its natural shape, and their cost is borne by the agricultural products as the parts wear. They are instruments of labor with a lifetime of more than one year and cost more than 1000 UAH.Agriculture accounts for about 13% of the value of fixed assets of the economy.Availability and dynamics of main machinery in the farms shows next table.
Production circulating funds – it is the means of production, which are entirely consumed in the course of one production cycle and completely transferred to the newly created product cost and change their natural material form.
Table 3 – Availability of agricultural machinery in private farms at end of year; pieces
2000 2005 2009 2010 2011 2012
pcs in % to availability at beginning of year
Tractors – total 22118 30773 32029 29254 31981 34960 104,7
per 100 ha of arable land
Harvester combines for 1,11 0,88 0,77 0,70 0,76 0,82 X
grain 4585 7688 8662 7743 8492 8974 103,4
maize 165 429 371 344 331 309 100,6
fodder 422 641 551 558 560 553 100,0
potatoes 126 209 238 365 469 518 102,0
Beet diggers 617 984 853 766 728 728 97,3
Tractor drills 9982 15115 15990 15453 16984 18651 106,6
Trailed reapers 975 2639 2848 2824 3068 3099 104,7
Made by author based on [6]
Production circulating funds are divided into inventories, work in progress and prepaid expenses. Along with them at any given period some amount of resources is in the sphere of circulation, serves production in process and treatment funds. They consist of a ready-to-sale products and money (financial resources) intended for the purchase of various materials, for wages and cover other production needs.
Financial resources are a set of enterprises of all types of funds, financial assets held by the entity has and can be used to meet the financial obligations of the cost but the expansion, reproduction and economic stimulus working. They are the result of the interaction of income, expenses and cash distribution, stockpiling and use of [10, p.102]. Today's financial health of Ukrainian agriculture enterprises shows table 4.
In conditions of market relations formation of financial resources in the agricultural enterprises is made the expense of own funds (profits) rather than loan investments. Financial resources perform reproductive, regulatory, distribution, facilitating and monitoring functions. Needs in fixed assets and working capital are defining financial resources structure and sources.
Table 4 – Basic indicators of enterprises activity in agriculture
Indicators 2010 2011 25267,0 2012
Net profit (loss), mln. UAH 17253,6 26960,8
Enterprises which got net profit, percentage to total number 69,6 83,5 78,6
financial result, mln. UAH 22094,9 30182,3 33716,7
Enterprises which got dead loss, percentage to total number 30,4 16,5 21,4
financial result, mln. UAH 4841,3 4915,3 6755,9
Profitability level of all types of activity, % 17,5 19,3 16,2
Profitability level of operating activities, % 24,5 24,7 22,5
Number of employees, thsd. persons 645,2 632,1 625,3
Made by author based on [6]
For effective management of financial resources should be developed system of financial management, in