Profit and profitability of the agricultural enterprises in the process of inflation

B. Paskhaver

Economy and Forecasting, 2016, issue 3, 66-76

Abstract: The crisis of 2014-2015 had a devastating effect on the financial condition of Ukrainian enterprises: in the whole national economy, the positive profitability of the companies was reversed. An exception to this trend is the agricultural enterprises, where in 2015 a significant growth in profits and profitability took place. The factors that contributed to that phenomenon were: 1) a slight increase in sales; 2) inter-sectoral price disciplinary in favor of the agro-sphere; 3) the characteristic for agriculture lag between production costs and selling products, which, with high inflation, gives a temporary increase in profits. The author considers the question of determining the appropriate level of profitability necessary for sustainable development of the agro-sphere. It is recommended to calculate this index as the ratio of profit to the restored value of production (fixed and circulated floating). Although the profitability of agrarian enterprises grew during the crisis, decline in domestic effective demand negatively affected the output in all sectors of the agro-industrial complex. Output in the whole of agriculture decreased by 3%, in food processing - by 8.5%, and in food trade, the turnover in retailing decreased by 20%, and in wholesaling – by 30%. The author shows the role of government support of the agro-sphere in the dynamics of the financial condition of agricultural enterprises, and draws attention to the need to focus public support to solve the problems of unprofitable businesses and food sub-complexes in the agro-industrial complex.

Date: 2016
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