Iwona Cieślak

Farmer’s Labour Cost and the Price Calculation Model for the Agricultural Products

Agriculture at present plays three major functions: economic, social and spatial. The economic function refers mainly to the farmers’ obligation to produce agricultural products in order to meet the requirement of feeding the farmers themselves, as well as other members of the society. At the same time, however, the products produced shall be of appropriate dietary valour and quality. Furthermore, these products shall be delivered to the market at prices affordable to the consumers. Farms shall also create work places and provide the farmers and their families with fair incomes generated by their farming business. Additionally, the farmers are required to apply certain agricultural methods which would guarantee that the farmed land preserves its natural and environmental valour.In the contemporary Poland and Europe, agriculture is based mainly on the so-called family farm model which differs from other forms of agriculture by a number of specific features. At the same time, however, the methods applied by this family farm model generates a certain range of problems; in this respect, the basic issue for the family farms at present is the problem of fair income generation. Outside the agriculture sector, this problem is regulated by the motion of minimal income level by which all employees are guaranteed an income meeting all their basic social and life needs. Although this solution has been widely accepted by various societies, it does not exist within the agriculture sector despite the facts that the farmers deserve, as any other employees or producer of goods, a fair income for their work. The farmers’ incomes are generated from the sale of agricultural products produced; hence, it would seem quite appropriate to accept an assumption according to which determining the minium prices for agricultural products shall be tantamount to the introduction of the minium income levels obtained by the farmers. The acceptance of such a solution remains self-explanatory with regard to the definition of fair incomes [Morehart, Kuhn, Offut, 2000] generated by farms. According to this definition, income is regarded as fair if it covers all overheads resulting from managing a farm. This research paper presents some assumptions related to the model of agricultural products pricing policy, with the reference to the introduction of a minimum income system for the farmers which, as a fair income, shall guarantee the farmers and their families an economic situation in which all their social and life needs are fulfilled. The fair income system for the farmers was developed and presented for the purpose of this research paper based on the minimum fair income model. If the model of price calculation is to provide information on the acceptable prices which can cover the overheads resulting from the production process of a particular produce, it has to take into consideration the cost of the farmer’s labour. A price of agricultural product which includes the farmer’s labour cost allows for the calculation of a fair price; this approach emphasises also the requirement of covering the labour cost of the farmer; namely, the farmer’s work shall be paid for. Every worker or producer of goods shall be paid a fair wage. Considering the aspect of human capital in the perspective of any accountancy system means first of all taking into consideration the labour theory of value according to which the value of human-produced goods is defined by the input of labour required for their production. If the final product consists of a number of integral components, one of them is definitely the labour input required for the production of this final product. Therefore, the calculation of product value consists of both, the detailed evidence of the production process aggregating the labour input in the final stage of this production process, as well as the labour input evidence included in the materials used during this production; this estimation takes place during the cost calculation process. As underlined by Y. Ijiri [1999, p. 185]: ... contrary to the theory of value based on the work and which concentrates on work inputs, the theory of value based on utility, focuses on the effects, and therefore, the production process is not regarded as the subject matter of this approach… Therefore, the value understood as the historic cost of production is regarded as a widely present approach adopted for the theory of accountancy, and as such, is not present in the theory of utility. A similar concept of income, measured by the accountancy system, remains in compliance with the concept of the labour theory of value. The socially-accepted labour input defining the product value is included in the accountancy system based upon the accomplishment principle which emphasises the fact that the gross receipts determine the level of income obtained from a particular enterprise. Hence, the income creation process consists of a confrontation between the real labour input (cost balance) and the socially-acceptable labour input (market price) [Dobija (M.), 2002].