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The redesign of the Common Agricultural Policy (CAP) allows for more room to address issues related to stabilising farmers' income and developing their viability in areas facing natural constraints (ANC). Maintaining income levels, developing farm economies in rural areas, and encouraging competitive agricultural practises are the challenges facing the new CAP. ANCs in the Czech Republic are characterised by a lower level of income compared to areas outside ANCs and their generally prevailing specialisation in livestock production, which has been facing a relatively turbulent development in the last decade. The main aim of this paper is to evaluate the economic viability with regard to the level of natural disadvantage and with regard to farm specialisation. The database of Farm Accountancy Data Network (FADN) was used for assessment; the authors built the Farm Economic Viability indicator, which is based on modified Farm Net Value Added. The differences between the farm groups were tested through analysis of variance. Significantly lower viability was found in ANCs compared to farms outside ANCs. Field crops achieved significantly higher levels, both in and outside ANCs. The most threatened group of farms are grazing livestock in ANCs.

Estimation of farm economic sustainability and viability became more topical when redesigning the Common Agricultural Policy which should stabilise farm income and make agribusiness more viable and sustainable (typically in Czech areas facing natural constraints). The key question is how to calculate the income of farms or farm households not only to survive but also to grow sustainably. The article summarises and compares knowledge from 51 studies to provide a comprehensive discussion on different ways how to measure economic viability and sustainability to set income support for farms in the areas with natural constraints optimally. The authors found family farms and off-farm income as important limitations of FADN database (Farm Accountancy Data Network) for evaluation of the economic sustainability of farm household. Moreover, some financial ratios (Return on Assets - ROA and assets turnover) are not suitable viability indicators for farms with a high share of hired land (typically large legal entities). Joining family farms and legal entities, the authors recommend using modified Farm Net Value Added (MFNVA) allowing for opportunity costs of own land and non-land assets. The average wage in the economy or region is a better proxy for opportunity labour costs of unpaid work rather than average agricultural wage.

Opportunities for savings in both human labour and technical equipment were tested on the case of large farms situated in the less-favoured areas (LFA). Large LFA farms were found to be undoubtedly more efficient than the small ones, as well as the diversification of activities (to non-agricultural) was much wider at the large farms in the Czech Republic (CR). The targeting of the objectives of the LFA measure was analysed on the cases of the selected types of the small and large farms and also the amounts of support, devoted to reach these objectives. The paper further analyses economic results of the small and large farms in the LFA within the CR, and evaluates the impacts of the current LFA measures, where the payment distribution is based only on the grassland area, regardless of the farm size in the CR. Based on these analyses, it was suggested to distribute the LFA payments in the CR per 1ha of utilised agricultural area of farm. Also, it was showed that it would be suitable to introduce a graded decrease of the LFA payments rates according to the farm size. The analysis proves that the economic survival of the large farms, measured as the farm net value added per one annual work unit, will not be endangered.

This contribution evaluates efficiency of land resources protection policy in term of institutional economy in the Czech Republic. It resumes results of investigation in form of standardised interviews that was aimed at evaluation of individual phases of the programme cycle, from the problem analysis through proposal of a solution instrument to the problem resolution and implementation and monitoring of measures. The chosen measures were Land Consolidation and Good Agricultural and Environmental Conditions. The authors found that the soil erosion problem had been well identified and that it was generally perceived by the public as serious. However, many shortcomings were identified in the measure proposal, implementation as well as evaluation of the measure’s impacts. In consequence, these shortcomings reduce efficiency of the measure.

The authors address the issue of determining the size of less favoured area payments so that such payments, in compliance with the objectives of the measure, will be the compensation for the farmers' additional costs and income forgone due to the handicap of agricultural production in the area concerned. Alternative methods for the calculation of the handicaps caused by the less favoured conditions have been verified. A new methodology of determining the basic LFA payments level is proposed for the following program period. Similarly, a method for calculating the envisaged impacts of changes in the EU Common Agricultural Policy after 2013 on the natural handicap compensation is proposed and verified.