Assessing the Economic Viability of Agricultural Holdings with the Inclusion of Opportunity Costs

Zuzana Hloušková (), Michaela Lekešová, Anna Prajerová and Tomáš Doucha
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Zuzana Hloušková: Liaison Agency FADN CZ, Institute of Agricultural Economics and Information, 120 00 Prague, Czech Republic
Michaela Lekešová: Liaison Agency FADN CZ, Institute of Agricultural Economics and Information, 120 00 Prague, Czech Republic
Anna Prajerová: Liaison Agency FADN CZ, Institute of Agricultural Economics and Information, 120 00 Prague, Czech Republic
Tomáš Doucha: Research Section, Institute of Agricultural Economics and Information, 120 00 Prague, Czech Republic

Sustainability, 2022, vol. 14, issue 22, 1-15

Abstract: A key area of sustainable agriculture is the economic sustainability of agricultural holdings. Agricultural holdings should achieve such an income that they are able to cover all of their costs. As part of this study, an indicator of entrepreneurial income and an indicator of economic profit were proposed. Economic profit, in contrast to entrepreneurial income, considers the costs of lost opportunities, so-called opportunity costs. For this purpose, three indicators of the opportunity costs of production factors of labor, land, and capital were defined and calculated. To assess economic profit between different groups of holdings, an economic viability index is established, which identifies a holding as sustainable or at risk. This indicator is composed of the entrepreneurial income indicator and the difference between entrepreneurial income and economic profit. Based on FADN data of a five-year time series, it was confirmed that extensive holdings specializing in grazing livestock are among the most economically endangered subjects. The highest proportion of sustainable holdings was found in holdings specializing in milk production. From the size point of view, small holdings are most endangered, which was confirmed for all production focuses. In contrast, more large and very large holdings were included in the group of viable holdings.

Keywords: sustainability; viability of farms; opportunity costs; economic profit; farm typology; economic viability; production factors; farm accountancy data network (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:22:p:15087-:d:972667

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