Financial attractiveness of leasing versus buying land for agricultural production in southern Paraná

Rodrigo Gawlak and Flávio Carlos Dalchiavon

Revista IPecege, 2018, vol. 4, issue 3

Abstract: Land leasing for agricultural production is an option to avoid high investments in land acquisition. This study aimed to compare the economic viability of buying and leasing agricultural land in São Mateus do Sul – PR, in 2017, using the profitability of soybeans and corn in a crop rotation system with a ratio of 80/20%, respectively. Production costs were determined by Effective Operating Cost, Total Operating Cost, and Total Cost for each crop, as were Total Revenue, Gross Margin, Net Margin, and Total Profit. The viability of buying and leasing land was assessed by evaluating the initial investment, annual returns, Present Value, Net Present Value, Internal Rate of Return, and Payback. The land prices practiced were R$ 27,700.00 per hectare and 16 sacks of 60 kg soybeans per hectare per year of lease, a value defined by the market price of the oilseed. Corn is not attractive considering the Net Margin and Total Profit indicators; however, the soybean/corn system is profitable in an 80/20% ratio, respectively. The major obstacle is the scarcity of land available for agriculture, so leasing is more profitable during this period of commodity devaluation and inflated land prices, providing lower initial capital expenditure. Thus, land leasing is attractive in the short term, while purchasing is not attractive, nor is it attractive in the long term for soybean and corn production.

Keywords: Crop; Production/Industries (search for similar items in EconPapers)
Date: 2018
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