AP - A New Approach In Farm Business Analysis To Fit A Changing Farmland Investment Market

Increasing non-farm demand for land in developed countries is changing the farmland market and the business dynamics of owning it. Farmland’s value is now based less on the economic value of farm products it can produce and more on the non-farm characteristics and uses it can provide. This change has implications for farm business management decisions leading to the need for a new approach to the economic analysis of the farm business. This new approach calls for treating farmland as part of an investment portfolio, profit centre, rather than as a production cost input. This changes the traditional approach to cost budgeting and analysis of farm enterprises. Managers need to view the land ownership decision more as an investor in the land than as a producer on the land. This may have implications for developing countries in the future as well.

Key Words: farmland, cost analysis, cash rent, capital gains.