Approaches to estimation the farm-level economic viability and sustainability in agriculture: A literature review J., Hlavsa T., Soukupova K., Stolbova M. (2019): Approaches to estimation the farm-level economic viability and sustainability in agriculture: A literature review. Agric. Econ. – Czech, 65: 289-297.
download PDF

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.

Vilija Alekneviciene, Birute Stareviciute, Egle Alekneviciute (2018): Evaluation of the efficiency of European Union farms: a risk-adjusted return approach. Agricultural Economics (Zemědělská ekonomika), 64, 241-255.
Altman E.I., Hotchkiss E. (2005): Corporate financial distress and bankruptcy. John Wiley & Sons, Inc. Hoboken, NJ, USA.
Argilés Josep M. (2001): Accounting information and the prediction of farm non-viability. European Accounting Review, 10, 73-105.
Barnes A.P., Hansson H., Manevska-Tasevska G., Shrestha S.S., Thomson S.G. (2015): The influence of diversification on long-term viability of the agricultural sector. Land Use Policy, 49, 404-412.
Beaver William H. (1966): Financial Ratios As Predictors of Failure. Journal of Accounting Research, 4, 71.
Benidir M., Ghozlane F., Bousbia A., Belkheir B. (2013): The use of a critical analysis of a multicriterion method (IDEA) for assessing the sustainability of sedentary sheep rearing systems in the Algerian steppe areas. African Journal of Agricultural, 8: 804–811.
Blazkova I., Dvoulety O. (2018a): Investigating the differences in entrepreneurial success through the firm-specific factors: Microeconomic evidence from the Czech food industry. Journal of Entrepreneurship in Emerging Economies, 63: 667–690.
Blažková Ivana, Dvouletý Ondřej (2018): The causes of firm performance variation in the Czech food processing industry in the context of the outlier effect. Management Research Review, 41, 968-986.
Bossel H. (1999): Indicators for Sustainable Development: Theory, Method, Applications: a Report to the Balaton Group/Hartmut Bossel. International Institute for Sustainable Development, Winnipeg.
Brealey R.A., Myers S.C., Allen F. (2011): Principles of Corporate Finance. McGraw-Hill Higher Irwin, New York.
Camska D. (2013): Predicting financial distress of companies in the agricultural sector. In: Eglite A. (ed.): Economic Science for Rural Development: Finance and Taxes. Economic Science for Rural Development: Finance and Taxes, Latvia, Jelgava, April 25–26, 2013: 257–262.
Davidova Sophia, Gorton Matthew, Ratinger Tomas, Zawalinska Katarzyna, Iraizoz Belen (2005): Farm Productivity and Profitability: A Comparative Analysis of Selected New and Existing EU Member States. Comparative Economic Studies, 47, 652-674.
Dietrich Jorge, Arcelus F. J., Srinivasan G. (2005): Predicting financial failure: some evidence from new brunswick agricultural co-ops. Annals of Public and Cooperative Economics, 76, 179-194
Doucha T., Foltýn I., Humpál J. (2012):   Profitability of dairy and suckler cows breeding on Czech farms. Agricultural Economics (Zemědělská ekonomika), 58, 397-408.
European Investment Bank (2016): Methodological Handbook for Implementing an Ex-Ante Assessment of Agriculture Financial Instruments under the EAFRD. European Investment Bank, Luxembourg.
European Parliament and the Council of the European Union (2013): Regulation (EU) No. 1305/2013 of the European Parliament and of the Council of December 17, 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No. 1698/2005. In: Official Journal of the European Union.
FADN RICA (2010): Standard Results Indicators. Available at (accessed Aug 24, 2018).
Franc-Dąbrowska Justyna, Mądra-Sawicka Magdalena, Bereżnicka Joanna (2018): Cost of Agricultural Business Equity Capital—A Theoretical and Empirical Study for Poland. Economies, 6, 37.
Forti R. (2017): Agriculture, Forestry and Fishery Statistics: 2017 Edition. Publications Office, Luxembourg.
Gibson C.H. (2013): Financial Statement Analysis. Cengage Learning, Andover.
Gurčík Ľ. (2012): G-index – the financial situation prognosis method of agricultural enterprises. Agricultural Economics (Zemědělská ekonomika), 48, 373-378.
Hanibal J. (ed.) (2018): Výběrové šetření hospodářských výsledků zemědělských podniků v síti FADN CZ za rok 2016: Samostatná příloha ke Zprávě o stavu zemědělství ČR za rok 2016. Institute of Agricultural Economics and Information, Prague. (in Czech)
Hennessy Thia, Shrestha Shailesh, Farrell Maura (2008): Quantifying the viability of farming in Ireland: can decoupling address the regional imbalances?. Irish Geography, 41, 29-47.
Huang Zan, Chen Hsinchun, Hsu Chia-Jung, Chen Wun-Hwa, Wu Soushan (2004): Credit rating analysis with support vector machines and neural networks: a market comparative study. Decision Support Systems, 37, 543-558.
Chen S., Dodd J.L. (1997): Economic Value Added (EVA™): An empirical examination of a new corporate performance measure. Journal of Managerial Issues, 9: 318–333.
Chrastinova Z. (1998): Metódy hodnotenia ekonomickej bonity a predikcie finančnej situácie poľnohospodárskych podnikov. National Agricultural and Food Centre, Research Institute of Agricultural and Food Economics, Bratislava. (in Slovak)
Kelly Edel, Latruffe Laure, Desjeux Yann, Ryan Mary, Uthes Sandra, Diazabakana Ambre, Dillon Emma, Finn John (2018): Sustainability indicators for improved assessment of the effects of agricultural policy across the EU: Is FADN the answer?. Ecological Indicators, 89, 903-911
Václav Klepac, David Hampel (2017): Predicting financial distress of agriculture companies in EU. Agricultural Economics (Zemědělská ekonomika), 63, 347-355.
Koleda N., Lace N. (2010): Dynamic factor analysis of financial viability of Latvian service sector companies. Economics and Management, 15: 620–626.
Latruffe Laure, Desjeux Yann (2016): Common Agricultural Policy support, technical efficiency and productivity change in French agriculture. Review of Agricultural, Food and Environmental Studies, 97, 15-28
Latruffe Laure, Diazabakana Ambre, Bockstaller Christian, Desjeux Yann, Finn John, Kelly Edel, Ryan Mary, Uthes Sandra (2016): Measurement of sustainability in agriculture: a review of indicators. Studies in Agricultural Economics, 118, 123-130.
Latruffe L., Mann S. (2015): Is part-time farming less subsidised? The example of direct payments in France and Switzerland. Cahiers Agricultures, 24: 20–27.
Lobley Matt, Baker John, Whitehead Ian (2010): Farm Succession and Retirement: Some International Comparisons. Journal of Agriculture, Food Systems, and Community Development, , 49-64.
Meier B. (2005): The role of cash flow indicators in understanding farm households. In: Moreddu C., Poppe K.J. (eds): Proceedings of the OECD/PACIOLI Workshop on Information Needs for the Analysis of Farm Household Income Issues. Agricultural Economics Research Institute, Den Haag, 2004: 51–60.
Miceikiene A., Girdžiute L. (2016): Farmers’ economic viability assessment in the context of taxation and support. In: Proceedings International Scientific days 2016. The Agri-Food Value Chain: Challenges for Natural Resources Management and Society, Nitra, Slovakia, May 19–20, 2016: 350–360.
Mishra Ashok K., El‐Osta Hisham S., Sandretto Carmen L. (2004): Factors affecting farm enterprise diversification. Agricultural Finance Review, 64, 151-166
Mishra Ashok K., Holthausen Duncan M. (2002): Effect of Farm Income and Off-Farm Wage Variability on Off-Farm Labor Supply. Agricultural and Resource Economics Review, 31, 187-199.
Neumaierová Inka, Neumaier Ivan (2014): INFA Performance Indicator Diagnostic System. Central European Business Review, 3, 35-41.
O'Donoghue Cathal, Devisme Simon, Ryan Mary, Conneely Ricky, Gillespie Patrick, Vrolijk Hans (2016): Farm economic sustainability in the European Union: A pilot study. Studies in Agricultural Economics, 118, 163-171.
OECD (2003): Farm Household Income: Issues and Policy Responses. OECD, Paris.
Pollak H. (2003): Jak obnovit životaschopnost upadajících podniků. C.H. Beck, Prague. (in Czech)
Ryan M., Hennessy T., Buckley C., Dillon E.J., Donnellan T., Hanrahan K., Moran B. (2016): Developing farm-level sustainability indicators for Ireland using the Teagasc National Farm Survey. Irish Journal of Agricultural and Food Research, 55, 112-125.
Slavickiene A., Savickiene J. (2014a): Comparable analysis of farm viability assessment methodologies. European Scientific Journal, 10: 130–150.
Slavickiene A., Savickiene J. (2014b): The evaluation of small and medium farms’ economic Viability in the new EU countries. Economy & Business, 8: 843–855.
Smale M., Saupe W.E., Salant P. (1986): Farm family characteristics and the viability of farm households in Wisconsin, Mississippi, and Tennessee. Agricultural Economics Research, 38: 11–27.
Spicka J. (2017): Finanční analýza organizace z pohledu zájmových skupin. C.H. Beck, Prague. (in Czech)
Vrolijk H.C.J., de Bont C.J.A.M., Blokland P.W., Soboh R.A.M.E. (2010): Farm Viability in the European Union: Assessment of the Impact of Changes in Farm Payments. LEI Wageningen UR, Den Haag.
Wilcox Jarrod W. (1973): A Prediction of Business Failure Using Accounting Data. Journal of Accounting Research, 11, 163.
Zahm Frédéric, Viaux Philippe, Vilain Lionel, Girardin Philippe, Mouchet Christian (2008): Assessing farm sustainability with the IDEA method - from the concept of agriculture sustainability to case studies on farms. Sustainable Development, 16, 271-281.
Zmijewski Mark E. (1984): Methodological Issues Related to the Estimation of Financial Distress Prediction Models. Journal of Accounting Research, 22, 59.
download PDF

© 2020 Czech Academy of Agricultural Sciences