How opportunity costs change the view on the viability of farms? Empirical evidence from the EU

Abstract

The post-2020 Common Agricultural Policy targets at supporting small and medium-sized farms. Capping and redistribution of direct payments would have a direct impact on the economic viability of farms. Calculation of economic income is a reasonable way how to calculate the economic viability of firms. However, accounting profit has been preferred for its estimation so far. The article aims to compare the income from accounting and economic point of view and reveal how much the results differ across the EU. The literature review, an empirical analysis based on Farm Accountancy Data Network (2016–2018), and a clustered heat map were applied. The results provide clear evidence of high variability of opportunity costs when calculating the economic viability in the EU, especially between countries with small intensive farms and some post-communist countries where larger farms dominate.