Measuring the Economic Viability of Farms in Serbia using the Opportunity Cost Approach

Abstract

Summary The purpose of this paper is to observe and evaluate the economic viability of Serbian farms engaged in different types of farming on the basis of data obtained from the Serbian Farm Accountancy Data Network of 2021. Farm economic viability was assessed using the opportunity costs of the main factors of production in agriculture (namely labour, land, and capital). The share of unpaid labour was found highest in the livestock farms specialising in milk production and grazing livestock. The farms specialising in permanent crops and horticulture had the largest share of their own utilized agricultural land, representing a very intensive type of farming usually organized on small acreages. The highest share of economically viable farms was recorded in the field crop farming system, followed by horticulture and permanent crops. In the viable group, the field crop farms were dominant with the largest coefficients of short- and long-term viability, which increased with the economic size of the farm. In general, the farms engaged in plant production exhibited much higher economic viability levels than the livestock farms (excluding the granivore farms). The most endangered were the farms specialising in grazing livestock, with the largest proportion of non-viable farms and the lowest coefficients of economic viability. A notable number of these farms lack economic justification for agriculture. However, ceasing agricultural production may not be the best solution for them, particularly as farms in remote rural areas are managed by elderly and low-skilled farmers.