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Farmers' trade-off strategies between investment and private withdrawals, and the profitability of invested capital

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  • Jeanneaux, Philippe
  • Piet, Laurent

Abstract

Farmers capitalize a significant share of their cash flow in their farm’s professional assets. Indeed, the wealth generated on a farm can be allocated either to the immediate remuneration of the non-salaried workers or to the financing of investments, which can be considered as a deferred remuneration to be realized in the future. Based on the analysis of their annual cash flows and assets on their balance sheets, we document how this trade-off is implemented by a FADN sample of 1,374 French commercial farms over the period 2002-2018. It appears that the estimated internal rates of return of the investments are positive in most cases, with an average of 1.7%. We further identify five strategies based on the respective shares of the operating cash flow dedicated to either investments or private withdrawals.

Suggested Citation

  • Jeanneaux, Philippe & Piet, Laurent, 2024. "Farmers' trade-off strategies between investment and private withdrawals, and the profitability of invested capital," Working Papers 339873, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    • Handle: RePEc:ags:inrasl:339873
    DOI: 10.22004/ag.econ.339873
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    References listed on IDEAS

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    1. Evison, David, 2014. "The use of internal rate of return as a tool for evaluating and comparing investment performance," 2014 Conference, August 28-29, 2014, Nelson, New Zealand 201087, New Zealand Agricultural and Resource Economics Society.
    2. Philippe Jeanneaux & Yann Desjeux & Geoffroy Enjolras & Laure Latruffe, 2022. "Farm valuation: A comparison of methods for French farms," Agribusiness, John Wiley & Sons, Ltd., vol. 38(4), pages 786-809, October.
    3. Evison, David C., 2018. "Estimating annual investment returns from forestry and agriculture in New Zealand," Journal of Forest Economics, Elsevier, vol. 33(C), pages 105-111.
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    1. Evison, David C., 2018. "Estimating annual investment returns from forestry and agriculture in New Zealand," Journal of Forest Economics, Elsevier, vol. 33(C), pages 105-111.

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    Keywords

    Agricultural Finance; Farm Management; Production Economics;
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