IDEAS home Printed from https://ideas.repec.org/a/caa/jnlage/v65y2019i6id269-2018-agricecon.html
   My bibliography  Save this article

Approaches to estimation the farm-level economic viability and sustainability in agriculture: A literature review

Author

Listed:
  • Jindrich Spicka
  • Tomas Hlavsa

    (Institute of Agricultural Economics and Information, Prague, Czech Republic)

  • Katerina Soukupova

    (Institute of Agricultural Economics and Information, Prague, Czech Republic)

  • Marie Stolbova

    (Institute of Agricultural Economics and Information, Prague, Czech Republic)

Abstract

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.

Suggested Citation

  • Jindrich Spicka & Tomas Hlavsa & Katerina Soukupova & Marie Stolbova, 2019. "Approaches to estimation the farm-level economic viability and sustainability in agriculture: A literature review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(6), pages 289-297.
    • Handle: RePEc:caa:jnlage:v:65:y:2019:i:6:id:269-2018-agricecon
    DOI: 10.17221/269/2018-AGRICECON
    as

    Download full text from publisher

    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/269/2018-AGRICECON.html
    Download Restriction: free of charge
    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/269/2018-AGRICECON.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.17221/269/2018-AGRICECON?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. 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, Northeastern Agricultural and Resource Economics Association, vol. 31(2), pages 1-13, October.
    2. Laure Latruffe & Yann Desjeux, 2016. "Common Agricultural Policy support, technical efficiencyand productivity change in French agriculture," Review of Agricultural, Food and Environmental Studies, INRA Department of Economics, vol. 97(1), pages 15-28.
    3. Inka Neumaierová & Ivan Neumaier, 2014. "INFA Performance Indicator Diagnostic System," Central European Business Review, Prague University of Economics and Business, vol. 2014(1), pages 35-41.
    4. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure - Reply," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 123-127.
    5. Frédéric Zahm & Philippe Viaux & Lionel Vilain & Philippe Girardin & Christian Mouchet, 2008. "Assessing farm sustainability with the IDEA method - from the concept of agriculture sustainability to case studies on farms," Sustainable Development, John Wiley & Sons, Ltd., vol. 16(4), pages 271-281.
    6. Václav KLEPAC & David HAMPEL, 2017. "Predicting financial distress of agriculture companies in EU," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(8), pages 347-355.
    7. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 71-111.
    8. Tomáš DOUCHA & Ivan Foltýn & Jaroslav HUMPÁL, 2012. "Profitability of dairy and suckler cows breeding on Czech farms," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(9), pages 397-408.
    9. Ashok K. Mishra & Hisham S. El‐Osta & Carmen L. Sandretto, 2004. "Factors affecting farm enterprise diversification," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 64(2), pages 151-166, November.
    10. Jorge Dietrich & F. J. Arcelus & G. Srinivasan, 2005. "Predicting financial failure: some evidence from new brunswick agricultural co‐ops," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(2), pages 179-194, June.
    11. Josep Argiles, 2001. "Accounting information and the prediction of farm non-viability," European Accounting Review, Taylor & Francis Journals, vol. 10(1), pages 73-105.
    12. Wilcox, Jw, 1973. "Prediction Of Business Failure Using Accounting Data - Comment," Journal of Accounting Research, Wiley Blackwell, vol. 11, pages 188-190.
    13. 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, Research Institute for Agricultural Economics, vol. 118(3), pages 1-8, December.
    14. Zmijewski, Me, 1984. "Methodological Issues Related To The Estimation Of Financial Distress Prediction Models," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 59-82.
    15. Wilcox, Jw, 1973. "Prediction Of Business Failure Using Accounting Data," Journal of Accounting Research, Wiley Blackwell, vol. 11, pages 163-179.
    16. Smale, Melinda & Saupe, William E. & Salant, Priscilla, 1986. "Farm Family Characteristics and the Viability of Farm Households in Wisconsin, Mississippi, and Tennessee," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 38(02), pages 1-17.
    17. 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, Research Institute for Agricultural Economics, vol. 118(3), pages 1-9, December.
    18. Sophia Davidova & Matthew Gorton & Tomas Ratinger & Katarzyna Zawalinska & Belen Iraizoz, 2005. "Farm Productivity and Profitability: A Comparative Analysis of Selected New and Existing EU Member States1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 47(4), pages 652-674, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hasan Arisoy, 2020. "Impact of agricultural supports on competitiveness of agricultural products," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(6), pages 286-295.
    2. Firdovsi Fikretzade & Hamza Khalilov & Ramil Huseyn, 2024. "Analyzing the affordable dimensions for restricting the division of agricultural land: The case of Azerbaijan," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 0(1), pages 83-101.
    3. Tomas Hlavsa & Jindrich Spicka & Marie Stolbova & Zuzana Hlouskova, 2020. "Statistical analysis of economic viability of farms operating in Czech areas facing natural constraints," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(5), pages 193-202.
    4. Cecilia ALEXANDRI & Corina SAMAN & Bianca PAUNA, 2024. "Heterogeneity in the agricultural sector and its implications for modeling viability," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 144-156, December.
    5. Adele Coppola & Mario Amato & Domenico Vistocco & Fabio Verneau, 2022. "Measuring the economic sustainability of Italian farms using FADN data," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 68(9), pages 327-337.
    6. Martín-García, Jaime & Gómez-Limón, José A. & Arriaza, Manuel, 2024. "Conversion to organic farming: Does it change the economic and environmental performance of fruit farms?," Ecological Economics, Elsevier, vol. 220(C).
    7. repec:rjr:romjef:v::y:2024:i:4:p:144-157 is not listed on IDEAS
    8. Analena Bruce & Elise Neidecker & Luyue Zheng & Isaac Sohn Leslie & Alexa Wilhelm, 2025. "“A farm is viable if it can keep its head above water”: defining and measuring farm viability for small and mid-sized farms," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 42(2), pages 625-641, June.
    9. Rūta Savickienė & Aistė Galnaitytė, 2024. "Unveiling Determinants of Successful Dairy Farm Performance from Dairy Exporting EU Countries," Agriculture, MDPI, vol. 14(7), pages 1-23, July.
    10. Narayanamurthy, Gopalakrishnan & Jayanth, R Sai Shiva & Moser, Roger & Schaefers, Tobias & Nagendra, Narayan Prasad, 2025. "Data-driven digital transformation for uncertainty reduction – Application of satellite imagery analytics in institutional crop credit management," International Journal of Production Economics, Elsevier, vol. 280(C).
    11. Vida Dabkiené, 2020. "Off-farm role in stabilizing disposable farm income: A Lithuanian case study," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(7), pages 325-334.
    12. Jia, Xibei & Buyle, Sven & Macário, Rosário, 2023. "Developing an airport sustainability evaluation index through composite indicator approach," Journal of Air Transport Management, Elsevier, vol. 113(C).
    13. Katarína Novotná & Ľubomír Gurčík & Zuzana Lušňáková, 2023. "Economic determinants of the development and sustainability of family farms in Slovakia," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(7), pages 291-299.
    14. Karlsson, Johan O. & Robling, Helena & Cederberg, Christel & Spörndly, Rolf & Lindberg, Mikaela & Martiin, Carin & Ardfors, Elsa & Tidåker, Pernilla, 2023. "What can we learn from the past? Tracking sustainability indicators for the Swedish dairy sector over 30 years," Agricultural Systems, Elsevier, vol. 212(C).
    15. Ogawa, Keishi & Garrod, Guy & Yagi, Hironori, 2023. "Sustainability strategies and stakeholder management for upland farming," Land Use Policy, Elsevier, vol. 131(C).
    16. Ribašauskienė, Erika & Volkov, Artiom & Morkūnas, Mangirdas & Žičkienė, Agnė & Dabkiene, Vida & Štreimikienė, Dalia & Baležentis, Tomas, 2024. "Strategies for increasing agricultural viability, resilience and sustainability amid disruptive events: An expert-based analysis of relevance," Journal of Business Research, Elsevier, vol. 170(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tomas Hlavsa & Jindrich Spicka & Marie Stolbova & Zuzana Hlouskova, 2020. "Statistical analysis of economic viability of farms operating in Czech areas facing natural constraints," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(5), pages 193-202.
    2. Ángel Beade & Manuel Rodríguez & José Santos, 2024. "Multiperiod Bankruptcy Prediction Models with Interpretable Single Models," Computational Economics, Springer;Society for Computational Economics, vol. 64(3), pages 1357-1390, September.
    3. Nina Ponikvar & Maks Tajnikar & Ksenja Pušnik, 2009. "Performance ratios for managerial decision‐making in a growing firm," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 10(2), pages 109-120, February.
    4. Li, Chunyu & Lou, Chenxin & Luo, Dan & Xing, Kai, 2021. "Chinese corporate distress prediction using LASSO: The role of earnings management," International Review of Financial Analysis, Elsevier, vol. 76(C).
    5. Ahsan Habib & Mabel D' Costa & Hedy Jiaying Huang & Md. Borhan Uddin Bhuiyan & Li Sun, 2020. "Determinants and consequences of financial distress: review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1023-1075, April.
    6. Amin Jan & Maran Marimuthu & Muhammad Kashif Shad & Haseeb ur-Rehman & Muhammad Zahid & Ahmad Ali Jan, 2019. "Bankruptcy profile of the Islamic and conventional banks in Malaysia: a post-crisis period analysis," Economic Change and Restructuring, Springer, vol. 52(1), pages 67-87, February.
    7. Ogawa, Keishi & Garrod, Guy & Yagi, Hironori, 2023. "Sustainability strategies and stakeholder management for upland farming," Land Use Policy, Elsevier, vol. 131(C).
    8. Ivana Podhorska, 2016. "Success of prediction models in Slovak companies," GATR Journals gjbssr446, Global Academy of Training and Research (GATR) Enterprise.
    9. Sunti Tirapat & Aekkachai Nittayagasetwat, 1999. "An Investigation of Thai Listed Firms' Financial Distress Using Macro and Micro Variables," Multinational Finance Journal, Multinational Finance Journal, vol. 3(2), pages 103-125, June.
    10. Duc Hong Vo & Binh Ninh Vo Pham & Chi Minh Ho & Michael McAleer, 2019. "Corporate Financial Distress of Industry Level Listings in Vietnam," JRFM, MDPI, vol. 12(4), pages 1-17, September.
    11. Tamara Ayœs, Armando Lenin & Villegas, Gladis Cecilia & Leones Castro, María Cristina & Salazar Bocanegra, Juan Antonio, 2018. "Modelaci—n del riesgo de insolvencia en empresas del sector salud empleando modelos logit || Modeling of Insolvency Risk in Health Sector Companies Using Logit Models," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 26(1), pages 128-145, Diciembre.
    12. Bravo-Urquiza, Francisco & Moreno-Ureba, Elena, 2021. "Does compliance with corporate governance codes help to mitigate financial distress?," Research in International Business and Finance, Elsevier, vol. 55(C).
    13. Nguyen, Ha, 2023. "An empirical application of Particle Markov Chain Monte Carlo to frailty correlated default models," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 103-121.
    14. Sanjay Sehgal & Ritesh Kumar Mishra & Ajay Jaisawal, 2021. "A search for macroeconomic determinants of corporate financial distress," Indian Economic Review, Springer, vol. 56(2), pages 435-461, December.
    15. Sumaira Ashraf & Elisabete G. S. Félix & Zélia Serrasqueiro, 2019. "Do Traditional Financial Distress Prediction Models Predict the Early Warning Signs of Financial Distress?," JRFM, MDPI, vol. 12(2), pages 1-17, April.
    16. Apostolos G. Christopoulos & Ioannis G. Dokas & Iraklis Kollias & John Leventides, 2019. "An implementation of Soft Set Theory in the Variables Selection Process for Corporate Failure Prediction Models. Evidence from NASDAQ Listed Firms," Bulletin of Applied Economics, Risk Market Journals, vol. 6(1), pages 1-20.
    17. Sepulveda Velasquez, Jorge, 2021. "Bibliometric Review of Research in Financial Health," MPRA Paper 111353, University Library of Munich, Germany.
    18. Gemünden, Hans Georg, 1988. "Defekte der empirischen Insolvenzforschung," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 205, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    19. Vo, D.H. & Pham, B.V.-N. & Pham, T.V.-T. & McAleer, M.J., 2019. "Corporate Financial Distress of Industry Level Listings in an Emerging Market," Econometric Institute Research Papers EI2019-15, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    20. Kevin C.W. Chen & Chi†Wen Jevons Lee, 1993. "Financial Ratios and Corporate Endurance: A Case of the Oil and Gas Industry," Contemporary Accounting Research, John Wiley & Sons, vol. 9(2), pages 667-694, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:caa:jnlage:v:65:y:2019:i:6:id:269-2018-agricecon. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ivo Andrle (email available below). General contact details of provider: https://www.cazv.cz/en/home/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.