ECONOMIC EFFICIENCY ASSESSMENT OF INVESTMENTS IN AGRICULTURAL PRODUCTION

Boris Kuzman; Mirela Momčilović; Dajana Ercegovac; Dragana Milić

doi:10.59267/ekoPolj230161K

Authors

Boris Kuzman Institute of Agricultural Economics, Belgrade, Serbia https://orcid.org/0000-0002-8661-2993
Mirela Momčilović Novi Sad Business School, Novi Sad, Serbia https://orcid.org/0000-0001-5752-6992
Dajana Ercegovac Novi Sad Business School, Novi Sad, Serbia https://orcid.org/0000-0002-6526-0773
Dragana Milić Novi Sad Business School, Novi Sad, Serbia https://orcid.org/0000-0001-8250-0479

DOI:

https://doi.org/10.59267/ekoPolj230161K

Keywords:

investment evaluation, corn and soybean cultivation

Abstract

The purpose of this study is to assess the economic benefits of agricultural production and provide guidance to manufacturers and investors interested in agriculture. This paper applies dynamic efficiency evaluation methods i.e. net present value, profitability index, and internal rate of return, together with the sensitivity analysis that is useful in cases of market turbulences. The presented investment is purchasing 10 hectares of arable land and cultivating two alternative crops: corn and soybeans. Research results and projections imply that both scenarios are acceptable and economically profitable with the preference for the cultivation of corn giving better economic efficiency. This study can provoke further investment evaluations with dynamic capital budgeting methods in other crops or implementation of mechanization in agricultural production.

Downloads

Download data is not yet available.

Author Biographies

Boris Kuzman, Institute of Agricultural Economics, Belgrade, Serbia

Mirela Momčilović, Novi Sad Business School, Novi Sad, Serbia

Dajana Ercegovac, Novi Sad Business School, Novi Sad, Serbia

Dragana Milić, Novi Sad Business School, Novi Sad, Serbia

References

Andres, P., Fuente, G., & San Martin, P. (2015). Capital budgeting practices in Spain. Business Research Quarterly, 18(1), 37-56.

Baruwa, I.O., & Fabode, O.A., (2019). Uporedna investiciona analiza za male proizvođače brojlera i jaja u državi Osun, Nigerija. Journal of Agricultural Sciences, 64(3), 279-291.

CFA Institute, (2020). Corporate Finance and Equity. Level I, Volume 4. New Jersey: Wiley Global Finance.

Correia, C. (2012). Capital budgeting practices in South Africa: A review. South African Journal of Economics and Management.

Damodaran, А. (2005). Коrporativne finansije: Теоrija i praksa. Modus, Podgorica. [in English: Damodaran, A. (2005). Corporate finance: Theory and practice. Modus, Podgorica].

Damodaran, A. (2015). Applied Corporate Finance (4th Ed.). Hoboken, NJ: John Wiley & Sons Inc.

Damodaran, A., (2022). The equity risk premium for the German market; Unlevered beta for emerging markets for agriculture, (available at: https://pages.stern.nyu.edu/~adamodar/).

Dašić, D., Stanić, T., & Živković, D. (2022). Market of Agricultural and Food Products in the Republic of Serbia: Possibilities and Implications. Economics of Agriculture, 69(1), 57-74, DOI: 10.5937/ekoPolj2201057D.

Dedi, L., & Orsag, S., (2007). Capital budgeting practices: A survey of Croatian firms. South East European Journal of Economics and Business, 2(1), 59-67.

Ercegovac, D., & Živkov D. (2018). Competitiveness of the Serbian economy, FDI and balance of trade deficit problem. International Scientific and Expert Conference Economic Development and Competitiveness of European Countries, Novi Sad School of Business, Novi Sad, October, 49-51.

Graham, J.R., & Harvey, C.R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243.

Kuzman, B., Djuric, K., Mitrović, Lj., & Prodanovic, R. (2017). Agricultural Budget and Agriculture Development in Republic of Serbia. Economics of Agriculture, 64(2), 515-531.

Lopes Santos, D.F., de Morales Farinelli, J.B., Horita, K., da Silva, B.L., & Fonseca Souza, C.A. (2020). Investment analysis of soybean production system in sugarcrane renewal areas. Custos e @gronegocio on line, 16(3), 130-164.

Marković, M., Krstić, B., & Popović, S. (2022). Competitiveness of Agri-Food Exports of the Republic of Serbia in the Covid-19 Conditions. Economics of Agriculture, 69(1), 227-239, DOI: 10.5937/ekoPolj2201227M.

Mihailović, B., Cvijanović, D., & Kuzman, B. (2014). Challenges of Management Consulting in Modern Business of Agricultural Enterprise, (Monograph), Institute of Agricultural Economics, Belgrade.

Момчиловић, М, & Ерцеговац, Д. (2022). Анализа, моделирање и мерење ризика инвестиционих пројеката у Републици Србији, Научно-стручна конференција „ЕУ за младе – изазови и могућности“, Висока пословна школа струковних студија, Нови Сад, мај, 35. [in English: Momčilović, M. & Ercegovac, D. (2022). Analysis, modeling and measuring of investment projects risks in the Republic of Serba, Scientific conference „EU for jouth – chalanges and possibilities“, Novi Sad School of Business, Novi Sad, May, 35].

Novković, N., Vukelić, N., Mutavdžić, B., Lukač-Bulatović, M., & Milošević, M. (2017). Ekonomski efekti investiranja u zasad lešnika. Agroekonomika, 46(74), 21-29.

NS COMEX – Produktna berza ad Novi Sad, (2022). Prices and yields of corn and soybean, (available at: https://nscomex.com).

Njegić, J., Momčilović, M., & Berber, N. (2011). The Advantages of Investing in Organic Compared to Conventional Agricultural Production, 4th International Conference for Enterpreneurship, Innovation and Regional Development – ICEIRD, Ohrid, 1277-1284.

Pantić, N., Mikulič, K., & Lekovič, M. (2022). The influence of claims payments on the investment portfolio of insurance companies. Oditor, 8(3), 42-71. https://doi.org/10.5937/Oditor2203042P

Pavlović, M. M., Popović, J., & Turnjanin, D. (2021). Development of small and medium enterprises in Serbia. Oditor, 7(2), 47-64. https://doi.org/10.5937/Oditor2102047P

Peterson, P.P., & Fabozzi, F. J. (2002). Capital Budgeting: Theory and Practice. New York: John Wiley & Sons.

Radić, V., Radić, N., & Cogoljević, V. (2022). New Technologies as a Driver of Change in the Agricultural Sector. Economics of Agriculture, 69(1), 147-162, DOI:10.5937/ekoPolj2201147R.

Stančić, P., & Čupić, М. (2020). Коrporativne finansije. Ekonomski fakultet Kragujevac. [in English: Stančić, P., & Čupić, М. (2020). Corporate finance. Faculty of Economics Kragujevac].

Statista, (2022). Inflation in EU,(available at: https://statista.com/statistics/37520).

Subić, J. (2017). Assessment of Investments by the Use of Software Application for Development of the Business Plan in Agriculture. Ekonomika, 63(2), 1-14, DOI: 10.5937/ekonomika1702001S.

Subić, J., Kljajić, N., & Jeločnik, M. (2017). Renewable Energy Use in Raspberry Production. Economics of Agriculture, 64(2), 821-843.

Tešić, R., Mihajlović, M., Jeremić, D., & Ilić, Đ. (2021). Strategija diverzifikacije kao nužnost opstanka, rasta i razvoja proizvodnih preduzeća, Akcionarstvo, 27(1), 27-39.

Тоdorovic, М., Кalicanin, Dj., & Nojkovic, А. (2015). Practices of Performance Measurement in Companies in the Republic Of Serbia. Economic Horizons, 17(1), 45-58, DOI: 10.5937/ekonhor1501045T.

Todorović, M., & Ivanišević, M. (2018). Poslovne finansije. Beograd: Centar za izdavačku delatnost Ekonomskog fakulteta u Beogradu.

Trading Economics, (2022). Yield on the German 10-year government-owned bond, (available at: https://tradingeconomics.com/germany/government-bondyield).

Влаовић Беговић, С., Момчиловић, М., & Томашевић, С. (2018). Оцена економске ефикасности инвестиција. Анали Економског факултета у Суботици, 54(39), 187-204. [in English: Vlaović Begović, S., Momčilović, M., & Tomašević, S. (2018). Economic efficiency assessment of investment. Annals of Economic faculty in Subotica, 54(39), 187-204].