Economic sustainability and land appreciation: a breakdown of returns on agricultural assets in Brazil

Abstract

Abstract  This study analyzes and compares returns on agricultural assets for typical crop and fiber farms across five Brazilian regions – Carazinho (RS), Guarapuava (PR), Rio Verde (GO), Sorriso (MT), and western Bahia – from the 2013/14 to 2022/23 crop years. Primary production cost data from the Campo Futuro project (Cepea/CNA) were used. The Effective Operating Cost (EOC), Total Revenue (TR), Net Operating Revenue (NOR), the market value of assets, and the Annual Capital Recovery Cost (ACRC) were estimated, thereby allowing total returns to be decomposed into operating returns and capital gains. Results indicate expansion of leased areas and heterogeneous land appreciation across regions. Western Bahia recorded the highest average annual return on assets (11.01% p.a.), driven by high productivity and strong operating performance. In comparison, Carazinho (RS) showed the lowest return (2.33% p.a.), affected by adverse weather conditions. In four of the five regions, capital gains contributed more to profitability than operating returns. Soybeans were the dominant crop in terms of revenue. The findings highlight that economic sustainability depends on the interaction between productive performance and asset appreciation.

Keywords:
farm management; agricultural assets; production systems; economic sustainability