Farm valuation: A comparison of methods for French farms

Abstract

Farm transfer is increasingly seen as fundamental to the development of agriculture. One of the major challenges is to assess farm value in the context of an opaque market for farms. We contribute to the scarce literature on farm valuation by empirically applying three valuation methods to the Farm Accountancy Data Network database for France in 2017 and 2018 and for five types of farming. The three methods-the fundamental method, the patrimonial method, and the financial method-are well known for the valuation of companies, but have yet to be implemented widely for farms in the empirical literature. The results show that wine-growing farms have the highest values on average. Pig and beef farms have high average patrimonial values, reflecting their high capital intensity, but beef farms have the lowest average values calculated with methods based on cash flows, revealing unfavorable market conditions for these farms. The results further reveal that total farm output drives the value upward, but that high farm labor, indebtedness, and age contribute to reducing value. Our findings also highlight that, in practice, the differences in values across methods may be substantial.

The tenant's pre-emption rights in Italian agriculture: An introductory economic evaluation

“…However, we have to consider that in determining PR values some personal aspects (perceptions) may also intervene, or ‘intangible’ assets such as propensity to risk, capacity to insert the farm in its region, etc. [ 33 ]. These features do not impact only the income generated by the rented plot, the time prospect and discount but also the second component of the PR value, namely the expectations on possible third parties' bids and then the probability the tenant has to prevail in the case of land purchase or contract renewal.…”

“…Concerning the first component, in the case of DFTPR, the theory of farm appraisal [ 24 , 32 ] suggests that it can be viewed as the discounted flow of additional income the farmer gains once he/she becomes owner of the rented land. This income depends not only upon the rent he/she will no longer pay, but also from different factors related to the farmer's and his/her family's specific conditions [ 33 ], 11 the farm structure, the relation between this structure and the features of the rented plot on sale, including the possibility to make some investment on the acquired land that would not be feasible if it remains rented. According to the relevance of all these aspects, the discounted flow results in a maximum purchase price which may depart from the average market price for the plot on sale.…”

Methods for Farm Valuation

“…The different methods were applied to the 2017 and 2018 French Farm Accountancy Data Network (FADN) bookkeeping data (Jeanneaux et al ., 2022). Figure 3 shows that wine‐growing farms have the highest values on average.…”

“…Mean values per farm (Euros) in the 2018 French FADN sample Source: Adapted from Jeanneaux et al . (2022). …”