Agricultural valuation of a plot

Having an agricultural plantation implies knowing the economic capacity that is acquired. To know these values, you have to play with updated data and a series of methodology based on cash flows. To arrive at a numerical value that is close to the real value, the following information needs to be obtained.

 

HOW TO SET THE VALUE OF A CROP

  • Type of fruit or commercial plant
  • Kg / ha of production
  • Sale price (€ / ha)
  • Productive life of the crop

The kg / ha of production is a value that can be obtained with relative precision from databases such as those offered by the Ministry of Agriculture, Food and the Environment , through the statistical bulletin.

  • Year 2010
  • Year 2.009
  • Year 2.008

The previous links provide statistics of areas and crop production by province.

For example, for oranges in the Region of Murcia for the year 2009, the yield per hectare is 16,241 kg 

The sale price is a value that can be obtained from different sources. For example, for the Valencian community, agricultural prices are offered per week for citrus fruits, other fruit trees, nuts, cereals, etc. through this link.

In the Region of Murcia the link is as follows .

The desired prices can be obtained through the agricultural concierge of each community.

 The last step is to know the useful life or life in full production of the plantation. We can rely on different bibliographies, but the truth is that it will depend a lot on the health of the crop. In general, a fruit tree usually has a full production until 20 – 25 years.

  As an example, a plantation of 4,000 meters is located 2 Citrus (no matter the planting whenever performance is known per hectare) by setting the following values

  • Plantation lifespan: 25 years
  • Price or average of prices during the last years of citrus: (€ 0.24 / kg)
  • Yield in (kg / ha) of the plantation: Start of plantation, year 1, year 2 and year 3, there is no production (growth stage), year 4: 5,000 kg / ha, year 5: 10,000 kg / ha, year 6: 19,830 kg / ha (max. production).

Plantation cash flows

The annual payments, as seen in the table are variable and changing. As a general rule, and this time it has been followed like this, year zero implies investment in the automation and assembly of the irrigation system, contribution of fund subscribers, clearing, purchase of plant material, etc. In this example, that cost has been assumed at € 10,235.55 , it does not have to be this way, it can be cheaper or more expensive, depending on the area, the crop and other conditions.

The rest of the payments are due to maintenance uses on the plot (water, fertilizers and fertilizers, logging, harvesting labor, etc.). Although there is a high value in  year 1 , it is merely optional and is part of the example.

Let’s go back to a new practical example within this case. It turns out that the owner of this plantation wants to sell his plot. Regardless of the value of the land, the plant material has a value (it can be ornamental, environmental, or productive, as in this case). The age of the crop is 17 years, so it is necessary to assess the benefit that this plantation can give from that year until the end of its fully productive life .

There is a problem, the value of money today is not the same as that of the future, so an update rate, k, must be established based on future economic prospects (risk premium, time value of money, etc. ). In the example, the IRR value is located  (whose calculation is as simple as in Microsoft Excel to choose the IRR function of the cash flow values). The values ​​when performing this calculation are as follows.

Updated cash flows

The updated value is the sum of the values ​​from year 17. With this we assume that the value of the hectare of our plantation is € 11,146.99. But in the example, the plantation is 4,000 m 2  , so the final value is € 4,458.79.

The excel file is made available to the visitor for execution.

Welcome to The GardenPure! My name is Ryan Heagle, and I’m the founder of The GardenPure, I spent the first part of my adult life teaching and then living in Australia in various business ventures, the first of which was a business devoted to the sale of house plants.  I am now a full time blogger. I am a self taught gardener.

Ryan Heagle

Welcome to The GardenPure! My name is Ryan Heagle, and I’m the founder of The GardenPure, I spent the first part of my adult life teaching and then living in Australia in various business ventures, the first of which was a business devoted to the sale of house plants.  I am now a full time blogger. I am a self taught gardener.

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