Valuing on-farm investments

Abstract

The challenge of maximising the value of an onfarm investment is dependent on two factors: first, ensuring the full potential of the investment is realised by adjusting current practices to capture the gains; and second, the challenge of isolating, quantifying and valuing the contribution that investment makes to the whole farm business. A new generation farm optimisation model (INFORM) addresses both these issues. Two distinctly different on-farm investments, planting of a forestry block and sowing a multi-year forage crop, both on a hill country sheep and beef operation, are presented to illustrate the capability the model has for first optimising the investment and then using this information to conduct a farm system capital investment investigation. The investment analysis includes consideration of the capital requirements, and also calculates the maximum amount that can be spent on each of the investments to add value to the current business. Keywords: farm system analysis, investment, NPV, optimisation, INFORM