Key Determinants of the Economic Viability of Family Farms: Evidence from Serbia

Ensuring a fair income for farmers, as one of the key objectives of the Common Agricultural Policy (CAP), focuses on economic dimension of sustainable agricultural development. Achieving the economic viability of farms is often prioritized in developing countries, as the economic dimension is crucial for the farm survival in the long term. This paper aims to assess the economic viability of farms and to examine the impact of various factors on their viability. The study focuses on family farms that were part of Serbian Farm Accountancy Data Network (FADN) sample over a seven-year period from 2015 to 2021. Farm economic viability is evaluated using the opportunity cost approach. The results have shown that the highest proportion of economically viable farms was found in field crop farming. Conversely, grazing livestock farms were the least economically viable due to extensive farming methods they usually employ. Among the determinants of farm viability, the most important one was the asset turnover ratio, which positively affected the economic viability of all types of farming. The obtained results may help farm managers identify the primary obstacles to achieving optimal performance in the long run. Moreover, agricultural policymakers could improve existing measures and introduce new ones to strengthen the overall economic viability of farms.