Skip to content
RIMAIAgribusiness SchoolMy land

D-opportunity-cost Dictionary

Opportunity cost

The return you give up by using an asset one way instead of the next best way

All termsIntroduced in Module 1Open the Toolkit
An open dictionary on a farm office desk
Plain meaning
The return you give up by using an asset one way instead of the next best way
How to use it
Before committing land to an enterprise, price what the same hectares would earn if leased out or used for the next best enterprise. A venture that cannot beat that figure is destroying value even if it shows a profit.
South African benchmark
Concept term; use South African farm lease rates as a reference point.
Country notes
Use the local lease rate for land of similar quality in the student's district as the opportunity cost of the land.
Go and read
C1 Lesson 1.1, M1-U6
Calculate it
T-C-01 Land Use Planner
Library sources
LIB-A022
See also
Dead capital, Leasehold, Gross margin
Two hectares measured out, with the four numbers that make land a business assetTwo hectares, measured as a business assetHectare 1100 m x 100 mHectare 210,000 m²100 m100 m100 mLease value a yearthe return to beatSale valuethe capital tied upHolding costfencing, rates, upkeepTenure documentwhat a bank lends on1 hectare = 10,000 square metres. Two hectares is a 200 m x 100 m block.
Opportunity cost, shown as a diagram.

Introduced in C1 The Farm as an Asset.