EVALUATION OF AGRICULTURAL LAND PRIOR TO AND FOLLOWING THE DRAINAGE

The study demonstrates the methodological approach to the determination of the upper limit of land value and analyzes the influence of the mode of determination of the economic effect of land use and the level of groundwaters on its amount. A model was developed based on the business results of an agricultural enterprise involved in a field crop/livestock production over the past few years, which had planned to erect a drainage system in order to manage the excess of water on the available land area. In addition, a methodological approach to the determination of the land output value, i.e. the upper limit of its value was used as well. The need was stressed to start from the maximal economic effect obtained by optimizing production when determining the level. The mode of its determination under the conditions prior to and following land drainage was given as well.

The reasons for the evaluation of agricultural land, i.e. determination of its value are as follows: -purchasing or selling land and agricultural enterprises and farms, -transforming and reorganizing legally agricultural enterprises, -compensating damage to land owners -leasing, -imposing taxes, etc.
The purpose of land evaluation may be restricted by the mode of its evaluation.Considering some economic interests of the land owner, purchaser, leaser, the state, etc., it is necessary to be acquainted with the limit of its value.
While selling, leasing, compensating damage etc., it is economically unacceptable to the land owner to evaluate it at a price lower than that of the market.On the other hand, from the standpoint of the purchaser, leaser, the state, persons compensating the damage, it is also economically unacceptable to evaluate the land at a price higher than its output value, i.e. capitalized rent.
Therefore, the lower limit of the value represents the market value and the upper limit the output value of the land.
Land value is affected by a number of factors mainly those which influence the success of agricultural production (K r i š t o f, 1977).These are: natural (climate, location, quality and arrangement of land), economic (market and prices, economic development of the country), social (economic system, scientific and technological development) and other factors.
Considering the fact that the turnover value of land created on the market cannot be effected, the objective of the study was to determine upper value limits, i.e. output values of land prior to and following its drainage.

Material and Methods
A model was developed and the business results of an agricultural enterprise focused on field crop/livestock production over the past few years were used.The enterprise had 960 ha of arable lowland of even quality at its disposal and a farm for bullock fattening (up to 450 kg), annual capacity comprised 1 030 animals.Of the total available land intended for field crop production, 320 ha accounted for tight, impervious and often humid soil.For this reason, the erection of a drainage system was considered most important.The enterprise had all the machinery and implements at its disposal needed for both field crop and livestock production.The objective was to determine land value, i.e. to evaluate its value prior to and following the erection of a drainage system.
Knowing that land value depends on the economic effects achieved from its utilization, it was first of all necessary to determine its amount.The economic effect of land utilization was determined based on the average production structure over a number of previous years and average output and optimal production structure needed to achieve maximal amount.
The current production structure was derived from the achieved economic benefit of some field crops, fodder needs as well as taking into account crop rotation and capacity limitations of some basic production factors -available labor, machinery and permanent manpower.
The average structure and output registered on the acreages either exposed to or not exposed to excess of water over the past few years are given in Table 1.
T a b.However, in order to get on with the study, it was necessary to determine the maximal economic effect for average climatic, soil, economic and other conditions over a number of previous years.Maximal economic effect is known to be achieved using an optimal production structure, applying well-known methods of optimization.The achievement of an optimal production structure is limited by the total land area, crop rotation (the share of cereals may account for 50% at the most and 30% at the least, the share of sunflower and sugarbeet acreages may account for 20% at the most and the least share of leguminous crops may account for 10%), machinery availability under optimal deadlines for performing certain activities (April, September, October and November), manpower availability (May, June, July and October), possibility of hiring seasonal labor, available capacity for livestock production, possibility of ensuring bulk feed from own production, possibility of selling certain field crop products on the market required for own production (commercial corn, alfalfa hay).
The standard simplex method for solving linear programming problems using the program LINDO was used in the study in order to establish the optimal structure of the enterprise.
Technical input-output coefficients in the initial simplex table were determined based on the input and output parity prices over the past few years, labor input norms and machinery for the given production conditions and crop rotation conditions, certain technical characteristics and production intensity in the enterprise -prior to and following the erection of the drainage system, i.e. yield per unit capacity over the preceding years (Table 1).
Production optimization under current conditions was determined by computing maximal values of the objective function: where: F (x i ) = maximal net income -difference between the market value and external variable costs, x i = range of the share of some activities (production line, activities of seasonal labor, feed preparation, produce sale, etc.), c i = optimization coeffcient of the activities per unit capacity, namely: in the case of: 1) activities, the products of which are achieved on the market, it is the net income and in the function of the objective denoted "+ " , 2) activities the products of which are only partly or wholy used for further reproduction it is the amount of external variable costs and in the function of the objective denoted "-" , 3) costs for hiring seasonal labor per hour and in the function of the objective denoted "-" and 4) sale prices of products sold on the market in the function of the objective denoted "+ ".
The upper limit of land, enterprise or farm value is represented by its output value (L a u r, 1928; K r i š t o f, 1977).The output value was the capitalized difference between the market production value and total costs without interest, taxes and dues, i.e.The output value of an enterprise or farm may be determined based on the present production structure and structure enabling the maximal economic effect, i.e. optimal production structure.
A modified method for determining land output value (L a u r , 1928) was used in the study.Thus, land value was evaluated according to the value which was obtained by subtracting the value of other fixed assets from the previously determined output value of the enterprise or farm, i.e.: where C = land value (upper limit of land value), and K = value of other fixed assets of an enterprise or farm.
Appropriate business decisions were made by comparing the output value with the market value of the land.If the output value is greater than the market value, then the purchaser decides on its purchase up to the level of its amount.If the output value obtained on the basis of the optimal production structure is greater than the output value obtained on the basis of the current production structure and the market value, the land owner makes the decision whether to organize the production himself, sell the land or lease it.
The market value, which is to be compared with the output value, should be the average for the total land area and not the value relating to smaller land areas, more fertile soil or land having a more favourable location, etc.
The value of fixed assets of the enterprise prior to the erection of the drainage system amounted to: The expenses originating from owning fixed assets of the enterprise, irrespective of the length of their use or production output, i.e. fixed costs of the enterprise prior to the erection of the drainage system were: -material costs . . . .The erection of the system of horizontal drainage to be emptied into the nonregulated river bed and surrounding canals has been predicted for draining the excess of water from the exposed land area (320 ha).Undermining has been planned as an additional measure in addition to pipe drainage.The investments needed for the erection of the system of drainage Fixed costs for maintaining the drainage system amounted to a total of 20,775 Dinars, and without the interest rate on investment credits to 17,566 Dinars.

Results and Discussion
Matrices of initial data for determining the optimal production structure and maximal business results were developed (Tables 2 and 3) based on the assumed constraints for production optimization under the conditions prior to and following the erection of the drainage system.
Based on the assumed constraints, which were the result of optimization, it was possible to obtain optimal values of the objective function, output of availabe resources and production activities.
Optimization results under the conditions prior to and following the erection of the system for drainage are given in Table 4 The output value of the whole enterprise and its land was determined (Table 5) based on the net income, amount of fixed costs of the enterprise without interest, taxes and dues and values of other fixed costs of the enterprise under the conditions prior to and following the erection of the system for drainage.
The previously computed output values for the assumed conditions represent the average upper limit of land value, i.e. the maximal amount needed for land evaluation.
Based on the obtained results, it can be concluded that land value is influenced by the mode of determination of its economic effects and arrangement, i.e. water level management in the soil.If some known methods of optimization are used in order to determine the economic effect of land use, in our case the method of linear programming, a greater land output value, i.e. 1,884.8Dinars/ha>1,230.9Dinars/ha will be obtained.Based on the land output value determined according to the present production structure, the land owner may come to the wrong decision when deciding to either organize the production himself, sale or lease.Therefore, when determining the output value it is necessary to start initially from the maximal economic effect obtained from production optimization.In addition, when managing the water level in the fertile soil layer, its output value is very likely to rise (2,011.6Dinars/ha>1,884.8Dinars/ha).

Indices
Current structure Prior to system erection

Following system erection
From the standpoint of the enterprise owner as the potential salesman or leaser, it is of major importance that he be acquainted with the amount of output values in order to be able to compare them with the market value.If the land output value is greater than the market value, then the owner will achieve greater economic effects by establishing the optimal production structure and this in turn will contribute to his declining interest to sell or lease the land or enterprise and vice versa.
When purchasing, compensating the damage or leasing land or enterprise, the output value represents the economically maximal acceptable value, i.e. for the assumed conditions up to 1,884.8Dinars/ha prior to drainage and 2,011.6Dinars/ha after drainage.

C o n c l u s i o n
Land may be evaluated from the standpoint of the land owner, purchaser, the state and other subjects and the reasons for it may be numerous.Therefore, considering the economic interests of the subjects requiring evaluation it is of major importance to know the limits of land evaluation.When purchasing or selling, transforming and reorganizing legally, imposing taxes, determining the amount of damage or land leasing, etc., it is of major interest to know these limits.It is within these limits that subjects find their economic interest.From the standpoint of the land owner, the lower limit of land evaluation represents the market value, whereas from the standpoint of the purchaser, leaser or the subject compensating the damage the upper limit represents the output value.The amount of this value is affected by different factors -natural, economic, social and other.This study has shown that when determing the upper limit of land value one should initially take into account the maximal economic effect achieved by the optimal production structure on the land to be evaluated.In addition, the study has shown that land arrangement, i.e. managing the water level in the fertile soil layer, had a significant effect on the amount of the value.
The amount of the lower limit of land value cannot be directly effected by subjects because it is created on the market.However, knowing its upper limit is of major importance to the subjects when purchasing, selling, leasing, compensating damage etc., because of the need to compare it with the market value.U radu je izložen metodski postupak određivanja gornje granice vrijednosti zemljišta i ispitivan uticaj načina utvrđivanja ekonomskog efekta korišćenja zemljišta i nivoa podzemnih voda na njen iznos.
unlimited use, and where P = output value of the enterprise or farm, R =average net output (difference between net income and fixed costs of the enterprise or farms without interest, taxes and dues), r = cumulative interest factor which equals 1+ 100 p where p stands for interest rate.