Farmland capital values are higher when locations are closer to good infrastructure due to reduced transport costs. Reliable access to markets (domestic and export) is vitally important to maximising farm profits and the overall performance of the agricultural investment.
In many ways it is a double edged sword as inputs need to reach the farm and outputs must arrive at market without losing quality during the journey.
We use Mozambique and the USA to illustrate the issues to be aware of and how to maximise opportunities to mitigate the potential costs. Location is fundamental to investment performance.
Mozambique
■ Transport can be as much as 30% of crop output
■ Transport approximately: 20 cents per km per tonne along main highway
■ 80% of roads are unpaved and only accessible in dry season
■ Transport times are excessive and unreliable
■ Costs and accessibility increase either side of road and depend on distance from main road and local conditions
COSTS CAN BE MITIGATED BY:
■ Linking road and rail investment
■ Acquiring land in accessible locations
■ Increasing output/reducing costs (especially if agronomic factors outweigh transport costs)