This forgone income is called an opportunity cost . If your land is paid for, there would be no cash cost for the land other than taxes and insurance, but the opportunity cost includes the income that is not earned on the equity invested in the land. These cost categorizations are not distinct from one another. By comparison, the rent and wages you will not earn because you are using your own land and labor in you farm operation are implicit non-cash costs. The purpose of recognizing these cost categorizations is to better understand the farm operation.
Some resources pose unique issues in developing enterprise budgets.
One such resource is land, because its cost varies depending on whether it is rented, owned without debt, or owned with some debt. An example may clarify the issue. To assure a proper rotation, the farmer uses both rented and owned land in the enterprise being analyzed. Principal that must be paid on land debt times the portion that is owned is a fixed cash outflow but not a cost. Another question that arises is what method should be used to calculate depreciation.