Joleen C. Hadrich, Joseph Janzen, Xiaoli Liao Etienne and Elizabeth Yeager
Joleen C. Hadrich, Christopher A. Wolf and Kamina K. Johnson
The structural change of the dairy industry has been a long-term process with fewer, larger dairy herds in all regions. The purpose of this paper is to evaluate whether this…
Abstract
Purpose
The structural change of the dairy industry has been a long-term process with fewer, larger dairy herds in all regions. The purpose of this paper is to evaluate whether this structural change is leading to less income and wealth equality across dairy farms and how these factors differ across the USA.
Design/methodology/approach
Income and wealth inequality of US dairy farms was estimated by Gini coefficients using data from the 2000 and 2010 ARMS dairy costs and returns data. A population-level quantile regression was estimated at decile increments to determine the factors that affect net farm income (NFI) and net worth (NETW) and if they changed across the time periods.
Findings
Adjusted-Gini coefficients were estimated and indicated that income inequality was greater than wealth inequality across US dairy farms. Results of the quantile regressions confirm regional differences exist with dairy farms in Mountain regions consistently having lower NFI and NETW relative to farms in the Lake States region when factors such as herd size were equal. Life cycle effects were not observed for NFI, but present within NETW estimates across the ten years.
Originality/value
This analysis estimates industry-specific-adjusted Gini coefficients to determine if income and wealth inequality exist.
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Joleen C. Hadrich, Ryan Larsen and Frayne E. Olson
The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery…
Abstract
Purpose
The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery purchases on North Dakota farming operations.
Design/methodology/approach
A double hurdle model was used to estimate the two decisions: purchasing machinery and the intensity of the machinery purchase. Data were collected from the North Dakota Farm and Ranch Management Business Association Annual Summaries for 1993-2011.
Findings
Results demonstrated that the tax incentive provided by Section 179 deduction had the largest positive effect on machinery purchases when compared to operating profit margin, leverage ratio, producer type, and experience of the principal operator of the farm.
Originality/value
Section 179 deductions have changed substantially over the 19-year period studied and have not been analyzed in previous machinery investment work. This analysis puts a numerical value on the effect of Section 179 deductions over time and demonstrates the large effect tax incentives have on machinery purchase decisions and levels.
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– The purpose of this paper is to determine the sources and factors affecting farm revenue variation on crop and livestock farms in the Northern Great Plains.
Abstract
Purpose
The purpose of this paper is to determine the sources and factors affecting farm revenue variation on crop and livestock farms in the Northern Great Plains.
Design/methodology/approach
A two method approach is used. Variance decomposition analysis is completed on an 18-year balanced panel data set of North Dakota producers to determine the sources of farm revenue variation. The second component of this research uses a random effects estimator to determine the effect of farm characteristics on farm revenue variation measured by coefficient of variation.
Findings
Crop revenue is the largest source of farm revenue variation, with crop insurance being the largest source of revenue variation diversification. Small market crops and corn were found to increase revenue variation compared to those operations that received the largest sum of their revenue from wheat. Government payments and insurance payments were also found to increase farm revenue variation indicating they may provide an incentive to plant more risky crops.
Originality/value
This analysis examined specific enterprises that affect farm revenue variation, which has not been examined in earlier work. This distinction allows for focus on potential policy implications of small market crops and new crops in “transitional planting zones”.
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Joleen C. Hadrich and Frayne Olson
The purpose of this paper is to determine if a single dominant measure defines farm size and farm performance consistently over a ten‐year time period, or if alternative measures…
Abstract
Purpose
The purpose of this paper is to determine if a single dominant measure defines farm size and farm performance consistently over a ten‐year time period, or if alternative measures are needed. The paper also seeks to determine the correlation between farm size and farm performance and how this correlation may change over time.
Design/methodology/approach
A confirmatory factor analysis was used to test the relative strength of farm size and performance indicator variables and estimate the relationship between farm size and performance latent variables. Data were collected from the North Dakota Farm and Ranch Business Management Association (NDFRBA) Annual Summaries for 2000‐2009.
Findings
Results demonstrated that a single indicator, such as acres or rate of return on assets, may not capture the array of farm size and farm performance concepts and multiple indicators should be used to jointly determine farm size and farm performance measures. Results also found a sequential decrease in correlation between farm size and performance for seven of the ten years.
Originality/value
This paper addresses the issue regarding multiple measures for farm size and farm performance which helps provide the framework to begin developing a systematic classification of farms for use in strategic farm planning and guide future government policies, federal farm programs, and environmental regulations.
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Christopher A. Wolf, J. Roy Black and Joleen C. Hadrich
The purpose of this paper is to examine the sources and magnitude of variation in accrual adjusted gross farm revenue and farm revenue net of feed purchases on Michigan dairy…
Abstract
Purpose
The purpose of this paper is to examine the sources and magnitude of variation in accrual adjusted gross farm revenue and farm revenue net of feed purchases on Michigan dairy farms representative of Upper Midwest dairy farms. The paper aims to assess whether adjusted gross revenue‐type insurance instruments meet insurability conditions when applied to dairy farms.
Design/methodology/approach
Accrual adjusted dairy farm revenue and revenue net of feed purchased from Michigan dairy farm panel data from 1995 through 2006 were detrended and summarized. Variance decomposition was used to identify sources of variation in adjusted gross revenue and adjusted gross revenue less feed purchases. In‐sample insurance premiums were estimated and Monte Carlo simulations were used to adjust these premiums for out‐of‐sample considerations.
Findings
Milk price variation was the largest source of variation while milk production per cow varied little. Farms with smaller herds and those with larger percentages of farm revenue from crop sales had higher relative revenue variability and would trigger a higher frequency of indemnities under a whole farm revenue insurance contract.
Research limitations/implications
Because the data analyzed conclude in 2006, the volatility of the past couple of years is not reflected. Therefore, researchers are encouraged to test the proposed insurance feasibility further with more recent data.
Practical implications
The paper addresses considerations for the development and commercialization of a feasible dairy revenue insurance instrument.
Originality/value
This paper fulfils a need to understand magnitude and source of revenue variation on dairy farms and how insurance might mitigate negative consequences of this variation.
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Becca B.R. Jablonski, Joleen Hadrich, Allison Bauman, Martha Sullins and Dawn Thilmany
The Agriculture Improvement Act of 2018 directed the US Secretary of Agriculture to report on the profitability and viability of beginning farmers and ranchers. Many beginning…
Abstract
Purpose
The Agriculture Improvement Act of 2018 directed the US Secretary of Agriculture to report on the profitability and viability of beginning farmers and ranchers. Many beginning operations use local food markets as they provide more control, or a premium over commodity prices, and beginning operations cannot yet take advantage of economies of scale and subsequently have higher costs of production. Little research assesses the relationship between beginning farmer profitability and sales through local food markets. In this paper, the profitability implications of sales through local food markets for beginning farmers and ranchers are explored.
Design/methodology/approach
The authors utilize 2013–2016 USDA agricultural resource management survey data to assess the financial performance of US beginning farmers and ranchers who generate sales through local food markets.
Findings
The results point to four important takeaways to support beginning operations. (1) Local food channels can be viable marketing opportunities for beginning operations. (2) There are differences when using short- and long-term financial performance indicators, which may indicate that there is benefit to promoting lean management strategies to support beginning operations. (3) Beginning operations with intermediated local food sales, on average, perform better than those operations with direct-to-consumer sales. (4) Diversification across local food market channel types does not appear to be an indicator of improved financial performance.
Originality/value
This article is the first to focus on the relationship beginning local food sales and beginning farmer financial performance. It incorporates short-term and long-term measures of financial performance and differentiates sales by four local food market type classifications: direct-to-consumer sales at farmers markets, other direct-to-consumer sales, direct-to-retail sales and direct-to-regional distributor or institution sales.
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Becca B.R. Jablonski, Joleen Hadrich and Allie Bauman
The Agriculture Improvement Act of 2018 directed the United States Department of Agriculture (USDA) Risk Management Association to investigate a policy targeted to farms and…
Abstract
Purpose
The Agriculture Improvement Act of 2018 directed the United States Department of Agriculture (USDA) Risk Management Association to investigate a policy targeted to farms and ranches that sell through local food markets. However, there is no available research that quantitatively documents the extent to which local food producers utilize Federal crop insurance.
Design/methodology/approach
The authors utilize 2013–2016 USDA Agricultural Resource Management Survey data to compare farms and ranches with sales through local food markets to those with and without Federal crop insurance expenditure, as well as the distribution of Federal crop expenditure, across market channels and scales.
Findings
There is a little variation in Federal crop insurance expenditure across market channels, defined as direct-to-consumer only sales, intermediated sales, and a combination of direct-to-consumer and intermediated sales. Rather, the results show that scale is the primary predictor of Federal crop insurance expenditure; larger operations are more likely to have nonzero Federal crop insurance expenses.
Originality/value
This article provides the first national research to document descriptive statistics of the utilization of Federal crop insurance by US farms and ranches that utilize local food market channels.
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Rebecca Weir, Joleen Hadrich, Alessandro Bonanno and Becca B.R. Jablonski
Beginning Farmer and Rancher programs are available for operators with ten years of experience or less on any farm. These programs support farmers who are starting operations…
Abstract
Purpose
Beginning Farmer and Rancher programs are available for operators with ten years of experience or less on any farm. These programs support farmers who are starting operations, often without an initial asset allocation. However, some beginning farmers acquire operations that are already established, with substantial assets in place. The authors investigate whether a profitability gap exists between beginning farmers entering the industry ex novo and those operating a preexisting operation and if so, what factors contribute to the gap.
Design/methodology/approach
The authors utilize the Blinder-Oaxaca decomposition to determine what drives financial differences between first-generation beginning farmers, second-generation beginning farmers and established farmers using a unique farm-level panel dataset from 1997 to 2021.
Findings
Results indicate that first- and second-generation beginning farmers have similar operating profit margins, but first-generation beginning farmers have a statistically higher rate of return on assets than second-generation beginning farmers. Established farmers outperform second-generation beginning farmers on both the operating profit margin and rate of return on assets. These results suggest that economic viability for beginning farmers differs depending upon the initial status of their operation, suggesting that heterogenous policies may be more impactful in supporting various pathways to enter agriculture.
Originality/value
This analysis is the first to identify beginning farmers that enter the industry without an asset base and those that take over a principal operator role on an established farm through an assumed farm transition. The authors quantify differences in financial performance using detailed accrual-based financial data that tracks farms over time in one dataset.
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Dawn Thilmany, Allison Bauman, Joleen Hadrich, Becca B.R. Jablonski and Martha Sullins
Beginning farmers have unique challenges securing credit because they are less likely to have established sales and collateral for secured loans. This article explores US…
Abstract
Purpose
Beginning farmers have unique challenges securing credit because they are less likely to have established sales and collateral for secured loans. This article explores US beginning farmers’ financing strategies relative to those of established operations, with a focus on the source of financing and debt structure (short- vs long-term usage). Agricultural operations commonly use nontraditional financing tools and strategies to start, build and/or sustain their businesses. This article provides a comparative overview of financing strategies comparing established operators to operations with only beginning operators, as well as those multigenerational operations with at least one beginning operator.
Design/methodology/approach
The study uses 2013–2016 USDA Agricultural Resource Management Survey data to explore how various financing patterns vary across US beginning farmers and ranchers with a particular focus on understanding differences where (1) all operators are beginning, (2) there is a mix of beginning and established operators and (3) all operators are established.
Findings
This article explores how the nature of beginning farmer status, human capital resources and alternative marketing strategies may influence financial management strategies and lead to differential use of nontraditional financing sources for beginning farmers and ranchers.
Originality/value
Though exploratory, the authors hope that attention to patterns among US beginning farmers and ranchers of reliance on human capital resources including off-farm income and type of beginning farm operation, nontraditional government support programs and alternative marketing strategies can provide important information as to the role of nontraditional credit in the US farm economy.