Volume
64, Number 1, Spring 2004
Research
"Credit Score Migration Analysis
of Farm Businesses: Conditioning on Business Cycles and Migration Trends" authored by Jill M. Phillips and Ani L. Katchova
Abstract
This study examines credit score migration rates of farm businesses,
testing whether migration probabilities differ across business cycles.
Results suggest that agricultural credit ratings are more likely to
improve during expansions and deteriorate during recessions. The analysis
also tests whether agricultural credit ratings depend on the previous
period migration trends. The findings show that credit score ratings
exhibit trend reversal where upgrades (downgrades) are more likely to
be followed by downgrades (upgrades).
Key words:
business cycle, credit migration, migration trend, path dependence,
rating drift, trend reversal
"Determinants
of Investments in Non-Farm Assets by Farm Households"
authored by Teresa Serra, Barry K. Goodwin, and Allen M. Featherstone
Abstract
Off-farm investment decisions of farm households are analyzed. Farm-level
data for a sample of Kansas farms observed from 1994 through 2000 are
utilized. A system of censored dependent variable models is estimated
to investigate the factors that influence the composition of farm households'
portfolios. The central question underlying the analysis is whether
farm income variability influences off-farm investment decisions. Previous
analyses on the determinants of non-farm investments have failed to
consider the role of income variability. Results of this study indicate
that higher farm income fluctuations increase the relevance of non-farm
assets in the farm household portfolio, thus suggesting these assets
are used as farm household income risk management tools.
Key words:
farm income variability, off-farm investments, risk management
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"Rural
Small Business Finance: Evidence from the 1998 Survey of Small Business
Finances" authored by Cole R. Gustafson
Abstract
The
1998 Survey of Small Business Finances provides robust information on
the financing of small businesses, including an overview of the firms'
organization, financial characteristics, and credit use. Information
from the survey is used in this study to compare the financial characteristics
of metro and rural small businesses. While many financial characteristics
are similar, rural small businesses do own more land and depreciable
assets, and have lower inventory and other current assets when compared
to metro firms. Rural firms have relatively similar access to technology
and financial services, although utilization varies. Both metro and
rural small businesses rely on a wide variety of sources for financing;
however, rural small businesses have significantly more mortgages, loans
from shareholders, and other types of loans, but fewer credit cards.
Use of nonparametric rank order statistical methods was required because
normality assumptions were violated due to asymmetric distribution of
small firms.
Key words:
business, finances, rural, small business, survey
"Risk
Management Strategy Evaluation for Corn and Soybean Producers" authored by James G. Pritchett, George F. Patrick, Kurt J. Collins,
and Ana Rios
Abstract
Returns to a model farm are simulated to assess the impact of marketing
and insurance risk management tools as measured by mean net returns
and returns at 5% value-at-risk (VaR). Results indicate that revenue
insurance strategies and strategies involving a combination of price
and yield protection provide substantial downside revenue protection,
while mean net returns only modestly differ from the benchmark harvest
sale strategy when considering all years between 1986 and 2000.
Key words:
crop insurance, marketing strategy, risk management
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"Deciding
When to Replace an Open Beef Cow" authored by Gregory
A. Ibendahl, John D. Anderson, and Leslie H. Anderson
Abstract
A cow that fails to conceive must either be kept for a year without
revenue or replaced by a bred heifer. This choice is a unique case of
comparing investments with different economic lives because the potential
replacement asset is just a newer version of the old asset. In this
study, a net present value model is developed that eliminates the problem
of finding a common timeframe. Results indicate there are often times
producers should keep the open cow. Whenever feed costs are low, the
price differential between cull cows and replacement heifers is high,
or the calf crop value is low, retaining open cows becomes more desirable.
Key words:
bred heifer, net present value, open cow, perpetual annuity, replacement
decision, unequal asset life
Teaching
"The
DuPont Profitability Analysis Model: An Application and Evaluation of
an E-Learning Tool" authored by Jon Melvin, Michael
Boehlje, Craig Dobbins, and Allan Gray
Abstract
Successful farm business managers must understand the determinants of
profitability and have an overall long-term or strategic management
focus. The objective of this research was to explore the use of an e-learning
tool to help producers understand the impacts of different production,
pricing, cost control, and investment decisions on their farm's financial
performance. This objective was accomplished by developing and testing
a computer-based training and application tool to facilitate determination
of the financial health of farm businesses using the DuPont profitability
analysis model. The results of the two experiments indicate that the
computer software was effective for teaching techniques of profitability
analysis contained within the DuPont model.
Key words:
computer-assisted analysis, DuPont profitability analysis, e-learning,
return on assets (ROA), return on equity (ROE)
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