Invited Paper

Harl / Chapter 12 Bankruptcy: A Review and Evaluation

Submitted Papers

Gustafson and Solemsaas / Geographic Expansion of North Dakota's Commercial Banks: What is the Potential?

Klonsky, Norris, and Buckles / How Will Cleanup of Contaminated Farm Properties Be Financed? Problems and Solutions

Duncan and Singer / The Farm Credit System Crisis and Agency Security Yield-Spread Response

Gwinn, Barry, and Ellinger / Farm Financial Structure Under Uncertainty: An Application to Grain Farms

Nixon and Mjelde / The Impact of Tax Law and Business Organizational Form on Marketing Rangeland Calves and Yearlings

White / Farm Programs' Impact on Cash Flow and Factor Returns

Monke, Boehlie, and Pederson / Efficient Investment Strategies: Impacts of Tax Policies and Risk Preferences

Abstracts

Harl / Chapter 12 Bankruptcy: A Review and Evaluation <top>

The authority for Chapter 12 bankruptcy, one of the more far-reaching legal enactments for dealing with the farm debt crisis of the 1980's, terminates on October 1, 1993, unless extended. The impacts of Chapter 12 bankruptcy have been noted in several studies and provide a base for reviewing Chapter 12 bankruptcy and evaluating whether Chapter 12  has functioned on an efficient, workable, and evenhanded basis. The author concludes that consideration should be given for continuing Chapter 12 bankruptcy indefinitely.

Gustafson and Solemsaas / Geographic Expansion of North Dakota's Commercial Banks: What is the Potential? <top>

Bank merger potential is gauged with a correlation-decomposition  model using 1976-87 Call Report data. One-fourth of possible bank mergers in North Dakota could yield diversification benefits. Bank characteristics most important to merger include size, loan portfolio diversity, loan pricing strategies, service income, and liability management practices.

Klonsky, Norris, and Buckles / How Will Cleanup of Contaminated Farm Properties Be Financed?  Problems and Solutions <top>

Environmental legislation of the 1980s has posed the problem of high-cost cleanup on contaminated agricultural properties. Vast expenditures are being  made fighting court cases and lobbying to avoid liability, while properties remain contaminated. Agricultural lenders are unwilling to make traditional loans for cleanup because of potential liability and because contaminated land is not acceptable collateral. In response to this dilemma, creative approaches for financial cleanup have emerged from both the public and private sectors, including new types of loan structuring and insurance, bonds, and public sector cleanup funds.

Duncan and Singer / The Farm Credit System Crisis and Agency Security Yield-Spread Response <top>

Investors' reaction to the Farm Credit System (FCS) crisis in 1985 lends insight into the importance of agency status for FCS bonds. Yields on seasoned U.S. government and agency securities are compared for a period surrounding the FCS request for federal assistance. Three periods are considered: prior to public announcement of FCS financial difficulties, subsequent to the announcement but prior to legislative action, and subsequent to legislative action. Statistical tests indicate significant increases in yield spreads over Treasury securities for FCS securities following the announcement, as well as for other selected agency securities. The spreads reach a peak shortly before the passage of federal legislation authorizing financial assistance to the FCS.

Gwinn, Barry, and Ellinger / Farm Financial Structure Under Uncertainty: An Application to Grain Farms <top>

A multiperiod quadratic programming   model is used to derive risk-efficient growth plans and financial structures for a representative cash grain farm infer a broader set of sources of risk than has been previously considered and over various levels of risk aversion. The results indicate farm sizes, assets structures, and debt levels are  consistent with empirical observations. The results further indicate investment and financial structures that can  provide useful in determining safe and manageable levels of farm financial leverage in the future.

Nixon and Mjelde / The Impact of Tax Law and Business Organizational Form on Marketing Rangeland Calves and Yearlings <top>

Building on an article in the 1991 Agricultural Finance Review, a dynamic programming model was used to asses the impact of tax law under both a sole proprietorship and a Subchapter C corporation on the optimal marketing strategies of a Texas Rolling Plains cow-calf producer. Although tax considerations are important in determining the optimal marketing strategies, the type of business organizational form and alternative equity levels appeared to have only minor impacts on the producers marketing strategies.

White / Farm Programs' Impact on Cash Flow and Factor Returns <top>

Government programs for U.S. agriculture are generally aimed at increasing farm income. Are these programs effective in the long run in achieving this goal?  To answer this question, the present study examines the relationships between government payments and farm income, using different measures of income ranging from net cash returns to capital, labor, and management. The study also examines how government payments respond to various measures of farm income. The results indicate that a change in government payments will have a small impact on net cash income but a relatively large impact on factor returns. Government payments are responsive to various income measures, being inversely related to the level of income.

Monke, Boehlie, and Pederson / Efficient Investment Strategies: Impacts of Tax Policies and Risk Preferences <top>

Simulation and stochastic dominance methods identify efficient investment strategies under alternative tax policies. Risk averse investors maximize utility  by combining financial assets and farm assets; dominant portfolios rarely include more than two or three assets. Changes in capital gains tax polices significantly affect the optimal proportion of value-appreciating  assets under certain tax proposals. Tax-deferred retirement savings plans are preferred to assets taxed on a current basis when tax rates are expected to decline.

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