MAJOR IDEAS IN THE HISTORY OF AGRICULTURAL FINANCE AND FARM MANAGEMENT

This paper contains two articles that discuss major ideas from the history of agricultural finance and farm management. The agricultural finance article focuses on ideas that emerged prior to 1960. These ideas are classified into those emerging from action and scientific-framing eras. The second article characterizes the evolution of farm management and production economics from its beginnings in about 1900 to the start of the 21st century. Emphasis is placed on the melding of ideas from agriculturalists and economists.Agricultural finance, farm management, production economics, Agricultural Finance,

PORTFOLIO ANALYSIS CONSIDERING ESTIMATION RISK AND IMPERFECT MARKETS

Mean-variance efficient portfolio analysis is applied to situations where not all assets are perfectly price elastic in demand nor are asset moments known with certainty. Estimation and solution of such a model are based on an agricultural banking example. The distinction and advantages of a Bayesian formulation over a classical statistical approach are considered. For maximizing expected utility subject to a linear demand curve, a negative exponential utility function gives a mathematical programming problem with a quartic term. Thus, standard quadratic programming solutions are not optimal. Empirical results show important differences between classical and Bayesian approaches for portfolio composition, expected return and measures of risk.Agricultural Finance, Research Methods/ Statistical Methods,

CREDIT SCORING, LOAN PRICING, AND FARM BUSINESS PERFORMANCE

In light of recent developments in agricultural credit evaluations, this study employs a multiperiod simulation model that endogenizes farm investment decisions, credit evaluations, and loan pricing based on the credit scoring procedures of agricultural lender. Model results show that credit-scored pricing yields time patterns of performance, credits classifications, and interest rates that parallel the firmÂ’s investment, financing, and debt servicing activities. Moreover, the lenderÂ’s price responses dampen growth incentives as credit worthiness diminished, stimulate growth as credit improves, and lead to similar capital structures over time.Agricultural Finance,

FINANCIAL CONTROL AND VARIABLE AMORTIZATION UNDER UNCERTAINTY: AN APPLICATION TO TEXAS RICE FARMS

Agricultural Finance,

DEVELOPING A SCALE FOR ASSESSING RISK ATTITUDES OF AGRICULTURAL DECISION MAKERS

This study adapts a methodology formulated in the social sciences to develop a scale for measuring an economic agentÂ’s attitude toward risk. The scale assesses risk attitudes by eliciting farmersÂ’ opinions towards risk management tools using a Likert procedure. The methodology validates the scale with a scientific risk attitude measure and compares the scale to the farmersÂ’ self-assessment of their risk attitudes. The resulting scale methodology could be administered to people without the need for personal interviews. The subjects for this study were Midwestern farmers, but the methodology can be applied to any sector of the agricultural industry.Risk and Uncertainty,

FARM-LEVEL EVIDENCE ON THE RISK BALANCING HYPOTHESIS FROM ILLINOIS GRAIN FARMS

This study provides farm-level empirical support to the Risk-Balancing Hypothesis using Illinois grain farm data. The econometric results indicate that risk-balancing farmers comprise more than half of the sample. These farmers tend to be older, have higher leasing ratios, are less financially efficient and manage risk through crop specialization, enterprise diversification, and marketing strategies in addition to risk balancing.Risk and Uncertainty,

The New Basel Capital Accord: Implications for US Agricultural Lenders

Agricultural Finance,

FINANCIAL INTERMEDIATION IN AGRICULTURE: A SUGGESTED ANALYTICAL MODEL

Agricultural Finance,

ASSESSING FARMERS' ATTITUDES TOWARD RISK USING THE "CLOSING-IN" METHOD

The 1996 Farm Bill and low commodity prices have regenerated interest in the impact of risk and farmers' risk attitudes on production agriculture. Previous research has used expected utility theory (EUT) and direct elicitation of utility functions (DEU) for eliciting risk attitudes. To overcome the criticism of EUT and DEU, a recently developed technique called the "closing in" method is adapted for eliciting farmers' risk attitudes. This method is applied to Illinois farmers by using a computerized decision procedure, and is validated by comparing the results to the farmers' self-assessment of their risk attitudes and score to a risk attitudinal scale.Risk and Uncertainty,