Agricultural Household Hedging With Off-Farm Income

Agricultural Finance, Risk and Uncertainty,

The Present Value Model, Farmland Prices and Structural Breaks

We review the constant discount rate present value model of farmland prices using non-stationary panel data analysis. We use panel unit root and cointegration analysis to test if the present value model holds for a sample of 31 U.S. States covering the period 1960-2000. Preliminary results indicate that farmland prices and cash rents are non-stationary and non-cointegrated assuming a constant discount rate. The absence of cointegration may be due to the presence of a regime shift representing a time-varying discount rate. To accommodate this possibility, we introduce new panel cointegration tests that allow for unknown regime shifts in the cointegration relationship. The results suggest that the cointegration hypothesis cannot be rejected if there is a regime shift. Thus, while the present value model of farmland prices must be rejected when the discount rate is presumed constant, it cannot be rejected once we allow for regime shifts representing a time-varying discount rate.farmland prices, present value model, non-stationary panel data analysis, regime shift, Q24, Land Economics/Use, C22, C23, G12,

THE STRUCTURE, PERFORMANCE, AND SUSTAINABILITY OF AGRICULTURE IN THE MOUNTAIN REGION

Farmers in the Mountain Region-in both metro and nonmetro areas-face growth in population and nonfarm employment that affects land use and how farmers operate their businesses. Even in remote locations, people moving to amenity areas may result in farmers changing their operations. Sustainable agriculture, already practiced by Mountain Region farmers to some extent, may help farming to continue. Nonfarm people also have an interest in the continuation of agriculture and the adaptation of sustainable practices, in order to help preserve the amenities that make the region attractive to migrants. Growth in the region does provide some benefits to farmers, however. Growth can help keep the value of farmland up through nonfarm demand for land. In addition, the greater availability of jobs means that off-farm work is available to households operating farms. Off-farm work is particularly important, given the concentrated distribution of farm income.Production Economics,

Profit Patterns Across American Agriculture

To remain viable, agriculture in each location must offer returns that are competitive with those from alternative investments and sufficient to cover producers' financial obligations. Economic theory says that rates of return converge over time as resources flow into more-profitable industries and out of less-profitable industries, causing factor price changes. Both traditional growth and trade theories say factor markets will adjust to equalize commodity returns over time. This study examines spatial relationships in agriculture's profitability over time. Results show temporal and spatial convergence of returns consistent with trade and development theories. However, there are profit patterns unique to state/regional agriculture, raising policy implications.convergence, return on assets, "risk of ruin", Agribusiness,

RATES OF RETURN IN THE FARM AND NON-FARM SECTORS: A TIME SERIES COMPARISON

Financial Economics,

NEXT YEAR ON THE U.S. FARMLAND MARKET: AN INFORMATIONAL APPROACH

This paper formulates an information measure for changes in asset values and applies the formulation to farmland values in the United States for 1960-99. The results indicate that changes in asset values contained significant information following the Russian wheat sale in the early 1970s and the financial crisis in agriculture in the mid 1980s. Further, information about preceding year's asset value largely explains the regional distribution of current year's farmland values.Land Economics/Use,

PROFIT PATTERNS IN THE U.S. AND THE WEST, 1992 AND 1997: WHAT COUNTY-LEVEL DATA REVEAL

We examine whether there are spatial relationships in U.S. production agriculture's profitability across regions and over time. We test the traditional view that factor markets (approximately) adjust to equalize agriculture's net returns over space and time using county-level data from the UDSA's Census of Agriculture, 1992 and 1997. We estimate Gini coefficients and calculate the Theil Entropy Measure (TMI) to examine changes in the concentration of returns over space and time, and to decompose the variation in inequality in returns due to between-region variation in returns. Although factor markets (approximately) adjust to equalize net returns over space and time, there is still considerable variability in returns within regions and within states. Use of county-level (Census of Agriculture) and farm-level data (ARMS Survey) to help highlight these differences. In general, farm-level Gini coefficients have remained fairly constant but show a mild increase in concentration since the 1996 FAIR Act. The TMI analysis reveals that in 1997 about 54 percent of the variation in total returns (net cash returns) was due to within-region variation, and about 46 percent was due to (average) between-region variation (compared to 53 and 47 percent in 1992). Total U.S. inequity of net cash returns increased from 0.14 in 1992 to 0.21 in 1997.Gini coefficient, Theil Entropy Measure, net cash returns, net cash and net farm income, farm structure, Agricultural Finance, Community/Rural/Urban Development, Q, Q140,

THE MEASUREMENT OF INEQUALITY IN CANADIAN AND U.S. AGRICULTURAL INCOME BY COMPONENTS OF NET VALUE ADDED

This paper examines changes in net value added generated through Canadian and U.S. farm production, 1970-2000. We consider how the structural changes in Canadian and U.S. agriculture have affected the size and distribution of net value added and its components: rent, capital, labor, and to net farm income. We use the Theil Measure of Inequality (TMI) to compare and explain changes in 1) the between and within-region distribution of net value added, and 2) changes in the distribution of factor shares of net value added in Canada and in the U.S. Results show that in Canada (1960-2000), net value added has become somewhat more equally distributed relative to the number of farms per province, but has varied widely from 1972-1988. Between-region inequality in net value added accounted for from 0.5 to 85.5 percent of this inequality from 1960-2000. In the U.S. (1949-2000), net value added has become more unequally distributed. About half of the variation in net value added in the U.S. is due to between-region variation and about half to within-region variation in net value added. We find that most of the variation in the components of net value added (returns to capital, labor, nonoperator landlords, and to farm operators) in Canada and the United States is due to variations across regions, rather than to variations in the components of net value added themselves. These variations have generally been due to macroeconomic differences in regions, such as shifts in enterprise specialization, urbanization, changes in government programs, and to other structural changes in agriculture.Agricultural Finance,

Recent Changes in Farm Structure: A Canada-U.S. Comparison

Following a series of bilateral and multilateral agreements, the past two decades have seen increased trade and investment liberalization between Canada and the United States in the agri-food sector. Changes in trade policy are one of several paths by which farm structure can change. This increased liberalization, together with the largest drop in Canadian farm numbers recorded by the Census of Agriculture in thirty years, has provided the impetus to review some aspects of farm structure. In particular, this article presents the latest Canadian and U.S. data on the number of farms by sales class, the concentration of sales and other production-related variables, and the distribution of income and receipts. We explore whether significant changes in the latter two elements of farm structure have occurred during this period of trade and investment liberalization.Crop Production/Industries, Farm Management, International Relations/Trade,

Assessing Economic and Environmental Impacts of Ethanol Production on Fertilizer Use in Corn Production

The share of corn used in ethanol production has been growing rapidly. USDA predicts that more than 30 percent of the corn crop will be used for ethanol production in 2009/2010. Expanded corn acreage contributes to the application of more fertilizer and is likely to introduce a larger volume of nutrients into the environment. This study found that an increase in ethanol production is consistent with a significant increase in quality-adjusted fertilizer use in selected corn states.quality-adjusted fertilizer, corn production, ethanol, excess nutrients, Crop Production/Industries, Environmental Economics and Policy,